Thanks, Enrique. Q4 was a solid finish to FY 2019, where we once again demonstrated our ability to consistently deliver company results, posting growth in revenue, non-GAAP operating profit and EPS.
Before diving further into Q4, let me quickly recap FY 2019 for the full-year. We grew revenue, we grew non-GAAP operating profit dollars faster than revenue, and we grew non-GAAP EPS even faster. These results show the strength of our financial model.
For the full-year, constant currency revenue was up 2%. Non-GAAP operating profit dollars grew 3%, with operating margin rate expansion in both print and personal systems. Print grew margins by 10 basis points to 16%, while PS grew 120 basis points to 4.9%, both within our guided ranges.
We delivered non-GAAP EPS of $2.24, an increase of 11% and above our guided range. We generated $4 billion of free cash flow, ahead of our full-year outlook of at least $3.7 billion, and we returned $3.4 billion, or 85% of free cash flow to shareholders.
Importantly, we delivered these results, while investing in our business for future growth and efficiency opportunities.
Our foundation is strong, including our balance sheets, and we have multiple levers to create value for our shareholders. This is what we said at our Security Analyst Meeting and this is what we intend to do. Overall, we are pleased with our full-year results, despite more challenging industry, macro economic and geopolitical dynamics.
Now let’s look at the details of the fourth quarter. Net revenue was $15.4 billion flat year-on-year, or up 2% in constant currency. Regionally, in constant currency, APJ grew 7%, Americas grew 1% and EMEA was flat. Gross margin was 19%, up 1.4 percentage points a year-on-year, driven primarily by disciplined execution and improved rate in personal systems, as well as improved rate in print, supported by higher hardware gross margins.
Non-GAAP operating expenses were $1.8 billion, up a 11%, driven by increased investments for both growth and efficiency, including investments to drive future revenue and innovation, as well as investments in HP’s digital transformation.
Non-GAAP net OI&E expense was $60 million for the quarter. We delivered non-GAAP diluted net earnings per share of $0.60, up $0.06, or 11%, with a diluted share count of approximately 1.5 billion shares.
Non-GAAP diluted net earnings per share excludes amortization of intangible assets of $21 million, acquisition-related charges of $21 million, restructuring and other charges of $105 million, as well as non-operating retirement-related credits of $14 million. It also excludes the net expense of $378 million for tax adjustments. This net expense is primarily driven by the termination of our Tax Matters Agreement with Hewlett Packard Enterprise, partially offset by other tax adjustments.
As a result, Q4 GAAP diluted net earnings per share was $0.26. At the segment level and personal systems, we are again very pleased with our results. Revenue in the fourth quarter was $10.4 billion, up 4%, or 5% in constant currency. By customer segment, commercial revenue was up 8% and consumer revenue was down 4%. By product category, revenue was up 12% for workstations, up 5% for desktops and up 2% for notebooks.
The team continue to successfully manage our overall product mix, as commercial demand remains strong, while navigating a softer consumer market. Personal systems has been consistently delivering profitable growth and share gains over time. HP outgrew the market in calendar quarter three with strong execution, HP specific innovation and a focus on exceptional partner and end customer experiences.
In addition, we see opportunities to improve our portfolio mix over time in areas of premium, displays and accessories, and services.
For example, this quarter, our revenue in retail solutions business and gaming, along with our services orders, all grew double digits.
Q4 operating margins remained exceptionally strong at 5.3%, up 1.6 points year-on-year. The large increase was driven mainly by the team’s continued execution of our strategy, balancing the industry’s various puts and takes and remaining disciplined in a favorable commodity cost environment. Operating profit was $556 million, up 48% from the prior year.
In print, the business performed generally in line with our expectations for the quarter.
We continue to deliver leading customer experiences, big progress in our contractual offerings, incrementally shift more profit to hardware and address our near-term operational challenges in EMEA.
Looking at the details. Q4 total print revenue was $5 billion, down 6% nominally and 5% in constant currency.
Our operating margins were down 0.4 points to 15.6% due to lower supplies revenue.
Commercial hardware revenue was down 2% and consumer hardware revenue was down 10%. Total hardware units were down 9%, driven by declines in consumer units, which were down 10%, with commercial units down 1%.
Fourth quarter supplies revenue was $3.2 billion, down 7% in constant currency, again, driven by declines in EMEA.
We are making progress on our operational improvement plans and we’ve seen a significant reduction in Tier 1 and monitored Tier 2 channel inventory dollars in EMEA throughout the year. Overall, Tier 1 channel inventory levels remain the low the reduced ceilings.
We continue to make progress on our strategic plans to evolve our business models.
We’re seeing success in contractual, as we grew both managed print service and Instant Ink this quarter.
Importantly, we remain under indexed in contractual and are pleased that we continue to outgrow the market.
Let me now turn to our transformation efforts, and specifically our cost savings opportunities. At SAM, we described our plans to generate approximately $1 billion of gross run rate savings by the end of FY 2022, and that we continue looking for more opportunities.
In Q4, we announced a voluntary early retirement programs in the United States within 1,000 participants have opted into the plan, which will be effective through the course of the year. This take rate adds to our confidence in delivering both the FY 2020 and overall plan savings targets.
Turning to cash flow and capital allocation. Q4 cash flow from operations and free cash flow were $588 million and $392 million, respectively. We generated $4 billion in free cash flow for the full-year. In Q4, the cash conversion cycle was minus 31 days. Sequentially, the cash conversion cycle declined five days, in line with normal seasonality with a six-day decrease in days payable outstanding. a two-day increase in day sales outstanding and a three-day decrease in days of inventory.
We’ve returned $461 million to shareholders through share repurchases and $236 million via cash dividends in Q4.
For the full-year, we returned $2.4 billion to shareholders through share repurchases and $1 billion via cash dividends.
Looking forward to Q1 and FY 2020, keep the following in mind related to our overall financial outlook.
We expect that the macroeconomic conditions will remain dynamic as they are today and we expect our end markets to remain competitive.
We’re expecting currency to have about a 1% year-over-year negative impact.
Specific to personal systems, we expect commodities to be significantly less of a tailwind in FY 2020 and in FY 2019, especially in the second-half. We now expect industry-wide CPU supply constraints to persist through the first-half of 2020.
In Q1 specifically, we’re anticipating a larger revenue impact than in Q4.
However, we expect our mix to shift to more profitable units, which should largely mitigate the profit impact.
In printing, we’re assuming a year-over-year unit market decline, driven by the home market.
As a reminder, we are deliberately not chasing share, especially as we raise hardware pricing and focus on profitable growth.
As described at SAM, as we progress through the year, we expect the net benefits of our transformation cost savings and other operational changes to begin to materialize.
In addition, for the full-year, we expect our non-GAAP tax rate, which is based on our long-term non-GAAP financial projections to be 16% in FY 2020.
Consistent to what we communicated in October, we expect to return at least 75% of free cash flow to shareholders in FY 2020, as we view our shares as significantly undervalued.
Taking these considerations into account, we are providing the following outlook. Q1 2020 non-GAAP diluted net earnings per share to be in the range of $0.53 to $0.56. Q1 2020 GAAP diluted net earnings per share to be in the range of $0.39 to $0.42.
We are raising our full-year fiscal 2020 non-GAAP diluted net earnings per share to be in the range of $2.24 to $2.32, and full-year fiscal 2020 GAAP diluted net earnings per share to be in the range of $2 to $2.10.
Operator, we can now open the call for questions.