Best Buy Reports Second Quarter Results

Comparable Sales Declined 6.2%

GAAP Diluted EPS of $1.25

Non-GAAP Diluted EPS of $1.22

MINNEAPOLIS--(BUSINESS WIRE)--Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week second quarter ended July 29, 2023 (“Q2 FY24”), as compared to the 13-week second quarter ended July 30, 2022 (“Q2 FY23”).

	Q2 FY24			Q2 FY23
Revenue ($ in millions)
Enterprise	$	9,583		$	10,329
Domestic segment	$	8,890		$	9,569
International segment	$	693		$	760
Enterprise comparable sales % change^1		(6.2	)%		(12.1	)%
Domestic comparable sales % change^1		(6.3	)%		(12.7	)%
Domestic comparable online sales % change^1		(7.1	)%		(14.7	)%
International comparable sales % change^1		(5.4	)%		(4.2	)%
Operating Income
GAAP operating income as a % of revenue		3.6	%		3.6	%
Non-GAAP operating income as a % of revenue		3.8	%		4.1	%
Diluted Earnings per Share ("EPS")
GAAP diluted EPS	$	1.25		$	1.35
Non-GAAP diluted EPS	$	1.22		$	1.54

For GAAP to non-GAAP reconciliations of the measures referred to in the above table, please refer to the attached supporting schedule.

“Today we are reporting second quarter sales results that are at the high-end of the outlook we shared in May and profitability that was better than expectations,” said Corie Barry, Best Buy CEO. “These results continue to demonstrate our strong operational execution as we balance our reaction to the current industry sales pressure with our ongoing strategic investments.”

“Our financial results were better than expected, and they reflect a consumer electronics industry that remains challenged due to the pull-forward of demand in prior years and the various macroeconomic factors that we are all too familiar with,” Barry continued. “With that said, we continue to expect that this year will be the low point in tech demand after two years of sales declines. Next year the consumer electronics industry should see stabilization and possibly growth driven by the natural upgrade and replacement cycles and the normalization of tech innovation. I am very proud of the way our teams are managing the business and preparing for our future, and we remain incredibly excited about our future opportunities.”

FY24 Financial Guidance

“In May, we noted that we were preparing for a number of scenarios within our annual guidance range, and we believed our sales were aligning closer to the midpoint of the annual comparable sales guidance,” said Matt Bilunas, Best Buy CFO. “Today we are lowering the high-end of our full year revenue outlook to our previous midpoint, while keeping the low-end of our revenue guidance unchanged. At the same time, we are narrowing our profitability ranges, effectively raising the midpoint of our previous annual guidance for non-GAAP operating income rate and non-GAAP diluted EPS.”

Bilunas continued, “As it relates specifically to the third quarter, we expect our comparable sales to be slightly better than the negative 6.2% we reported for the second quarter and our non-GAAP operating income rate to be approximately 3.4%.”

Best Buy’s guidance for FY24, which includes 53 weeks, is the following:

• Revenue of $43.8 billion to $44.5 billion, which compares to prior guidance of $43.8 billion to $45.2 billion
• Comparable sales decline of 4.5% to 6.0%, which compares to prior guidance of a decline of 3.0% to 6.0%
• Enterprise non-GAAP operating income rate² of 3.9% to 4.1%, which compares to prior guidance of 3.7% to 4.1%
• Non-GAAP effective income tax rate² of approximately 24.5%, which remains unchanged
• Non-GAAP diluted EPS² of $6.00 to $6.40, which compares to prior guidance of $5.70 to $6.50
• Capital expenditures of approximately $850 million, which remains unchanged

Note: Incorporated in the above guidance, the 53rd week is expected to add approximately $700 million of revenue to Q4 FY24 and provide a benefit of approximately 10 basis points to the company’s full year non-GAAP operating income rate.²

Domestic Segment Q2 FY24 Results

Domestic Revenue

Domestic revenue of $8.89 billion decreased 7.1% versus last year primarily driven by a comparable sales decline of 6.3%.

From a merchandising perspective, the largest drivers of the comparable sales decline on a weighted basis were appliances, home theater, computing and mobile phones. These drivers were partially offset by growth in gaming.

Domestic online revenue of $2.76 billion decreased 7.1% on a comparable basis, and as a percentage of total Domestic revenue, online revenue was flat to last year at 31.0%.

Domestic Gross Profit Rate

Domestic gross profit rate was 23.1% versus 22.0% last year. The higher gross profit rate was primarily due to: (1) favorable product margin rates; (2) improved financial performance from the company’s membership offerings, which included higher services margin rates and reduced costs associated with program changes made to the company’s free membership offering; and (3) an improved gross profit rate from the company’s Health initiatives.

Domestic Selling, General and Administrative Expenses (“SG&A”)

Domestic GAAP SG&A was $1.73 billion, or 19.5% of revenue, versus $1.73 billion, or 18.1% of revenue, last year. On a non-GAAP basis, SG&A was $1.71 billion, or 19.2% of revenue, versus $1.71 billion, or 17.9% of revenue, last year. Both GAAP and non-GAAP SG&A were approximately flat to last year, as higher incentive compensation was primarily offset by reduced store payroll expense.

International Segment Q2 FY24 Results

International revenue of $693 million decreased 8.8% versus last year. This decrease was primarily driven by a comparable sales decline of 5.4% and the negative impact of approximately 340 basis points from foreign currency exchange rates.

International operating income was $19 million, or 2.7% of revenue, compared to $28 million, or 3.7% of revenue, last year. The lower operating income rate was primarily driven by SG&A deleverage on lower revenue, which was partially offset by an improvement in the company’s gross profit rate of approximately 80 basis points compared to last year.

Income Taxes

The Q2 FY24 GAAP effective tax rate was 26.1% versus 15.6% last year. On a non-GAAP basis, the effective tax rate was 26.6% versus 16.7% last year. The lower GAAP and non-GAAP effective tax rates last year were primarily due to the resolution of certain discrete tax matters.

Share Repurchases and Dividends

In Q2 FY24, the company returned a total of $279 million to shareholders through dividends of $200 million and share repurchases of $79 million. On a year-to-date basis, the company has returned a total of $560 million to shareholders through dividends of $402 million and share repurchases of $158 million.

Today, the company announced that its board of directors has authorized the payment of a regular quarterly cash dividend of $0.92 per common share. The quarterly dividend is payable on October 10, 2023, to shareholders of record as of the close of business on September 19, 2023.

Conference Call

Best Buy is scheduled to conduct an earnings conference call at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) on August 29, 2023. A webcast of the call is expected to be available at www.investors.bestbuy.com, both live and after the call.

Notes:

(1) The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as other retailers’ methods. For additional information on comparable sales, please see our most recent Annual Report on Form 10-K, and our subsequent Quarterly Reports on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”), and available at www.investors.bestbuy.com.

(2) A reconciliation of the projected non-GAAP operating income rate, non-GAAP effective income tax rate and non-GAAP diluted EPS, which are forward-looking non-GAAP financial measures, to the most directly comparable GAAP financial measures, is not provided because the company is unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. These GAAP measures may include the impact of such items as restructuring charges; price-fixing settlements; goodwill impairments; gains and losses on sales of subsidiaries and certain investments; intangible asset amortization; certain acquisition-related costs; and the tax effect of all such items. Historically, the company has excluded these items from non-GAAP financial measures. The company currently expects to continue to exclude these items in future disclosures of non-GAAP financial measures and may also exclude other items that may arise (collectively, “non-GAAP adjustments”). The decisions and events that typically lead to the recognition of non-GAAP adjustments, such as a decision to exit part of the business or reaching settlement of a legal dispute, are inherently unpredictable as to if or when they may occur. For the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results.

Forward-Looking and Cautionary Statements:

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these statements by the fact that they use words such as "anticipate," “appear,” “approximate,” "assume," "believe," “continue,” “could,” "estimate," "expect," “foresee,” "guidance," "intend," “may,” “might,” "outlook," "plan," “possible,” "project" “seek,” “should,” “would,” and other words and terms of similar meaning or the negatives thereof. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, our operating model, new strategies and growth initiatives, the competitive environment, consumer behavior and other events. These statements involve a number of judgments and are subject to certain risks and uncertainties, many of which are outside the control of the Company, that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our most recent Annual Report on Form 10-K, and any updated information in subsequent Quarterly Reports on Form 10-Q, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this release. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: macroeconomic pressures in the markets in which we operate (including but not limited to inflation rates, fluctuations in foreign currency exchange rates, limitations on a government’s ability to borrow and/or spend capital, fluctuations in housing prices, energy markets, and jobless rates and effects related to the conflict in Ukraine or other geopolitical events); catastrophic events, health crises and pandemics; susceptibility of the products we sell to technological advancements, product life cycle fluctuations and changes in consumer preferences; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers and in the provision of delivery speed and options); our ability to attract and retain qualified employees; changes in market compensation rates; our expansion into health and new products, services and technologies; our focus on services as a strategic priority; our reliance on key vendors and mobile network carriers (including product availability); our ability to maintain positive brand perception and recognition; our ability to effectively manage strategic ventures, alliances or acquisitions; our ability to effectively manage our real estate portfolio; inability of vendors or service providers to perform components our supply chain (impacting our stores or other aspects of our operations) and other various functions of our business; risks arising from and potentially unique to our exclusive brands products; our reliance on our information technology systems, internet and telecommunications access and capabilities; our ability to prevent or effectively respond to a cyber-attack, privacy or security breach; product safety and quality concerns; changes to labor or employment laws or regulations; risks arising from statutory, regulatory and legal developments (including statutes and/or regulations related to tax or privacy); evolving corporate governance and public disclosure regulations and expectations (including, but not limited to, cybersecurity and environmental, social and governance matters); risks arising from our international activities (including those related to the conflict in Ukraine or fluctuations in foreign currency exchange rates) and those of our vendors; failure to effectively manage our costs; our dependence on cash flows and net earnings generated during the fourth fiscal quarter; pricing investments and promotional activity; economic or regulatory developments that might affect our ability to provide attractive promotional financing; constraints in the capital markets; changes to our vendor credit terms; changes in our credit ratings; failure to meet financial-performance guidance or other forward-looking statements; and general economic uncertainty in key global markets and worsening of global economic conditions or low levels of economic growth. We caution that the foregoing list of important factors is not complete. Any forward-looking statements speak only as of the date they are made and we assume no obligation to update any forward-looking statement that we may make.

BEST BUY CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS ($ and shares in millions, except per share amounts) (Unaudited and subject to reclassification)
	Three Months Ended						Six Months Ended
	July 29, 2023			July 30, 2022			July 29, 2023			July 30, 2022
Revenue	$	9,583		$	10,329		$	19,050		$	20,976
Cost of sales		7,363			8,042			14,680			16,336
Gross profit		2,220			2,287			4,370			4,640
Gross profit %		23.2	%		22.1	%		22.9	%		22.1	%
Selling, general and administrative expenses		1,879			1,882			3,727			3,772
SG&A %		19.6	%		18.2	%		19.6	%		18.0	%
Restructuring charges		(7	)		34			(16	)		35
Operating income		348			371			659			833
Operating income %		3.6	%		3.6	%		3.5	%		4.0	%
Other income (expense):
Gain on sale of subsidiary, net		21			-			21			-
Investment income (expense) and other		12			3			33			(2	)
Interest expense		(12	)		(7	)		(24	)		(13	)
Earnings before income tax expense and equity in income (loss) of affiliates		369			367			689			818
Income tax expense		96			58			171			168
Effective tax rate		26.1	%		15.6	%		24.8	%		20.5	%
Equity in income (loss) of affiliates		1			(3	)		-			(3	)
Net earnings	$	274		$	306		$	518		$	647
Basic earnings per share	$	1.25		$	1.36		$	2.37		$	2.86
Diluted earnings per share	$	1.25		$	1.35		$	2.36		$	2.85
Weighted-average common shares outstanding:
Basic		218.6			225.4			218.7			226.1
Diluted		219.0			226.1			219.5			227.2

BEST BUY CO., INC. CONDENSED CONSOLIDATED BALANCE SHEETS ($ in millions) (Unaudited and subject to reclassification)
	July 29, 2023		July 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	1,093	$	840
Receivables, net		856		840
Merchandise inventories		5,651		6,043
Other current assets		704		621
Total current assets		8,304		8,344
Property and equipment, net		2,305		2,319
Operating lease assets		2,813		2,796
Goodwill		1,383		1,385
Other assets		513		575
Total assets	$	15,318	$	15,419
Liabilities and equity
Current liabilities:
Accounts payable	$	5,471	$	5,406
Unredeemed gift card liabilities		250		273
Deferred revenue		996		1,133
Accrued compensation and related expenses		377		374
Accrued liabilities		709		820
Current portion of operating lease liabilities		615		629
Current portion of long-term debt		15		15
Total current liabilities		8,433		8,650
Long-term operating lease liabilities		2,254		2,221
Long-term liabilities		651		472
Long-term debt		1,145		1,184
Equity		2,835		2,892
Total liabilities and equity	$	15,318	$	15,419

BEST BUY CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in millions) (Unaudited and subject to reclassification)
	Six Months Ended
	July 29, 2023			July 30, 2022
Operating activities
Net earnings	$	518		$	647
Adjustments to reconcile net earnings to total cash provided by (used in) operating activities:
Depreciation and amortization		473			453
Restructuring charges		(16	)		35
Stock-based compensation		75			65
Gain on sale of subsidiary, net		(21	)		-
Other, net		2			19
Changes in operating assets and liabilities:
Receivables		289			201
Merchandise inventories		(508	)		(79	)
Other assets		(32	)		(13	)
Accounts payable		(206	)		(1,434	)
Income taxes		(148	)		42
Other liabilities		(245	)		(645	)
Total cash provided by (used in) operating activities		181			(709	)
Investing activities
Additions to property and equipment		(395	)		(441	)
Purchases of investments		(2	)		(46	)
Net proceeds from sale of subsidiary		14			-
Other, net		2			3
Total cash used in investing activities		(381	)		(484	)
Financing activities
Repurchase of common stock		(158	)		(465	)
Dividends paid		(402	)		(397	)
Other, net		-			1
Total cash used in financing activities		(560	)		(861	)
Effect of exchange rate changes on cash and cash equivalents		(2	)		1
Decrease in cash, cash equivalents and restricted cash		(762	)		(2,053	)
Cash, cash equivalents and restricted cash at beginning of period		2,253			3,205
Cash, cash equivalents and restricted cash at end of period	$	1,491		$	1,152

BEST BUY CO., INC. SEGMENT INFORMATION ($ in millions) (Unaudited and subject to reclassification)
	Three Months Ended						Six Months Ended
Domestic Segment Results	July 29, 2023			July 30, 2022			July 29, 2023			July 30, 2022
Revenue	$	8,890		$	9,569		$	17,691		$	19,463
Comparable sales % change		(6.3	)%		(12.7	)%		(8.4	)%		(10.6	)%
Comparable online sales % change		(7.1	)%		(14.7	)%		(9.7	)%		(14.8	)%
Gross profit	$	2,052		$	2,109		$	4,044		$	4,279
Gross profit as a % of revenue		23.1	%		22.0	%		22.9	%		22.0	%
SG&A	$	1,730		$	1,732		$	3,440		$	3,473
SG&A as a % of revenue		19.5	%		18.1	%		19.4	%		17.8	%
Operating income	$	329		$	343		$	619		$	772
Operating income as a % of revenue		3.7	%		3.6	%		3.5	%		4.0	%
Domestic Segment Non-GAAP Results^1
Gross profit	$	2,052		$	2,109		$	4,044		$	4,279
Gross profit as a % of revenue		23.1	%		22.0	%		22.9	%		22.0	%
SG&A	$	1,709		$	1,710		$	3,399		$	3,429
SG&A as a % of revenue		19.2	%		17.9	%		19.2	%		17.6	%
Operating income	$	343		$	399		$	645		$	850
Operating income as a % of revenue		3.9	%		4.2	%		3.6	%		4.4	%
	Three Months Ended						Six Months Ended
International Segment Results	July 29, 2023			July 30, 2022			July 29, 2023			July 30, 2022
Revenue	$	693		$	760		$	1,359		$	1,513
Comparable sales % change		(5.4	)%		(4.2	)%		(5.5	)%		(2.8	)%
Gross profit	$	168		$	178		$	326		$	361
Gross profit as a % of revenue		24.2	%		23.4	%		24.0	%		23.9	%
SG&A	$	149		$	150		$	287		$	299
SG&A as a % of revenue		21.5	%		19.7	%		21.1	%		19.8	%
Operating income	$	19		$	28		$	40		$	61
Operating income as a % of revenue		2.7	%		3.7	%		2.9	%		4.0	%
International Segment Non-GAAP Results^1
Gross profit	$	168		$	178		$	326		$	361
Gross profit as a % of revenue		24.2	%		23.4	%		24.0	%		23.9	%
SG&A	$	149		$	150		$	287		$	299
SG&A as a % of revenue		21.5	%		19.7	%		21.1	%		19.8	%
Operating income	$	19		$	28		$	39		$	62
Operating income as a % of revenue		2.7	%		3.7	%		2.9	%		4.1	%

(1)	For GAAP to non-GAAP reconciliations, please refer to the attached supporting schedule titled Reconciliation of Non-GAAP Financial Measures.

BEST BUY CO., INC. REVENUE CATEGORY SUMMARY (Unaudited and subject to reclassification)
	Revenue Mix				Comparable Sales
	Three Months Ended				Three Months Ended
Domestic Segment	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Computing and Mobile Phones	41	%	42	%	(6.4	)%	(16.6	)%
Consumer Electronics	30	%	30	%	(5.7	)%	(14.7	)%
Appliances	16	%	17	%	(16.1	)%	(1.2	)%
Entertainment	6	%	5	%	9.0	%	(9.2	)%
Services	6	%	5	%	7.6	%	(8.5	)%
Other	1	%	1	%	2.4	%	15.6	%
Total	100	%	100	%	(6.3	)%	(12.7	)%
	Revenue Mix				Comparable Sales
	Three Months Ended				Three Months Ended
International Segment	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Computing and Mobile Phones	45	%	43	%	(2.4	)%	(7.6	)%
Consumer Electronics	28	%	29	%	(10.4	)%	(4.8	)%
Appliances	13	%	14	%	(6.1	)%	6.8	%
Entertainment	7	%	7	%	2.5	%	(5.8	)%
Services	5	%	5	%	4.6	%	(0.4	)%
Other	2	%	2	%	(38.1	)%	12.6	%
Total	100	%	100	%	(5.4	)%	(4.2	)%

BEST BUY CO., INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
($ in millions, except per share amounts)
(Unaudited and subject to reclassification)
The following information provides reconciliations of the most comparable financial measures presented in accordance with accounting principles generally accepted in the U.S. (GAAP financial measures) to presented non-GAAP financial measures. The company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP financial measures. Generally, presented non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and intangible asset impairments, price-fixing settlements, gains and losses on subsidiaries and certain investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when the company believes this provides greater clarity to management and investors. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, the GAAP financial measures presented in this earnings release and the company’s financial statements and other publicly filed reports. Non-GAAP financial measures as presented herein may not be comparable to similarly titled measures used by other companies.
	Three Months Ended									Three Months Ended
	July 29, 2023									July 30, 2022
	Domestic			International			Consolidated			Domestic			International			Consolidated
SG&A	$	1,730		$	149		$	1,879		$	1,732		$	150		$	1,882
% of revenue		19.5	%		21.5	%		19.6	%		18.1	%		19.7	%		18.2	%
Intangible asset amortization^1		(21	)		-			(21	)		(22	)		-			(22	)
Non-GAAP SG&A	$	1,709		$	149		$	1,858		$	1,710		$	150		$	1,860
% of revenue		19.2	%		21.5	%		19.4	%		17.9	%		19.7	%		18.0	%
Operating income	$	329		$	19		$	348		$	343		$	28		$	371
% of revenue		3.7	%		2.7	%		3.6	%		3.6	%		3.7	%		3.6	%
Intangible asset amortization^1		21			-			21			22			-			22
Restructuring charges^2		(7	)		-			(7	)		34			-			34
Non-GAAP operating income	$	343		$	19		$	362		$	399		$	28		$	427
% of revenue		3.9	%		2.7	%		3.8	%		4.2	%		3.7	%		4.1	%
Effective tax rate								26.1	%								15.6	%
Intangible asset amortization^1								(0.4	)%								0.4	%
Restructuring charges^2								0.4	%								0.7	%
Loss on investments								0.5	%								-	%
Non-GAAP effective tax rate								26.6	%								16.7	%

	Three Months Ended									Three Months Ended
	July 29, 2023									July 30, 2022
	Pretax Earnings			Net of Tax^4			Per Share			Pretax Earnings		Net of Tax^4		Per Share
Diluted EPS							$	1.25						$	1.35
Intangible asset amortization^1	$	21		$	21			0.10		$	22	$	17		0.07
Restructuring charges^2		(7	)		(7	)		(0.03	)		34		26		0.12
Loss on investments		2			2			-			-		-		-
Gain on sale of subsidiary, net^3		(21	)		(21	)		(0.10	)		-		-		-
Non-GAAP diluted EPS							$	1.22						$	1.54

	Six Months Ended									Six Months Ended
	July 29, 2023									July 30, 2022
	Domestic			International			Consolidated			Domestic			International			Consolidated
SG&A	$	3,440		$	287		$	3,727		$	3,473		$	299		$	3,772
% of revenue		19.4	%		21.1	%		19.6	%		17.8	%		19.8	%		18.0	%
Intangible asset amortization^1		(41	)		-			(41	)		(44	)		-			(44	)
Non-GAAP SG&A	$	3,399		$	287		$	3,686		$	3,429		$	299		$	3,728
% of revenue		19.2	%		21.1	%		19.3	%		17.6	%		19.8	%		17.8	%
Operating income	$	619		$	40		$	659		$	772		$	61		$	833
% of revenue		3.5	%		2.9	%		3.5	%		4.0	%		4.0	%		4.0	%
Intangible asset amortization^1		41			-			41			44			-			44
Restructuring charges^2		(15	)		(1	)		(16	)		34			1			35
Non-GAAP operating income	$	645		$	39		$	684		$	850		$	62		$	912
% of revenue		3.6	%		2.9	%		3.6	%		4.4	%		4.1	%		4.3	%
Effective tax rate								24.8	%								20.5	%
Intangible asset amortization^1								0.4	%								0.2	%
Restructuring charges^2								(0.1	)%								0.1	%
Non-GAAP effective tax rate								25.1	%								20.8	%

	Six Months Ended									Six Months Ended
	July 29, 2023									July 30, 2022
	Pretax Earnings			Net of Tax^4			Per Share			Pretax Earnings		Net of Tax^4		Per Share
Diluted EPS							$	2.36						$	2.85
Intangible asset amortization^1	$	41		$	36			0.16		$	44	$	34		0.14
Restructuring charges^2		(16	)		(14	)		(0.06	)		35		27		0.12
Loss on investments		2			2			0.01			-		-		-
Gain on sale of subsidiary, net^3		(21	)		(21	)		(0.10	)		-		-		-
Non-GAAP diluted EPS							$	2.37						$	3.11

(1)	Represents the non-cash amortization of definite-lived intangible assets associated with acquisitions, including customer relationships, tradenames and developed technology assets.
(2)	Represents charges related to employee termination benefits and subsequent adjustments from higher-than-expected employee retention related to previously planned organizational changes.
(3)	Represents the gain on sale of a Mexico subsidiary subsequent to our exit from operations in Mexico.
(4)	The non-GAAP adjustments primarily relate to the U.S. and Mexico. As such, the forecasted annual income tax charge on the U.S. non-GAAP adjustments is calculated using the statutory tax rate of 24.5%. There is no forecasted annual income tax benefit for Mexico non-GAAP items, as there is no forecasted annual tax expense on the income in the calculation of GAAP income tax expense.

Return on Assets and Non-GAAP Return on Investment   The tables below provide calculations of return on assets ("ROA") (GAAP financial measure) and non-GAAP return on investment (“ROI”) (non-GAAP financial measure) for the periods presented. The company believes ROA is the most directly comparable financial measure to ROI. Non-GAAP ROI is defined as non-GAAP adjusted operating income after tax divided by average invested operating assets. All periods presented below apply this methodology consistently. The company believes non-GAAP ROI is a meaningful metric for investors to evaluate capital efficiency because it measures how key assets are deployed by adjusting operating income and total assets for the items noted below. This method of determining non-GAAP ROI may differ from other companies' methods and therefore may not be comparable to those used by other companies.
Return on Assets ("ROA")	July 29, 2023^1			July 30, 2022^1
Net earnings	$	1,290		$	1,772
Total assets		16,130			17,702
ROA		8.0	%		10.0	%
Non-GAAP Return on Investment ("ROI")	July 29, 2023^1			July 30, 2022^1
Numerator
Operating income	$	1,621		$	2,306
Add: Non-GAAP operating income adjustments^2		179			136
Add: Operating lease interest^3		113			110
Less: Income taxes^4		(469	)		(625	)
Add: Depreciation		855			806
Add: Operating lease amortization^5		666			653
Adjusted operating income after tax	$	2,965		$	3,386
Denominator
Total assets	$	16,130		$	17,702
Less: Excess cash^6		(346	)		(1,374	)
Add: Accumulated depreciation and amortization^7		5,071			6,212
Less: Adjusted current liabilities^8		(8,706	)		(9,866	)
Average invested operating assets	$	12,149		$	12,674
Non-GAAP ROI		24.4	%		26.7	%

(1)	Income statement accounts represent the activity for the trailing 12 months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balances for the trailing 12 months ended as of each of the balance sheet dates.
(2)	Non-GAAP operating income adjustments include continuing operations adjustments for intangible asset amortization and restructuring charges. Additional details regarding these adjustments are included in the Reconciliation of Non-GAAP Financial Measures schedule within the company’s earnings releases.
(3)	Operating lease interest represents the add-back to operating income to approximate the total interest expense that the company would incur if its operating leases were owned and financed by debt. The add-back is approximated by multiplying average operating lease assets by 4%, which approximates the interest rate on the company’s operating lease liabilities.
(4)	Income taxes are approximated by using a blended statutory rate at the Enterprise level based on statutory rates from the countries in which the company does business, which primarily consists of the U.S. with a statutory rate of 24.5% for the periods presented.
(5)	Operating lease amortization represents operating lease cost less operating lease interest. Operating lease cost includes short-term leases, which are immaterial, and excludes variable lease costs as these costs are not included in the operating lease asset balance.
(6)	Excess cash represents the amount of cash, cash equivalents and short-term investments greater than $1 billion, which approximates the amount of cash the company believes is necessary to run the business and may fluctuate over time.
(7)	Accumulated depreciation and amortization represents accumulated depreciation related to property and equipment and accumulated amortization related to definite-lived intangible assets.
(8)	Adjusted current liabilities represent total current liabilities less short-term debt and the current portions of operating lease liabilities and long-term debt.