HPE Reports Q2 Results

In order to achieve this level of cost savings, HPE estimates cash funding payments between $1.0 billion to $1.3 billion over the next three years.

Fiscal Year 2020 Outlook

On April 6, 2020, HPE filed an 8K to withdraw fiscal year 2020 guidance due to increased level of uncertainty in which the global COVID-19 pandemic may adversely impact business operations, financial performance and results of operations. Consistent with that filing, HPE will not be providing fiscal year 2020 third quarter or full year guidance.

1Backlog represents the price of firm orders related to fiscal 2020 second quarter and prior quarters for which work has not been performed or goods have not been delivered as of April, 30 2020.

About Hewlett Packard Enterprise

Hewlett Packard Enterprise is the global edge-to-cloud platform-as-a-service company that helps organizations accelerate outcomes by unlocking value from all of their data, everywhere. Built on decades of reimagining the future and innovating to advance the way we live and work, HPE delivers unique, open and intelligent technology solutions, with a consistent experience across all clouds and edges, to help customers develop new business models, engage in new ways, and increase operational performance. For more information, visit: www.hpe.com.

Use of non-GAAP financial information

To supplement Hewlett Packard Enterprise’s condensed consolidated financial statement information presented on a generally accepted accounting principles (GAAP) basis, Hewlett Packard Enterprise provides revenue on a constant currency basis as well as non-GAAP gross profit margin, non-GAAP operating expense, non-GAAP operating profit (Non-GAAP earnings from operations), non-GAAP operating profit margin, non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash financial measures. Hewlett Packard Enterprise also provides forecasts of non-GAAP diluted net earnings per share and free cash flow. A reconciliation of adjustments to GAAP financial measures 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 Hewlett Packard Enterprise’s management uses these non-GAAP measures to evaluate its business, the substance behind Hewlett Packard Enterprise’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Hewlett Packard Enterprise’s management compensates for those limitations, and the substantive reasons why Hewlett Packard Enterprise’s management believes that these non-GAAP measures provide useful information to investors is included under “Use of non-GAAP financial measures” further below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for revenue, gross profit margin, operating profit (earnings from operations), operating profit margin, net earnings, diluted net earnings per share, cash, cash equivalents and restricted cash, cash flow from operations, investments in property, plant and equipment, or total company debt prepared in accordance with GAAP.

Forward-looking statements

This press 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 Hewlett Packard Enterprise 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 the scope and duration of the novel coronavirus (“COVID-19”) pandemic and its impact on our business operations, liquidity and capital resources, employees, customers, supply chain, financial results and the world economy, any projections of revenue, margins, expenses, effective tax rates, the impact of the U.S. Tax Cuts and Jobs Act of 2017, net earnings, net earnings per share, cash flows, backlog, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings, restructuring charges, or other transformation actions; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of corporate transactions or contemplated acquisitions, transformation and restructuring plans and any resulting benefit, cost savings or restructuring charges, 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 Hewlett Packard Enterprise and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements or assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise’s businesses; the competitive pressures faced by Hewlett Packard Enterprise’s businesses; risks associated with executing Hewlett Packard Enterprise’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Hewlett Packard Enterprise’s products and the delivery of Hewlett Packard Enterprise’s services effectively; the protection of Hewlett Packard Enterprise’s intellectual property assets, including intellectual property licensed from third parties and intellectual property shared with its former Parent; risks associated with Hewlett Packard Enterprise’s international operations (including pandemics and public health problems, such as the outbreak of COVID-19); 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 Hewlett Packard Enterprise and its suppliers, customers, clients and partners, including any impact thereon resulting from events such as the COVID-19 pandemic; the hiring and retention of key employees; execution, integration and other risks associated with business combination and investment transactions; and the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of Hewlett Packard Enterprise's business) and the anticipated benefits of the transformation and restructuring plans; the effects of the U.S. Tax Cuts and Jobs Act and related guidance and regulations; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019, subsequent Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as applicable.

As in prior periods, the financial information set forth in this press release, including tax-related items, reflects estimates based on information available at this time. While Hewlett Packard Enterprise believes these estimates to be reasonable, these amounts could differ materially from reported amounts in the Hewlett Packard Enterprise Quarterly Report on Form 10-Q for the second quarter ended April 30, 2020. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In millions, except per share amounts)

 

 

 

Three months ended

 

April 30,
2020

 

January 31,
2020

 

April 30,
2019

Net revenue

$

6,009

 

 

$

6,949

 

 

$

7,150

 

Costs and expenses:

 

 

 

 

 

Cost of sales

 

4,095

 

 

 

4,667

 

 

 

4,845

 

Research and development

 

450

 

 

 

485

 

 

 

457

 

Selling, general and administrative

 

1,109

 

 

 

1,218

 

 

 

1,214

 

Amortization of intangible assets

 

84

 

 

 

120

 

 

 

69

 

Impairment of goodwill (a)

 

865

 

 

 

 

 

Transformation costs

 

200

 

 

 

89

 

 

 

54

 

Disaster charges (recovery) (b)

 

22

 

 

 

 

 

(7

)

Acquisition, disposition and other related charges

 

18

 

 

 

22

 

 

 

84

 

Total costs and expenses

 

6,843

 

 

 

6,601

 

 

 

6,716

 

(Loss) earnings from operations

 

(834

)

 

 

348

 

 

 

434

 

Interest and other, net

 

(68

)

 

 

(19

)

 

 

(18

)

Tax indemnification adjustments

 

(35

)

 

 

(21

)

 

 

4

 

Non-service net periodic benefit credit

 

36

 

 

 

37

 

 

 

17

 

(Loss) earnings from equity interests

 

(10

)

 

 

33

 

 

 

3

 

(Loss) earnings before taxes

 

(911

)

 

 

378

 

 

 

440

 

Benefit (provision) for taxes

 

90

 

 

 

(45

)

 

 

(21

)

Net (loss) earnings

$

(821

)

 

$

333

 

 

$

419

 

Net (loss) earnings per share:

 

 

 

 

 

Basic

$

(0.64

)

 

$

0.26

 

 

$

0.31

 

Diluted (h)

$

(0.64

)

 

$

0.25

 

 

$

0.30

 

Cash dividends declared per share

$

0.1200

 

 

$

0.1200

 

 

$

0.1125

 

Weighted-average shares used to compute net (loss) earnings per share:

 

 

 

 

 

Basic

 

1,291

 

 

 

1,300

 

 

 

1,367

 

Diluted (h)

 

1,291

 

 

 

1,315

 

 

 

1,382

 

 

 

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In millions, except per share amounts)

 

 

 

Six months ended April 30,

 

2020

 

2019

Net revenue

$

12,958

 

 

$

14,703

 

Costs and expenses:

 

 

 

Cost of sales

 

8,762

 

 

 

10,052

 

Research and development

 

935

 

 

 

923

 

Selling, general and administrative

 

2,327

 

 

 

2,425

 

Amortization of intangible assets

 

204

 

 

 

141

 

Impairment of goodwill (a)

 

865

 

 

 

Transformation costs

 

289

 

 

 

132

 

Disaster charges (recovery) (b)

 

22

 

 

 

(7

)

Acquisition, disposition and other related charges

 

40

 

 

 

147

 

Total costs and expenses

 

13,444

 

 

 

13,813

 

(Loss) earnings from operations

 

(486

)

 

 

890

 

Interest and other, net

 

(87

)

 

 

(69

)

Tax indemnification adjustments

 

(56

)

 

 

223

 

Non-service net periodic benefit credit

 

73

 

 

 

33

 

Earnings from equity interests

 

23

 

 

 

18

 

(Loss) earnings before taxes

 

(533

)

 

 

1,095

 

Benefit (provision) for taxes

 

45

 

 

 

(499

)

Net (loss) earnings

$

(488

)

 

$

596

 

Net (loss) earnings per share:

 

 

 

Basic

$

(0.38

)

 

$

0.43

 

Diluted (h)

$

(0.38

)

 

$

0.43

 

Cash dividends declared per share

$

0.2400

 

 

$

0.2250

 

Weighted-average shares used to compute net (loss) earnings per share:

 

 

 

Basic

 

1,295

 

 

 

1,384

 

Diluted (h)

 

1,295

 

 

 

1,397

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months
ended April 30,
2020

 

Diluted net
earnings
per share

 

Three months
ended

January 31,
2020

 

Diluted net
earnings
per share

 

Three months
ended April 30,
2019

 

Diluted net
earnings
per share

GAAP net (loss) earnings

$

(821

)

 

$

(0.64

)

 

 

333

 

 

$

0.25

 

 

$

419

 

 

$

0.30

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Amortization of initial direct costs

 

3

 

 

 

 

 

3

 

 

 

 

 

 

 

Amortization of intangible assets

 

84

 

 

 

0.07

 

 

 

120

 

 

 

0.09

 

 

 

69

 

 

 

0.05

 

Impairment of goodwill (a)

 

865

 

 

 

0.67

 

 

 

 

 

 

 

 

 

Transformation costs

 

200

 

 

 

0.15

 

 

 

89

 

 

 

0.07

 

 

 

54

 

 

 

0.04

 

Disaster charges (recovery) (b)

 

22

 

 

 

0.02

 

 

 

 

 

 

 

(7

)

 

 

(0.01

)

Acquisition, disposition and other related charges

 

25

 

 

 

0.02

 

 

 

42

 

 

 

0.03

 

 

 

84

 

 

 

0.06

 

Tax indemnification adjustments

 

35

 

 

 

0.03

 

 

 

21

 

 

 

0.02

 

 

 

(4

)

 

 

Non-service net periodic benefit credit

 

(36

)

 

 

(0.03

)

 

 

(37

)

 

 

(0.03

)

 

 

(17

)

 

 

(0.01

)

Loss from equity interests (c)

 

37

 

 

 

0.03

 

 

 

37

 

 

 

0.03

 

 

 

38

 

 

 

0.03

 

Adjustments for taxes

$

(129

)

 

 

(0.10

)

 

 

(33

)

 

 

(0.02

)

 

 

(57

)

 

 

(0.04

)

Non-GAAP net earnings

$

285

 

 

$

0.22

 

 

$

575

 

 

$

0.44

 

 

$

579

 

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP (loss) earnings from operations

$

(834

)

 

 

 

$

348

 

 

 

 

$

434

 

 

 

Non-GAAP adjustments

 

 

 

 

 

 

 

 

 

 

 

Amortization of initial direct costs

 

3

 

 

 

 

 

3

 

 

 

 

 

 

 

Amortization of intangible assets

 

84

 

 

 

 

 

120

 

 

 

 

 

69

 

 

 

Impairment of goodwill (a)

 

865

 

 

 

 

 

 

 

 

 

 

 

Transformation costs

 

200

 

 

 

 

 

89

 

 

 

 

 

54

 

 

 

Disaster charges (recovery) (b)

 

22

 

 

 

 

 

 

 

 

 

(7

)

 

 

Acquisition, disposition and other related charges

 

25

 

 

 

 

 

42

 

 

 

 

 

84

 

 

 

Non-GAAP earnings from operations

$

365

 

 

 

 

$

602

 

 

 

 

$

634

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating profit margin

 

(13.9

)%

 

 

 

 

5.0

%

 

 

 

 

6.1

%

 

 

Non-GAAP adjustments

 

20.0

%

 

 

 

 

3.7

%

 

 

 

 

2.8

%

 

 

Non-GAAP operating profit margin

 

6.1

%

 

 

 

 

8.7

%

 

 

 

 

8.9

%

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

 

 

Three months ended
April 30, 2020

 

Three months ended
January 31, 2020

 

Three months ended
April 30, 2019

GAAP net revenue

$

 

6,009

 

 

$

 

6,949

 

 

$

 

7,150

 

GAAP cost of sales

 

4,095

 

 

 

4,667

 

 

 

4,845

 

GAAP gross profit

$

 

1,914

 

 

$

 

2,282

 

 

$

 

2,305

 

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

 

Amortization of initial direct costs

$

 

3

 

 

$

 

3

 

 

$

 

 

Acquisition, disposition and other related charges (d)

 

7

 

 

 

20

 

 

 

Non-GAAP gross profit

$

 

1,924

 

 

$

 

2,305

 

 

$

 

2,305

 

 

 

 

 

 

 

GAAP gross profit margin

 

31.9

%

 

 

32.8

%

 

 

32.2

%

Non-GAAP adjustments

 

0.1

%

 

 

0.4

%

 

%

Non-GAAP gross profit margin

 

32.0

%

 

 

33.2

%

 

 

32.2

%

 

 

 

 

 

 

Net cash provided (used in) by operating activities

$

 

100

 

 

$

 

(79

)

 

$

 

987

 

Investment in property, plant and equipment

 

(591

)

 

 

(568

)

 

 

(799

)

Proceeds from sale of property, plant and equipment

 

89

 

 

 

462

 

 

 

214

 

Free cash flow

$

 

(402

)

 

$

 

(185

)

 

$

 

402

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

Six months
ended April 30,
2020

 

Diluted net
earnings per
share

 

Six months
ended April 30,
2019

 

Diluted net
earnings per
share

GAAP net (loss) earnings

$

(488

)

 

$

(0.38

)

 

$

596

 

 

$

0.43

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Amortization of initial direct costs

 

6

 

 

 

 

 

 

 

Amortization of intangible assets

 

204

 

 

 

0.17

 

 

 

141

 

 

 

0.11

 

Impairment of goodwill (a)

 

865

 

 

 

0.67

 

 

 

 

 

Transformation costs

 

289

 

 

 

0.22

 

 

 

132

 

 

 

0.09

 

Disaster charges (recovery) (b)

 

22

 

 

 

0.02

 

 

 

(7

)

 

 

(0.01

)

Acquisition, disposition and other related charges

 

67

 

 

 

0.05

 

 

 

147

 

 

 

0.11

 

Tax indemnification adjustments

 

56

 

 

 

0.04

 

 

 

(223

)

 

 

(0.16

)

Non-service net periodic benefit credit

 

(73

)

 

 

(0.06

)

 

 

(33

)

 

 

(0.02

)

Loss from equity interests (c)

 

74

 

 

 

0.06

 

 

 

76

 

 

 

0.05

 

Adjustments for taxes

 

(162

)

 

 

(0.13

)

 

 

340

 

 

 

0.24

 

Non-GAAP net earnings

$

860

 

 

$

0.66

 

 

$

1,169

 

 

$

0.84

 

 

 

 

 

 

 

 

 

GAAP (loss) earnings from operations

$

(486

)

 

 

 

$

890

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

 

 

 

Amortization of initial direct costs

 

6

 

 

 

 

 

 

 

Amortization of intangible assets

 

204

 

 

 

 

 

141

 

 

 

Impairment of goodwill (a)

 

865

 

 

 

 

 

 

 

Transformation costs

 

289

 

 

 

 

 

132

 

 

 

Disaster charges (recovery) (b)

 

22

 

 

 

 

 

(7

)

 

 

Acquisition, disposition and other related charges

 

67

 

 

 

 

 

147

 

 

 

Non-GAAP earnings from operations

$

967

 

 

 

 

$

1,303

 

 

 

 

 

 

 

 

 

 

 

GAAP operating profit margin

 

(3.8

)%

 

 

 

 

6.1

%

 

 

Non-GAAP adjustments

 

11.3

%

 

 

 

 

2.8

%

 

 

Non-GAAP operating profit margin

 

7.5

%

 

 

 

 

8.9

%

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

Six months ended April
30, 2020

 

Six months ended April
30, 2019

GAAP net revenue

$

12,958

 

 

$

14,703

 

GAAP cost of sales

 

8,762

 

 

 

10,052

 

GAAP gross profit

$

4,196

 

 

$

4,651

 

 

 

 

 

Non-GAAP adjustments

 

 

 

Amortization of initial direct costs

$

6

 

 

$

 

Acquisition, disposition and other related charges (d)

 

27

 

 

 

Non-GAAP gross profit

$

4,229

 

 

$

4,651

 

 

 

 

 

GAAP gross profit margin

 

32.4

%

 

 

31.6

%

Non-GAAP adjustments

 

0.2

%

 

%

Non-GAAP gross profit margin

 

32.6

%

 

 

31.6

%

 

 

 

 

Net cash provided by operating activities

$

21

 

 

$

1,369

 

Investment in property, plant and equipment

 

(1,159

)

 

 

(1,528

)

Proceeds from sale of property, plant and equipment

 

551

 

 

 

371

 

Free cash flow

$

(587

)

 

$

212

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except par value)

 

 

 

As of

 

April 30, 2020

 

October 31, 2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

5,131

 

 

$

3,753

 

Accounts receivable, net of allowance for doubtful accounts

 

2,610

 

 

 

2,957

 

Financing receivables, net of allowance for doubtful accounts

 

3,630

 

 

 

3,572

 

Inventory

 

3,476

 

 

 

2,387

 

Assets held for sale

 

6

 

 

 

46

 

Other current assets

 

3,130

 

 

 

2,428

 

Total current assets

 

17,983

 

 

 

15,143

 

Property, plant and equipment

 

5,588

 

 

 

6,054

 

Long-term financing receivables and other assets (e)

 

10,295

 

 

 

8,918

 

Investments in equity interests

 

2,276

 

 

 

2,254

 

Goodwill and intangible assets

 

18,373

 

 

 

19,434

 

Total assets

$

54,515

 

 

$

51,803

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Notes payable and short-term borrowings

$

5,162

 

 

$

4,425

 

Accounts payable

 

5,482

 

 

 

5,595

 

Employee compensation and benefits

 

968

 

 

 

1,522

 

Taxes on earnings

 

202

 

 

 

186

 

Deferred revenue

 

3,268

 

 

 

3,234

 

Accrued restructuring

 

198

 

 

 

195

 

Other accrued liabilities (e)

 

4,917

 

 

 

4,002

 

Total current liabilities

 

20,197

 

 

 

19,159

 

Long-term debt

 

11,553

 

 

 

9,395

 

Other non-current liabilities (e)

 

6,507

 

 

 

6,100

 

Stockholders’ equity

 

 

 

HPE stockholders’ equity:

 

 

 

Preferred stock, $0.01 par value (300 shares authorized; none issued)

 

 

 

Common stock, $0.01 par value (9,600 shares authorized; 1,282 and 1,294 shares issued and outstanding at April 30, 2020 and October 31, 2019, respectively)

 

13

 

 

 

13

 

Additional paid-in capital

 

28,207

 

 

 

28,444

 

Accumulated deficit (f)

 

(8,385

)

 

 

(7,632

)

Accumulated other comprehensive loss (f)

 

(3,625

)

 

 

(3,727

)

Total HPE stockholders’ equity

 

16,210

 

 

 

17,098

 

Non-controlling interests

 

48

 

 

 

51

 

Total stockholders’ equity

 

16,258

 

 

 

17,149

 

Total liabilities and stockholders’ equity

$

54,515

 

 

$

51,803

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

 

 

Three months ended
April 30, 2020

 

Six months ended
April 30, 2020

Cash flows from operating activities:

 

 

 

Net loss

$

(821

)

 

$

(488

)

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

641

 

 

 

1,331

 

Impairment of goodwill

 

865

 

 

 

865

 

Stock-based compensation expense

 

67

 

 

 

160

 

Provision for doubtful accounts and inventory

 

87

 

 

 

128

 

Restructuring charges

 

164

 

 

 

248

 

Deferred taxes on earnings

 

(75

)

 

 

(103

)

Loss (earnings) from equity interests

 

10

 

 

 

(23

)

Other, net

 

44

 

 

 

8

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

 

241

 

 

 

323

 

Financing receivables

 

31

 

 

 

(73

)

Inventory

 

(992

)

 

 

(1,196

)

Accounts payable

 

177

 

 

 

(73

)

Taxes on earnings

 

(98

)

 

 

(125

)

Restructuring

 

(157

)

 

 

(244

)

Other assets and liabilities

 

(84

)

 

 

(717

)

Net cash provided by operating activities

 

100

 

 

 

21

 

Cash flows from investing activities:

 

 

 

Investment in property, plant and equipment

 

(591

)

 

 

(1,159

)

Proceeds from sale of property, plant and equipment

 

89

 

 

 

551

 

Purchases of available-for-sale securities and other investments

 

(14

)

 

 

(73

)

Maturities and sales of available-for-sale securities and other investments

 

20

 

 

 

28

 

Financial collateral posted

 

(3

)

 

 

(51

)

Financial collateral received

 

466

 

 

 

613

 

Payments made in connection with business acquisitions, net of cash acquired

 

(7

)

 

 

(13

)

Net cash used in investing activities

 

(40

)

 

 

(104

)

Cash flows from financing activities:

 

 

 

Short-term borrowings with original maturities less than 90 days, net

 

(45

)

 

 

82

 

Proceeds from debt, net of issuance costs

 

3,225

 

 

 

3,565

 

Payment of debt

 

(481

)

 

 

(931

)

Net proceeds related to stock-based award activities

 

(4

)

 

 

(47

)

Repurchase of common stock

 

(151

)

 

 

(355

)

Cash dividends paid to non-controlling interests

 

(8

)

 

 

(8

)

Contributions from non-controlling interests

 

 

 

1

 

Cash dividends paid

 

(154

)

 

 

(310

)

Net cash provided by financing activities

 

2,382

 

 

 

1,997

 

Increase in cash, cash equivalents and restricted cash

 

2,442

 

 

 

1,914

 

Cash, cash equivalents and restricted cash at beginning of period

 

3,548

 

 

 

4,076

 

Cash, cash equivalents and restricted cash at end of period

$

5,990

 

 

$

5,990

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions)

 

 

 

 

 

Three months ended

 

 

April 30,
2020

 

January 31,
2020

 

April 30,
2019

Net revenue: (g)

 

 

 

 

 

 

Compute

 

$

2,640

 

 

$

3,011

 

 

$

3,318

 

HPC & MCS

 

 

589

 

 

 

823

 

 

 

721

 

Storage

 

 

1,086

 

 

 

1,250

 

 

 

1,318

 

A & PS

 

 

237

 

 

 

243

 

 

 

260

 

Intelligent Edge

 

 

665

 

 

 

720

 

 

 

685

 

Financial Services

 

 

833

 

 

 

859

 

 

 

896

 

Corporate Investments

 

 

124

 

 

 

121

 

 

 

125

 

Total segment net revenue

 

 

6,174

 

 

 

7,027

 

 

 

7,323

 

Elimination of intersegment net revenue

 

 

(165

)

 

 

(78

)

 

 

(173

)

Total Hewlett Packard Enterprise consolidated net revenue

 

$

6,009

 

 

$

6,949

 

 

$

7,150

 

 

 

 

 

 

 

 

Earnings before taxes: (g)

 

 

 

 

 

 

Compute

 

$

125

 

 

$

286

 

 

$

307

 

HPC & MCS

 

 

33

 

 

 

49

 

 

 

92

 

Storage

 

 

145

 

 

 

226

 

 

 

244

 

A & PS

 

 

2

 

 

 

(2

)

 

 

(14

)

Intelligent Edge

 

 

73

 

 

 

70

 

 

 

36

 

Financial Services

 

 

75

 

 

 

73

 

 

 

77

 

Corporate Investments

 

 

(28

)

 

 

(27

)

 

 

(29

)

Total segment earnings from operations

 

 

425

 

 

 

675

 

 

 

713

 

 

 

 

 

 

 

 

Unallocated corporate costs and eliminations

 

 

(48

)

 

 

(52

)

 

 

(64

)

Unallocated stock-based compensation expense

 

 

(12

)

 

 

(21

)

 

 

(15

)

Amortization of initial direct costs

 

 

(3

)

 

 

(3

)

 

 

Amortization of intangible assets

 

 

(84

)

 

 

(120

)

 

 

(69

)

Impairment of goodwill (a)

 

 

(865

)

 

 

 

 

Transformation costs

 

 

(200

)

 

 

(89

)

 

 

(54

)

Disaster (charges) recovery (b)

 

 

(22

)

 

 

 

 

7

 

Acquisition, disposition and other related charges

 

 

(25

)

 

 

(42

)

 

 

(84

)

Interest and other, net

 

 

(68

)

 

 

(19

)

 

 

(18

)

Tax indemnification adjustments

 

 

(35

)

 

 

(21

)

 

 

4

 

Non-service net periodic benefit credit

 

 

36

 

 

 

37

 

 

 

17

 

(Loss) earnings from equity interests

 

 

(10

)

 

 

33

 

 

 

3

 

Total Hewlett Packard Enterprise consolidated (loss) earnings before taxes

 

$

(911

)

 

$

378

 

 

$

440

 

 

 

 

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions)

 

 

 

 

 

Six months ended April 30,

 

 

 

2020

 

 

2019

Net revenue: (g)

 

 

 

 

Compute

 

$

 

5,651

 

 

$

 

6,893

 

HPC & MCS

 

 

1,412

 

 

 

1,500

 

Storage

 

 

2,336

 

 

 

2,674

 

A & PS

 

 

480

 

 

 

501

 

Intelligent Edge

 

 

1,385

 

 

 

1,390

 

Financial Services

 

 

1,692

 

 

 

1,815

 

Corporate Investments

 

 

245

 

 

 

243

 

Total segment net revenue

 

 

13,201

 

 

 

15,016

 

Elimination of intersegment net revenue

 

 

(243

)

 

 

(313

)

Total Hewlett Packard Enterprise consolidated net revenue

 

$

 

12,958

 

 

$

 

14,703

 

 

 

 

 

 

Earnings before taxes: (g)

 

 

 

 

Compute

 

 

411

 

 

 

647

 

HPC & MCS

 

 

82

 

 

 

190

 

Storage

 

 

371

 

 

 

498

 

A & PS

 

 

 

 

(46

)

Intelligent Edge

 

 

143

 

 

 

60

 

Financial Services

 

 

148

 

 

 

154

 

Corporate Investments

 

 

(55

)

 

 

(57

)

Total segment earnings from operations

 

 

1,100

 

 

 

1,446

 

 

 

 

 

 

Unallocated corporate costs and eliminations

 

 

(100

)

 

 

(114

)

Unallocated stock-based compensation expense

 

 

(33

)

 

 

(29

)

Amortization of initial direct costs

 

 

(6

)

 

 

Amortization of intangible assets

 

 

(204

)

 

 

(141

)

Impairment of goodwill (a)

 

 

(865

)

 

 

Transformation costs

 

 

(289

)

 

 

(132

)

Disaster (charges) recovery (b)

 

 

(22

)

 

 

7

 

Acquisition, disposition and other related charges

 

 

(67

)

 

 

(147

)

Interest and other, net

 

 

(87

)

 

 

(69

)

Tax indemnification adjustments

 

 

(56

)

 

 

223

 

Non-service net periodic benefit credit

 

 

73

 

 

 

33

 

Earnings from equity interests

 

 

23

 

 

 

18

 

Total Hewlett Packard Enterprise consolidated (loss) earnings before taxes

 

$

 

(533

)

 

$

 

1,095

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions, except percentages)

 

 

 

 

 

Three months ended

 

Change (%)

 

April 30,
2020

 

January 31,
2020

 

April 30,
2019

 

Q/Q

 

Y/Y

Net revenue: (g)

 

 

 

 

 

 

 

 

 

Compute

$

2,640

 

 

$

3,011

 

 

$

3,318

 

 

(12

%)

 

(20

%)

HPC & MCS

 

589

 

 

 

823

 

 

 

721

 

 

(28

%)

 

(18

%)

Storage

 

1,086

 

 

 

1,250

 

 

 

1,318

 

 

(13

%)

 

(18

%)

A & PS

 

237

 

 

 

243

 

 

 

260

 

 

(2

%)

 

(9

%)

Intelligent Edge

 

665

 

 

 

720

 

 

 

685

 

 

(8

%)

 

(3

%)

Financial Services

 

833

 

 

 

859

 

 

 

896

 

 

(3

%)

 

(7

%)

Corporate Investments

 

124

 

 

 

121

 

 

 

125

 

 

2

%

 

(1

%)

Total segment net revenue

 

6,174

 

 

 

7,027

 

 

 

7,323

 

 

(12

%)

 

(16

%)

Elimination of intersegment net revenue

 

(165

)

 

 

(78

)

 

 

(173

)

 

112

%

 

(5

%)

Total Hewlett Packard Enterprise consolidated net revenue

$

6,009

 

 

$

6,949

 

 

$

7,150

 

 

(14

%)

 

(16

%)

 

 

 

 

 

 

 

Six months ended April 30,

 

2020

 

2019

 

Y/Y

Net revenue: (g)

 

 

 

 

 

Compute

$

5,651

 

 

$

6,893

 

 

(18

%)

HPC & MCS

 

1,412

 

 

 

1,500

 

 

(6

%)

Storage

 

2,336

 

 

 

2,674

 

 

(13

%)

A&PS

 

480

 

 

 

501

 

 

(4

%)

Intelligent Edge

 

1,385

 

 

 

1,390

 

 

%

Financial Services

 

1,692

 

 

 

1,815

 

 

(7

%)

Corporate Investments

 

245

 

 

 

243

 

 

1

%

Total segment net revenue

 

13,201

 

 

 

15,016

 

 

(12

%)

Elimination of intersegment net revenue

 

(243

)

 

 

(313

)

 

(22

%)

Total Hewlett Packard Enterprise consolidated net revenue

$

12,958

 

 

$

14,703

 

 

(12

%)

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT OPERATING MARGIN SUMMARY DATA

(Unaudited)

 

 

 

 

 

 

 

Three months ended

 

Change in Operating
Margin (pts)

 

 

April 30, 2020

 

Q/Q

 

Y/Y

Segment operating profit margin: (g)

 

 

 

 

 

 

Compute

 

4.7

%

 

-4.8 pts.

 

-4.6 pts.

HPC & MCS

 

5.6

%

 

-0.4 pts.

 

-7.2 pts.

Storage

 

13.4

%

 

-4.7 pts.

 

-5.1 pts.

A & PS

 

0.8

%

 

1.6 pts.

 

6.2 pts.

Intelligent Edge

 

11.0

%

 

1.3 pts.

 

5.7 pts.

Financial Services

 

9.0

%

 

0.5 pts.

 

0.4 pts.

Corporate Investments

 

(22.6

)%

 

-0.3 pts.

 

0.6 pts.

Total segment operating profit margin

 

6.9

%

 

-2.7 pts.

 

-2.8 pts.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE

(Unaudited)

(In millions, except per share amounts)

 

 

 

Three months ended

 

April 30,
2020

 

January 31,
2020

 

April 30,
2019

Numerator:

 

 

 

 

 

GAAP net (loss) earnings

$

(821

)

 

$

333

 

 

$

419

 

Non-GAAP net earnings

$

285

 

 

$

575

 

 

$

579

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted-average shares used to compute basic net (loss) earnings per share

 

1,291

 

 

 

1,300

 

 

 

1,367

 

Dilutive effect of employee stock plans (h)

 

7

 

 

 

15

 

 

15

Weighted-average shares used to compute diluted net (loss) earnings per share

 

1,298

 

 

 

1,315

 

 

 

1,382

 

 

 

 

 

 

 

GAAP net (loss) earnings per share

 

 

 

 

 

Basic

$

(0.64

)

 

$

0.26

 

 

$

0.31

 

Diluted (h)

$

(0.64

)

 

$

0.25

 

 

$

0.30

 

 

 

 

 

 

 

Non-GAAP net earnings per share

 

 

 

 

 

Basic

$

0.22

 

 

$

0.44

 

 

$

0.42

 

Diluted (h)

$

0.22

 

 

$

0.44

 

 

$

0.42

 

 

Six months ended April 30,

 

2020

 

2019

Numerator:

 

 

 

GAAP net (loss) earnings

$

(488

)

 

$

596

 

Non-GAAP net earnings

$

860

 

 

$

1,169

 

 

 

 

 

Denominator:

 

 

 

Weighted-average shares used to compute basic net (loss) earnings per share

 

1,295

 

 

 

1,384

 

Dilutive effect of employee stock plans (h)

 

11

 

 

 

13

Weighted-average shares used to compute diluted net (loss) earnings per share

 

1,306

 

 

 

1,397

 

 

 

 

 

GAAP net earnings (loss) per share

 

 

 

Basic

$

(0.38

)

 

$

0.43

 

Diluted (h)

$

(0.38

)

 

$

0.43

 

 

 

 

 

Non-GAAP net earnings per share

 

 

 

Basic

$

0.66

 

 

$

0.84

 

Diluted (h)

$

0.66

 

 

$

0.84

 

(a)

The Company recorded $865 million of partial goodwill impairment charge in the second quarter of fiscal 2020 as it was determined that the fair value of the HPC & MCS reporting unit was below the carrying value of its net assets.

 

 

(b)

Disaster charges (recovery) for the three and six months ended April 30, 2020 primarily include direct costs resulting from COVID-19, as a result of HPE hosted, co-hosted, or sponsored event cancellations and shift to a virtual format. For the three and six months ended April 30, 2019, represents insurance recoveries in relation to damage to our facilities in Houston, Texas due to Hurricane Harvey in fiscal 2017.

 

 

(c)

Represents the amortization of basis difference adjustments related to the H3C divestiture.

 

 

(d)

For the periods presented, amounts represent Acquisition, disposition and other related charges related to a non-cash inventory fair value adjustment in connection with the acquisition of Cray, Inc., which was included in Cost of Sales.

 

 

(e)

The Company adopted the new accounting standard for leases in the first quarter of fiscal 2020 which requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset for the lease term. The Company elected the modified retrospective transition method whereby prior comparative periods are not restated. Adoption of the new lease standard resulted in the recognition of $1.0 billion of ROU assets and $1.1 billion of lease liabilities on the Company’s Condensed Consolidated Balance Sheet at November 1, 2019.

 

 

(f)

The Company adopted an accounting standard update in the first quarter of fiscal 2020 that allowed it to reclassify $43 million of stranded tax effects resulting from U.S. tax reform from accumulated other comprehensive loss into accumulated deficit.

 

 

(g)

Effective at the beginning of the first quarter of fiscal 2020, Hewlett Packard Enterprise Company ("HPE") implemented certain organizational changes to align its segment financial reporting more closely with its current business structure. As a result of these organizational changes, HPE replaced the Hybrid IT reportable segment (and the Compute, Storage and HPE Pointnext business units within it) with four new financial reporting segments: Compute, High Performance Compute & Mission-Critical Systems ("HPC & MCS"), Storage, and Advisory and Profession Services ("A & PS").

 

 

 

In addition, the Intelligent Edge segment now includes the Data Center Networking ("DC Networking") operational services business that was previously a part of the Hybrid IT Segment. The DC Networking business, other than operational services, had been transferred to the Intelligent Edge segment in a prior realignment.

 

 

 

The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the transfer of net revenue and operating profit for each of the businesses as described above. These changes had no impact on Hewlett Packard Enterprise’s previously reported consolidated net revenue, net earnings or net earnings per share ("EPS").

 

 

(h)

Diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards, but the effect is excluded when calculating GAAP diluted net (loss) per share because it would be anti-dilutive.


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