HPE Reports Q3 Results

Board of Directors have declared a regular cash dividend of $0.12 per share on the company's common stock. This dividend, the fourth in Hewlett Packard Enterprise's fiscal year 2020, is payable on October 7, 2020, to stockholders of record as of the close of business on September 9, 2020.

FY 2020 Outlook

For the fiscal 2020 fourth quarter, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.02 to $0.06. For fiscal 2020 full-year Hewlett Packard Enterprise estimates GAAP diluted net loss per share of $0.35 to $0.31.

For the fiscal 2020 fourth quarter, Hewlett Packard Enterprise estimates non-GAAP diluted net EPS to be in the range of $0.32 to $0.36. Fiscal 2020 fourth quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.30 per diluted share, primarily related to transformation costs and the amortization of intangible assets.

For fiscal 2020 full-year, Hewlett Packard Enterprise estimates non-GAAP diluted net EPS to be in the range of $1.30 to $1.34. Fiscal 2020 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.65 per diluted share, primarily related to goodwill impairment, transformation costs, amortization of intangible assets, and acquisition, disposition and other related charges.

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 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 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 within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise and its consolidated subsidiaries may differ materially from those expressed or implied by such forward-looking statements and assumptions. The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “aim,” “will,” “should” and similar expressions are intended to identify such forward-looking statements. 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 pandemic (“COVID-19”) and its impact on our business, operations, liquidity and capital resources, employees, customers, partners, 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; the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the costs and anticipated benefits of implementing the transformation and restructuring plans; the effects of the U.S. Tax Cuts and Jobs Act and related guidance and regulations that may be implemented; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s other filings with the Securities and Exchange Commission, including but not limited to the risks described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019, Hewlett Packard Enterprise’s Quarterly Reports on Form 10-Q for the fiscal quarters ended January 31, 2020 and April 30, 2020, Current Reports on Form 8-K, and in other filings made by Hewlett Packard Enterprise from time to time with the Securities and Exchange Commission.

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 third quarter ended July 31, 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

 

July 31,
2020

 

April 30,
2020

 

July 31,
2019

Net revenue

$

6,816

 

 

$

6,009

 

 

$

7,217

 

Costs and expenses:

 

 

 

 

 

Cost of sales

4,749

 

 

4,095

 

 

4,768

 

Research and development

455

 

 

450

 

 

481

 

Selling, general and administrative

1,131

 

 

1,109

 

 

1,253

 

Amortization of intangible assets

95

 

 

84

 

 

58

 

Impairment of goodwill (a)

 

 

865

 

 

 

Transformation costs

357

 

 

200

 

 

170

 

Disaster charges (b)

2

 

 

22

 

 

 

Acquisition, disposition and other related charges

15

 

 

18

 

 

563

 

Total costs and expenses

6,804

 

 

6,843

 

 

7,293

 

Earnings (loss) from operations

12

 

 

(834

 

(76

Interest and other, net

(71

 

(68

 

(70

Tax indemnification adjustments

(30

 

(35

 

(134

Non-service net periodic benefit credit

28

 

 

36

 

 

12

 

Earnings (loss) from equity interests

27

 

 

(10

 

3

 

Loss before taxes

(34

 

(911

 

(265

Benefit from taxes

43

 

 

90

 

 

238

 

Net earnings (loss)

$

9

 

 

$

(821

 

$

(27

Net earnings (loss) per share:

 

 

 

 

 

Basic

$

0.01

 

 

$

(0.64)

 

 

$

(0.02)

 

Diluted (c)

$

0.01

 

 

$

(0.64)

 

 

$

(0.02)

 

Cash dividends declared per share

$

 

 

$

0.1200

 

 

$

0.1125

 

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

 

 

 

 

 

Basic

1,292

 

 

1,291

 

 

1,334

 

Diluted (c)

1,300

 

 

1,291

 

 

1,334

 

 

 

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)

 

 

 

Nine months ended July 31,

 

2020

 

2019

Net revenue

$

19,774

 

 

$

21,920

 

Costs and expenses:

 

 

 

Cost of sales

13,511

 

 

14,820

 

Research and development

1,390

 

 

1,404

 

Selling, general and administrative

3,458

 

 

3,678

 

Amortization of intangible assets

299

 

 

199

 

Impairment of goodwill (a)

865

 

 

 

Transformation costs

646

 

 

302

 

Disaster charges (recovery) (b)

24

 

 

(7

Acquisition, disposition and other related charges

55

 

 

710

 

Total costs and expenses

20,248

 

 

21,106

 

(Loss) earnings from operations

(474

 

814

 

Interest and other, net

(158

 

(139

Tax indemnification adjustments

(86

 

89

 

Non-service net periodic benefit credit

101

 

 

45

 

Earnings from equity interests

50

 

 

21

 

(Loss) earnings before taxes

(567

 

830

 

Benefit (provision) for taxes

88

 

 

(261

Net (loss) earnings

$

(479

 

$

569

 

Net (loss) earnings per share:

 

 

 

Basic

$

(0.37

 

$

0.42

 

Diluted (c)

$

(0.37

 

$

0.41

 

Cash dividends declared per share

$0.2400

 

$0.3375

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

 

 

 

Basic

1,294

 

1,367

Diluted (c)

1,294

 

1,380

 

 

 

 

 

 

 

 

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 July 31,
2020

 

Diluted net
earnings
per share

 

Three months
ended April 30,
2020

 

Diluted net
earnings
per share

 

Three months
ended July 31,
2019

 

Diluted net
earnings
per share

GAAP net earnings (loss)

$

9

 

 

$

0.01

 

 

$

(821)

 

 

$

(0.64)

 

 

$

(27)

 

 

$

(0.02)

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Amortization of initial direct costs

3

 

 

 

 

3

 

 

 

 

 

 

 

Amortization of intangible assets

95

 

 

0.07

 

 

84

 

 

0.07

 

 

58

 

 

0.04

 

Impairment of goodwill (a)

 

 

 

 

865

 

 

0.67

 

 

 

 

 

Transformation costs

357

 

 

0.27

 

 

200

 

 

0.15

 

 

170

 

 

0.13

 

Disaster charges (b)

2

 

 

 

 

22

 

 

0.02

 

 

 

 

 

Acquisition, disposition and other related charges

15

 

 

0.01

 

 

25

 

 

0.02

 

 

563

 

 

0.42

 

Tax indemnification adjustments

30

 

 

0.03

 

 

35

 

 

0.03

 

 

134

 

 

0.10

 

Non-service net periodic benefit credit

(28

 

(0.02

 

(36

 

(0.03

 

(12

 

(0.01

Earnings from equity interests (d)

36

 

 

0.03

 

 

37

 

 

0.03

 

 

38

 

 

0.03

 

Adjustments for taxes

(100

 

(0.08

 

(129

 

(0.10

 

(321

 

(0.24

Non-GAAP net earnings

$

419

 

 

$

0.32

 

 

$

285

 

 

$

0.22

 

 

$

603

 

 

$

0.45

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP earnings (loss) from operations

12

 

 

 

 

(834)

 

 

 

 

(76)

 

 

 

Non-GAAP adjustments

 

 

 

 

 

 

 

 

 

 

 

Amortization of initial direct costs

3

 

 

 

 

3

 

 

 

 

 

 

 

Amortization of intangible assets

95

 

 

 

 

84

 

 

 

 

58

 

 

 

Impairment of goodwill (a)

 

 

 

 

865

 

 

 

 

 

 

 

Transformation costs

357

 

 

 

 

200

 

 

 

 

170

 

 

 

Disaster charges (b)

2

 

 

 

 

22

 

 

 

 

 

 

 

Acquisition, disposition and other related charges

15

 

 

 

 

25

 

 

 

 

563

 

 

 

Non-GAAP earnings from operations

$

484

 

 

 

 

$

365

 

 

 

 

$

715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating profit margin

0.2

%

 

 

 

(13.9

)%

 

 

 

(1.1

)%

 

 

Non-GAAP adjustments

6.9

%

 

 

 

20.0

%

 

 

 

11.0

%

 

 

Non-GAAP operating profit margin

7.1

%

 

 

 

6.1

%

 

 

 

9.9

%

 

 

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
July 31, 2020

 

Three months ended
April 30, 2020

 

Three months ended
July 31, 2019

GAAP net revenue

$

6,816

 

 

$

6,009

 

 

$

7,217

 

GAAP cost of sales

4,749

 

 

4,095

 

 

4,768

 

GAAP gross profit

$

2,067

 

 

$

1,914

 

 

$

2,449

 

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

 

Amortization of initial direct costs

$

3

 

 

$

3

 

 

$

 

Acquisition, disposition and other related charges (e)

 

 

7

 

 

 

Non-GAAP gross profit

$

2,070

 

 

$

1,924

 

 

$

2,449

 

 

 

 

 

 

 

GAAP gross profit margin

30.3

%

 

31.9

%

 

33.9

%

Non-GAAP adjustments

0.1

%

 

0.1

%

 

%

Non-GAAP gross profit margin

30.4

%

 

32.0

%

 

33.9

%

 

 

 

 

 

 

Net cash provided by operating activities

$

1,472

 

 

$

100

 

 

$

1,196

 

Investment in property, plant and equipment

(620

 

(591

 

(625

Proceeds from sale of property, plant and equipment

72

 

 

89

 

 

77

 

Free cash flow

$

924

 

 

$

(402

 

$

648

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
(In millions, except percentages and per share amounts)

 

Nine months
ended July 31,
2020

 

Diluted net
earnings
per share

 

Nine months
ended July 31,
2019

 

Diluted net
earnings per
share

GAAP net (loss) earnings

$

(479

 

$

(0.37

 

$

569

 

 

$

0.41

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Amortization of initial direct costs

9

 

 

0.01

 

 

 

 

 

Amortization of intangible assets

299

 

 

0.23

 

 

199

 

 

0.14

 

Impairment of goodwill (a)

865

 

 

0.67

 

 

 

 

 

Transformation costs

646

 

 

0.49

 

 

302

 

 

0.22

 

Disaster charges (recovery) (b)

24

 

 

0.02

 

 

(7

 

(0.01

Acquisition, disposition and other related charges

82

 

 

0.06

 

 

710

 

 

0.51

 

Tax indemnification adjustments

86

 

 

0.07

 

 

(89

 

(0.06

Non-service net periodic benefit credit

(101

 

(0.08

 

(45

 

(0.03

Earnings from equity interests (d)

110

 

 

0.09

 

 

114

 

 

0.08

 

Adjustments for taxes

(262

 

(0.21

 

19

 

 

0.02

 

Non-GAAP net earnings

$

1,279

 

 

$

0.98

 

 

$

1,772

 

 

$

1.28

 

 

 

 

 

 

 

 

 

GAAP (loss) earnings from operations

(474

)

 

 

 

$

814

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

 

 

 

Amortization of initial direct costs

9

 

 

 

 

 

 

 

Amortization of intangible assets

299

 

 

 

 

199

 

 

 

Impairment of goodwill (a)

865

 

 

 

 

 

 

 

Transformation costs

646

 

 

 

 

302

 

 

 

Disaster charges (recovery) (b)

24

 

 

 

 

(7

 

 

Acquisition, disposition and other related charges

82

 

 

 

 

710

 

 

 

Non-GAAP earnings from operations

$

1,451

 

 

 

 

$

2,018

 

 

 

 

 

 

 

 

 

 

 

GAAP operating profit margin

(2.4

)%

 

 

 

3.7

%

 

 

Non-GAAP adjustments

9.7

%

 

 

 

5.5

%

 

 

Non-GAAP operating profit margin

7.3

%

 

 

 

9.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
(In millions, except percentages and per share amounts)

 

 

 

 

 

Nine months ended July
31, 2020

 

Nine months ended July
31, 2019

GAAP net revenue

$

19,774

 

 

$

21,920

 

GAAP cost of sales

13,511

 

 

14,820

 

GAAP gross profit

$

6,263

 

 

$

7,100

 

 

 

 

 

Non-GAAP adjustments

 

 

 

Amortization of initial direct costs

$

9

 

 

$

 

Acquisition, disposition and other related charges (e)

27

 

 

 

Non-GAAP gross profit

$

6,299

 

 

$

7,100

 

 

 

 

 

GAAP gross profit margin

31.7

%

 

32.4

%

Non-GAAP adjustments

0.2

%

 

%

Non-GAAP gross profit margin

31.9

%

 

32.4

%

 

 

 

 

Net cash provided by operating activities

$

1,493

 

 

$

2,565

 

Investment in property, plant and equipment

(1,779

 

(2,153

Proceeds from sale of property, plant and equipment

623

 

 

448

 

Free cash flow

$

337

 

 

$

860

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except par value)

 

 

 

As of

 

July 31, 2020

 

October 31, 2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

8,465

 

 

$

3,753

 

Accounts receivable, net of allowance for doubtful accounts

2,856

 

 

2,957

 

Financing receivables, net of allowance for doubtful accounts

3,797

 

 

3,572

 

Inventory

3,469

 

 

2,387

 

Assets held for sale

3

 

 

46

 

Other current assets

2,793

 

 

2,428

 

Total current assets

21,383

 

 

15,143

 

Property, plant and equipment

5,709

 

 

6,054

 

Long-term financing receivables and other assets (f)

10,602

 

 

8,918

 

Investments in equity interests

2,269

 

 

2,254

 

Goodwill and intangible assets

18,276

 

 

19,434

 

Total assets

$

58,239

 

 

$

51,803

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Notes payable and short-term borrowings

$

5,727

 

 

$

4,425

 

Accounts payable

6,001

 

 

5,595

 

Employee compensation and benefits

1,181

 

 

1,522

 

Taxes on earnings

204

 

 

186

 

Deferred revenue

3,343

 

 

3,234

 

Accrued restructuring

386

 

 

195

 

Other accrued liabilities (f)

4,768

 

 

4,002

 

Total current liabilities

21,610

 

 

19,159

 

Long-term debt

13,730

 

 

9,395

 

Other non-current liabilities (f)

6,693

 

 

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; 1,286 and 1,294 shares issued and outstanding at July 31, 2020 and October 31, 2019, respectively)

13

 

 

13

 

Additional paid-in capital

28,275

 

 

28,444

 

Accumulated deficit (g)

(8,377

 

(7,632

Accumulated other comprehensive loss (g)

(3,756

 

(3,727

Total HPE stockholders’ equity

16,155

 

 

17,098

 

Non-controlling interests

51

 

 

51

 

Total stockholders’ equity

16,206

 

 

17,149

 

Total liabilities and stockholders’ equity

$

58,239

 

 

$

51,803

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)

 

Three months ended
July 31, 2020

 

Nine months ended
July 31, 2020

Cash flows from operating activities:

 

 

 

Net earnings (loss)

$

9

 

 

$

(479

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

 

 

 

Depreciation and amortization

642

 

 

1,973

 

Impairment of goodwill

 

 

865

 

Stock-based compensation expense

55

 

 

215

 

Provision for doubtful accounts and inventory

80

 

 

208

 

Restructuring charges

305

 

 

553

 

Deferred taxes on earnings

(111

 

(214

Earnings from equity interests

(27

 

(50

Dividends received from equity investees

35

 

 

35

 

Other, net

107

 

 

115

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

(254

 

69

 

Financing receivables

(338

 

(411

Inventory

(57

 

(1,253

Accounts payable

504

 

 

431

 

Taxes on earnings

40

 

 

(85

Restructuring

(106

 

(350

Other assets and liabilities

588

 

 

(129

Net cash provided by operating activities

1,472

 

 

1,493

 

Cash flows from investing activities:

 

 

 

Investment in property, plant and equipment

(620

 

(1,779

Proceeds from sale of property, plant and equipment

72

 

 

623

 

Purchases of available-for-sale securities and other investments

(5

 

(78

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

1

 

 

29

 

Financial collateral posted

(522

 

(573

Financial collateral received

24

 

 

637

 

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

 

 

(13

Net cash used in investing activities

(1,050

 

(1,154

Cash flows from financing activities:

 

 

 

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

(46

 

36

 

Proceeds from debt, net of issuance costs

3,180

 

 

6,745

 

Payment of debt

(468

 

(1,399

Net proceeds related to stock-based award activities

13

 

 

(34

Repurchase of common stock

 

 

(355

Cash dividends paid to non-controlling interests

 

 

(8

Contributions from non-controlling interests

 

 

1

 

Cash dividends paid

(154

 

(464

Net cash provided by financing activities

2,525

 

 

4,522

 

Increase in cash, cash equivalents and restricted cash

2,947

 

 

4,861

 

Cash, cash equivalents and restricted cash at beginning of period

5,990

 

 

4,076

 

Cash, cash equivalents and restricted cash at end of period

$

8,937

 

 

$

8,937

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)

 

 

 

 

 

Three months ended

 

 

July 31,
2020

 

April 30,
2020

 

July 31,
2019

Net revenue: (h)

 

 

 

 

 

 

Compute

 

$

3,389

 

 

$

2,640

 

 

$

3,400

 

HPC & MCS

 

649

 

 

589

 

 

633

 

Storage

 

1,128

 

 

1,086

 

 

1,255

 

A & PS

 

226

 

 

237

 

 

242

 

Intelligent Edge

 

684

 

 

665

 

 

781

 

Financial Services

 

811

 

 

833

 

 

888

 

Corporate Investments

 

119

 

 

124

 

 

130

 

Total segment net revenue

 

7,006

 

 

6,174

 

 

7,329

 

Elimination of intersegment net revenue

 

(190

 

(165

 

(112

Total Hewlett Packard Enterprise consolidated net revenue

 

$

6,816

 

 

$

6,009

 

 

$

7,217

 

 

 

 

 

 

 

 

Earnings before taxes: (h)

 

 

 

 

 

 

Compute

 

$

288

 

 

$

125

 

 

$

439

 

HPC & MCS

 

36

 

 

33

 

 

51

 

Storage

 

145

 

 

145

 

 

207

 

A & PS

 

(4

 

2

 

 

(9

Intelligent Edge

 

59

 

 

73

 

 

53

 

Financial Services

 

65

 

 

75

 

 

77

 

Corporate Investments

 

(27

 

(28

 

(25

Total segment earnings from operations

 

562

 

 

425

 

 

793

 

 

 

 

 

 

 

 

Unallocated corporate costs and eliminations

 

(65

 

(48

 

(65

Unallocated stock-based compensation expense

 

(13

)

 

(12

 

(13

Amortization of initial direct costs

 

(3

 

(3

 

 

Amortization of intangible assets

 

(95

 

(84

 

(58

Impairment of goodwill (a)

 

 

 

(865

 

 

Transformation costs

 

(357

 

(200

 

(170

Disaster charges (b)

 

(2

 

(22

 

 

Acquisition, disposition and other related charges

 

(15

 

(25

 

(563

Interest and other, net

 

(71

 

(68

 

(70

Tax indemnification adjustments

 

(30

 

(35

 

(134

Non-service net periodic benefit credit

 

28

 

 

36

 

 

12

 

Earnings (loss) from equity interests

 

27

 

 

(10)

 

 

3

 

Total Hewlett Packard Enterprise consolidated loss before taxes

 

$

(34

 

$

(911

 

$

(265

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)

 

 

 

 

 

Nine months ended July 31,

 

 

2020

 

2019

Net revenue: (h)

 

 

 

 

Compute

 

$

9,040

 

 

$

10,293

 

HPC & MCS

 

2,061

 

 

2,133

 

Storage

 

3,464

 

 

3,929

 

A & PS

 

706

 

 

743

 

Intelligent Edge

 

2,069

 

 

2,171

 

Financial Services

 

2,503

 

 

2,703

 

Corporate Investments

 

364

 

 

373

 

Total segment net revenue

 

20,207

 

 

22,345

 

Elimination of intersegment net revenue

 

(433

 

(425

Total Hewlett Packard Enterprise consolidated net revenue

 

$

19,774

 

 

$

21,920

 

 

 

 

 

 

Earnings before taxes: (h)

 

 

 

 

Compute

 

$

699

 

 

$

1,086

 

HPC & MCS

 

118

 

 

241

 

Storage

 

516

 

 

705

 

A & PS

 

(4

 

(55

Intelligent Edge

 

202

 

 

113

 

Financial Services

 

213

 

 

231

 

Corporate Investments

 

(82

 

(82

Total segment earnings from operations

 

1,662

 

 

2,239

 

 

 

 

 

 

Unallocated corporate costs and eliminations

 

(165

 

(179

Unallocated stock-based compensation expense

 

(46

 

(42

Amortization of initial direct costs

 

(9

 

 

Amortization of intangible assets

 

(299

 

(199

Impairment of goodwill (a)

 

(865

 

 

Transformation costs

 

(646

 

(302

Disaster (charges) recovery (b)

 

(24

 

7

 

Acquisition, disposition and other related charges

 

(82

 

(710

Interest and other, net

 

(158

 

(139

Tax indemnification adjustments

 

(86

 

89

 

Non-service net periodic benefit credit

 

101

 

 

45

 

Earnings from equity interests

 

50

 

 

21

 

Total Hewlett Packard Enterprise consolidated (loss) earnings before taxes

 

$

(567

 

$

830

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions, except percentages)

 

 

 

 

 

Three months ended

 

Change (%)

 

July 31,
2020

 

April 30,
2020

 

July 31,
2019

 

Q/Q

 

Y/Y

Net revenue: (h)

 

 

 

 

 

 

 

 

 

Compute

$

3,389

 

 

$

2,640

 

 

$

3,400

 

 

28

%

 

%

HPC & MCS

649

 

 

589

 

 

633

 

 

10

%

 

3

%

Storage

1,128

 

 

1,086

 

 

1,255

 

 

4

%

 

(10

%)

A & PS

226

 

 

237

 

 

242

 

 

(5

%)

 

(7

%)

Intelligent Edge

684

 

 

665

 

 

781

 

 

3

%

 

(12

%)

Financial Services

811

 

 

833

 

 

888

 

 

(3

%)

 

(9

%)

Corporate Investments

119

 

 

124

 

 

130

 

 

(4

%)

 

(8

%)

Total segment net revenue

7,006

 

 

6,174

 

 

7,329

 

 

13

%

 

(4

%)

Elimination of intersegment net revenue

(190

 

(165

 

(112

 

15

%

 

70

%

Total Hewlett Packard Enterprise consolidated net revenue

$

6,816

 

 

$

6,009

 

 

$

7,217

 

 

13

%

 

(6

%)

 

 

 

 

 

 

 

Nine months ended July 31,

 

2020

 

2019

 

Y/Y

Net revenue: (h)

 

 

 

 

 

Compute

$

9,040

 

 

$

10,293

 

 

(12

%)

HPC & MCS

2,061

 

 

2,133

 

 

(3

%)

Storage

3,464

 

 

3,929

 

 

(12

%)

A & PS

706

 

 

743

 

 

(5

%)

Intelligent Edge

2,069

 

 

2,171

 

 

(5

%)

Financial Services

2,503

 

 

2,703

 

 

(7

%)

Corporate Investments

364

 

 

373

 

 

(2

%)

Total segment net revenue

20,207

 

 

22,345

 

 

(10

%)

Elimination of intersegment net revenue

(433

 

(425

 

2

%

Total Hewlett Packard Enterprise consolidated net revenue

$

19,774

 

 

$

21,920

 

 

(10

%)

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT OPERATING MARGIN SUMMARY DATA
(Unaudited)

 

 

 

 

 

 

 

Three months ended

 

Change in Operating Profit
Margin (pts)

 

 

July 31, 2020

 

Q/Q

 

Y/Y

Segment operating profit margin: (h)

 

 

 

 

 

 

Compute

 

8.5

%

 

3.8

 

-4.4

HPC & MCS

 

5.5

%

 

-0.1

 

-2.6

Storage

 

12.9

%

 

-0.5

 

-3.6

A & PS

 

(1.8

)%

 

-2.6

 

1.9

Intelligent Edge

 

8.6

%

 

-2.4

 

1.8

Financial Services

 

8.0

%

 

-1.0

 

-0.7

Corporate Investments

 

(22.7

)%

 

-0.1

 

-3.5

Total segment operating profit margin

 

8.0

%

 

1.1

 

-2.8

 

 

 

 

 

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE
(Unaudited)
(In millions, except per share amounts)

 

 

 

Three months ended

 

July 31,
2020

 

April 30,
2020

 

July 31,
2019

Numerator:

 

 

 

 

 

GAAP net earnings (loss)

$

9

 

 

$

(821

 

$

(27

Non-GAAP net earnings

$

419

 

 

$

285

 

 

$

603

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

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

1,292

 

 

1,291

 

 

1,334

 

Dilutive effect of employee stock plans (c)

8

 

 

7

 

 

13

 

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

1,300

 

 

1,298

 

 

1,347

 

 

 

 

 

 

 

GAAP net earnings (loss) per share

 

 

 

 

 

Basic

$

0.01

 

 

$

(0.64

 

$

(0.02

Diluted (c)

$

0.01

 

 

$

(0.64

 

$

(0.02

 

 

 

 

 

 

Non-GAAP net earnings per share

 

 

 

 

 

Basic

$

0.32

 

 

$

0.22

 

 

$

0.45

 

Diluted (c)

$

0.32

 

 

$

0.22

 

 

$

0.45

 

 

Nine months ended July 31,

 

2020

 

2019

Numerator:

 

 

 

GAAP net (loss) earnings

$

(479

 

$

569

 

Non-GAAP net earnings

$

1,279

 

 

$

1,772

 

 

 

 

 

Denominator:

 

 

 

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

1,294

 

 

1,367

 

Dilutive effect of employee stock plans (c)

10

 

 

13

 

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

1,304

 

 

1,380

 

 

 

 

 

GAAP net (loss) earnings per share

 

 

 

Basic

$

(0.37

 

$

0.42

 

Diluted (c)

$

(0.37

 

$

0.41

 

 

 

 

 

Non-GAAP net earnings per share

 

 

 

Basic

$

0.99

 

 

$

1.30

 

Diluted (c)

$

0.98

 

 

$

1.28

 

(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 nine months ended July 31, 2020 include direct costs resulting from COVID-19. For the nine months ended July 31, 2019, represents insurance recoveries in relation to damage to our facilities in Houston, Texas due to Hurricane Harvey in fiscal 2017.

(c)

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.

(d)

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

(e)

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.

(f)

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.

(g)

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.

(h)

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").


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