HPE Delivers Q3 Results

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, 2019. 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,
2019

 

April 30,
2019

 

July 31,
2018

Net revenue(a)

$

7,217

 

 

$

7,150

 

 

$

7,764

 

Costs and expenses:

 

 

 

 

 

Cost of sales

4,768

 

 

4,845

 

 

5,399

 

Research and development

481

 

 

457

 

 

435

 

Selling, general and administrative

1,253

 

 

1,214

 

 

1,221

 

Amortization of intangible assets

58

 

 

69

 

 

72

 

Restructuring charges

 

 

 

 

(1

)

Transformation costs

170

 

 

54

 

 

126

 

Disaster charges

 

 

(7

)

 

 

Acquisition, disposition and other related charges(b)

563

 

 

84

 

 

24

 

Separation costs

 

 

 

 

(2

)

Total costs and expenses

7,293

 

 

6,716

 

 

7,274

 

(Loss) earnings from continuing operations

(76

)

 

434

 

 

490

 

Interest and other, net

(70

)

 

(18

)

 

(64

)

Tax indemnification adjustments (c)

(134

)

 

4

 

 

2

 

Non-service net periodic benefit credit (d)

12

 

 

17

 

 

26

 

Earnings from equity interests

3

 

 

3

 

 

11

 

(Loss) earnings from continuing operations before taxes

(265

)

 

440

 

 

465

 

Benefit (provision) for taxes (e)

238

 

 

(21

)

 

(13

)

Net (loss) earnings from continuing operations

(27

)

 

419

 

 

452

 

Net loss from discontinued operations

 

 

 

 

(1

)

Net (loss) earnings

$

(27

)

 

$

419

 

 

$

451

 

Net (loss) earnings per share:

 

 

 

 

 

Basic

 

 

 

 

 

Continuing operations

$

(0.02

)

 

$

0.31

 

 

$

0.30

 

Discontinued operations

 

 

 

 

 

Total basic net (loss) earnings per share

$

(0.02

)

 

$

0.31

 

 

$

0.30

 

Diluted

 

 

 

 

 

Continuing operations

$

(0.02

)

 

$

0.30

 

 

$

0.29

 

Discontinued operations

 

 

 

 

 

Total diluted net (loss) earnings per share

$

(0.02

)

 

$

0.30

 

 

$

0.29

 

Cash dividends declared per share

$

0.1125

 

 

$

0.1125

 

 

$

0.1125

 

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

 

 

 

 

 

Basic

1,334

 

 

1,367

 

 

1,513

 

Diluted

1,334

 

 

1,382

 

 

1,531

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In millions, except per share amounts)

 

 

 

Nine months ended July 31,

 

2019

 

2018

Net revenue (a)

$

21,920

 

 

$

22,906

 

Costs and expenses:

 

 

 

Cost of sales

14,820

 

 

16,114

 

Research and development

1,404

 

 

1,227

 

Selling, general and administrative

3,678

 

 

3,684

 

Amortization of intangible assets

199

 

 

222

 

Restructuring charges

 

 

14

 

Transformation costs

302

 

 

491

 

Disaster charges

(7

)

 

 

Acquisition, disposition and other related charges (b)

710

 

 

70

 

Total costs and expenses

21,106

 

 

21,822

 

Earnings from continuing operations

814

 

 

1,084

 

Interest and other, net

(139

)

 

(163

)

Tax indemnification adjustments (c)

89

 

 

(1,342

)

Non-service net periodic benefit credit (d)

45

 

 

90

 

Earnings from equity interests

21

 

 

23

 

Earnings (loss) from continuing operations before taxes

830

 

 

(308

)

(Provision) benefit for taxes (e)

(261

)

 

3,092

 

Net earnings from continuing operations

569

 

 

2,784

 

Net loss from discontinued operations

 

 

(119

)

Net earnings

$

569

 

 

$

2,665

 

Net earnings (loss) per share:

 

 

 

Basic

 

 

 

Continuing operations

$

0.42

 

 

$

1.79

 

Discontinued operations

 

 

(0.07

)

Total basic net earnings per share

$

0.42

 

 

$

1.72

 

Diluted

 

 

 

Continuing operations

$

0.41

 

 

$

1.76

 

Discontinued operations

 

 

(0.07

)

Total diluted net earnings per share

$

0.41

 

 

$

1.69

 

Cash dividends declared per share

$

0.3375

 

 

$

0.3750

 

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

 

 

 

Basic

1,367

 

 

1,552

 

Diluted

1,380

 

 

1,578

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,

OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months
ended July 31,
2019

 

Diluted net
earnings
per share

 

Three months
ended
April 30, 2019

 

Diluted net
earnings
per share

 

Three months
ended July 31,
2018

 

Diluted net
earnings
per share

GAAP net (loss) earnings from continuing operations

$

(27

)

 

$

(0.02

)

 

$

419

 

 

$

0.30

 

 

$

452

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

58

 

 

0.04

 

 

69

 

 

0.05

 

 

72

 

 

0.05

 

Restructuring charges (d)

 

 

 

 

 

 

 

 

(1

)

 

 

Transformation costs (d)

170

 

 

0.13

 

 

54

 

 

0.04

 

 

126

 

 

0.08

 

Disaster charges

 

 

 

 

(7

)

 

(0.01

)

 

 

 

 

Acquisition, disposition and other related charges (b)

563

 

 

0.42

 

 

84

 

 

0.06

 

 

24

 

 

0.02

 

Separation costs (d)

 

 

 

 

 

 

 

 

(2

)

 

 

Tax indemnification adjustments (c)

134

 

 

0.10

 

 

(4

)

 

 

 

(2

)

 

 

Non-service net periodic benefit credit (d)

(12

)

 

(0.01

)

 

(17

)

 

(0.01

)

 

(26

)

 

(0.02

)

Loss from equity interests (f)

38

 

 

0.03

 

 

38

 

 

0.03

 

 

38

 

 

0.02

 

Adjustments for taxes (e)(g)

(321

)

 

(0.24

)

 

(57

)

 

(0.04

)

 

(42

)

 

(0.02

)

Non-GAAP net earnings from continuing operations

$

603

 

 

$

0.45

 

 

$

579

 

 

$

0.42

 

 

$

639

 

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP (loss) earnings from continuing operations

$

(76

)

 

 

 

$

434

 

 

 

 

$

490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments related to continuing operations:

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

58

 

 

 

 

69

 

 

 

 

72

 

 

 

Restructuring charges (d)

 

 

 

 

 

 

 

 

(1

)

 

 

Transformation costs (d)

170

 

 

 

 

54

 

 

 

 

126

 

 

 

Disaster charges

 

 

 

 

(7

)

 

 

 

 

 

 

Acquisition, disposition and other related charges (b)

563

 

 

 

 

84

 

 

 

 

24

 

 

 

Separation costs (d)

 

 

 

 

 

 

 

 

(2

)

 

 

Non-GAAP earnings from continuing operations

$

715

 

 

 

 

$

634

 

 

 

 

$

709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin from continuing operations

(1

)%

 

 

 

6

%

 

 

 

6

%

 

 

Non-GAAP adjustments from continuing operations

11

%

 

 

 

3

%

 

 

 

3

%

 

 

Non-GAAP operating margin from continuing operations

10

%

 

 

 

9

%

 

 

 

9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss from discontinued operations

$

 

 

$

 

 

$

 

 

$

 

 

$

(1

)

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments related to discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

Adjustments for taxes

 

 

 

 

 

 

 

 

1

 

 

 

Non-GAAP net earnings from discontinued operations

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Total GAAP net (loss) earnings

$

(27

)

 

$

(0.02

)

 

$

419

 

 

$

0.30

 

 

$

451

 

 

$

0.29

 

Total Non-GAAP net earnings

$

603

 

 

$

0.45

 

 

$

579

 

 

$

0.42

 

 

$

639

 

 

$

0.42

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,

OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

 

 

 

 

Nine months
ended July 31,
2019

 

Diluted net
earnings per
share

 

Nine months
ended July 31,
2018

 

Diluted net
earnings per
share

GAAP net earnings from continuing operations

$

569

 

 

$

0.41

 

 

$

2,784

 

 

$

1.76

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Amortization of intangible assets

199

 

 

0.14

 

 

222

 

 

0.14

 

Restructuring charges (d)

 

 

 

 

14

 

 

0.01

 

Transformation costs (d)

302

 

 

0.22

 

 

491

 

 

0.31

 

Disaster charges

(7

)

 

(0.01

)

 

 

 

 

Acquisition, disposition and other related charges (b)

710

 

 

0.51

 

 

70

 

 

0.04

 

Tax indemnification adjustments (c)

(89

)

 

(0.06

)

 

1,342

 

 

0.86

 

Non-service net periodic benefit credit (d)

(45

)

 

(0.03

)

 

(90

)

 

(0.06

)

Loss from equity interests (f)

114

 

 

0.08

 

 

113

 

 

0.07

 

Adjustments for taxes (e)(g)

19

 

 

0.02

 

 

(3,281

)

 

(2.07

)

Non-GAAP net earnings from continuing operations

$

1,772

 

 

$

1.28

 

 

$

1,665

 

 

$

1.06

 

 

 

 

 

 

 

 

 

GAAP earnings from continuing operations

$

814

 

 

 

 

$

1,084

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments related to continuing operations:

 

 

 

 

 

 

 

Amortization of intangible assets

199

 

 

 

 

222

 

 

 

Restructuring charges (d)

 

 

 

 

14

 

 

 

Transformation costs (d)

302

 

 

 

 

491

 

 

 

Disaster charges

(7

)

 

 

 

 

 

 

Acquisition, disposition and other related charges (b)

710

 

 

 

 

70

 

 

 

Non-GAAP earnings from continuing operations

$

2,018

 

 

 

 

$

1,881

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin from continuing operations

4

%

 

 

 

5

%

 

 

Non-GAAP adjustments from continuing operations

5

%

 

 

 

3

%

 

 

Non-GAAP operating margin from continuing operations

9

%

 

 

 

8

%

 

 

 

 

 

 

 

 

 

 

GAAP net loss from discontinued operations

$

 

 

$

 

 

$

(119

)

 

$

(0.07

)

 

 

 

 

 

 

 

 

Non-GAAP adjustments related to discontinued operations:

 

 

 

 

 

 

 

Separation costs

 

 

 

 

51

 

 

0.03

 

Tax indemnification adjustments (c)

 

 

 

 

68

 

 

0.04

 

Non-GAAP net earnings from discontinued operations

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

Total GAAP net earnings

$

569

 

 

$

0.41

 

 

$

2,665

 

 

$

1.69

 

Total Non-GAAP net earnings

$

1,772

 

 

$

1.28

 

 

$

1,665

 

 

$

1.06

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except par value)

 

 

 

As of

 

July 31, 2019

 

October 31, 2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

3,693

 

 

$

4,880

 

Accounts receivable

2,965

 

 

3,263

 

Financing receivables

3,567

 

 

3,396

 

Inventory

2,216

 

 

2,447

 

Assets held for sale

52

 

 

6

 

Other current assets (h)

2,624

 

 

3,280

 

Total current assets

15,117

 

 

17,272

 

Property, plant and equipment

6,000

 

 

6,138

 

Long-term financing receivables and other assets

9,092

 

 

11,359

 

Investments in equity interests

2,346

 

 

2,398

 

Goodwill and intangible assets

18,205

 

 

18,326

 

Total assets

$

50,760

 

 

$

55,493

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Notes payable and short-term borrowings

$

2,207

 

 

$

2,005

 

Accounts payable

5,203

 

 

6,092

 

Employee compensation and benefits

1,454

 

 

1,412

 

Taxes on earnings

160

 

 

378

 

Deferred revenue

3,225

 

 

3,177

 

Accrued restructuring

223

 

 

294

 

Other accrued liabilities

4,686

 

 

3,840

 

Total current liabilities

17,158

 

 

17,198

 

Long-term debt

10,453

 

 

10,136

 

Other non-current liabilities

5,569

 

 

6,885

 

Stockholders’ equity

 

 

 

HPE stockholders’ equity:

 

 

 

Preferred stock, $0.01 par value (300 shares authorized; none issued and outstanding at July 31, 2019)

 

 

 

Common stock, $0.01 par value (9,600 shares authorized; 1,310 and 1,423 shares issued and outstanding at July 31, 2019 and October 31, 2018, respectively)

13

 

 

14

 

Additional paid-in capital

28,629

 

 

30,342

 

Accumulated deficit (j)

(7,959

)

 

(5,899

)

Accumulated other comprehensive loss

(3,150

)

 

(3,218

)

Total HPE stockholders’ equity

17,533

 

 

21,239

 

Non-controlling interests

47

 

 

35

 

Total stockholders’ equity

17,580

 

 

21,274

 

Total liabilities and stockholders’ equity

$

50,760

 

 

$

55,493

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

 

Three months ended
July 31, 2019

 

Nine months ended
July 31, 2019

Cash flows from operating activities:

 

 

 

Net earnings

$

(27

)

 

$

569

 

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

 

 

 

Depreciation and amortization

632

 

 

1,919

 

Stock-based compensation expense

58

 

 

207

 

Provision for doubtful accounts and inventory

63

 

 

181

 

Restructuring charges

94

 

 

146

 

Deferred taxes on earnings

541

 

 

885

 

Earnings from equity interests

(3

)

 

(21

)

Dividends received from equity investees

71

 

 

71

 

Other, net

89

 

 

134

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

172

 

 

315

 

Financing receivables

(293

)

 

(325

)

Inventory

(87

)

 

66

 

Accounts payable

(261

)

 

(826

)

Taxes on earnings

(936

)

 

(1,121

)

Restructuring

(63

)

 

(261

)

Other assets and liabilities

1,146

 

 

626

 

Net cash provided by operating activities

1,196

 

 

2,565

 

Cash flows from investing activities:

 

 

 

Investment in property, plant and equipment

(625

)

 

(2,153

)

Proceeds from sale of property, plant and equipment

77

 

 

448

 

Purchases of available-for-sale securities and other investments

(8

)

 

(33

)

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

10

 

 

12

 

Financial collateral posted

(17

)

 

(332

)

Financial collateral returned

233

 

 

740

 

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

(5

)

 

(81

)

Net cash used in investing activities

(335

)

 

(1,399

)

Cash flows from financing activities:

 

 

 

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

 

 

25

 

Proceeds from debt, net of issuance costs

385

 

 

1,010

 

Payment of debt

(312

)

 

(872

)

Net proceeds related to stock-based award activities

15

 

 

24

 

Repurchase of common stock

(577

)

 

(1,965

)

Cash dividends paid

(150

)

 

(461

)

Net cash used in financing activities

(639

)

 

(2,239

)

Increase (decrease) in cash, cash equivalents and restricted cash

222

 

 

(1,073

)

Cash, cash equivalents and restricted cash at beginning of period

3,789

 

 

5,084

 

Cash, cash equivalents and restricted cash at end of period (h)

$

4,011

 

 

$

4,011

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions)

 

 

 

 

 

Three months ended

 

 

July 31,
2019

 

April 30,
2019

 

July 31,
2018

Net revenue: (a)(i)

 

 

 

 

 

 

Hybrid IT

 

$

5,549

 

 

$

5,636

 

 

$

6,109

 

Intelligent Edge

 

762

 

 

666

 

 

785

 

Financial Services

 

888

 

 

896

 

 

928

 

Corporate Investments

 

130

 

 

125

 

 

134

 

Total segment net revenue

 

7,329

 

 

7,323

 

 

7,956

 

Elimination of intersegment net revenue and other

 

(112

)

 

(173

)

 

(192

)

Total Hewlett Packard Enterprise consolidated net revenue

 

$

7,217

 

 

$

7,150

 

 

$

7,764

 

 

 

 

 

 

 

 

Earnings from continuing operations before taxes: (d)(i)

 

 

 

 

 

 

Hybrid IT

 

$

704

 

 

$

645

 

 

$

624

 

Intelligent Edge

 

37

 

 

20

 

 

101

 

Financial Services

 

77

 

 

77

 

 

72

 

Corporate Investments

 

(25

)

 

(29

)

 

(25

)

Total segment earnings from operations

 

793

 

 

713

 

 

772

 

 

 

 

 

 

 

 

Unallocated corporate costs and eliminations (d)

 

(65

)

 

(64

)

 

(49

)

Unallocated stock-based compensation expense

 

(13

)

 

(15

)

 

(14

)

Amortization of intangible assets

 

(58

)

 

(69

)

 

(72

)

Restructuring charges (d)

 

 

 

 

 

1

 

Transformation costs (d)

 

(170

)

 

(54

)

 

(126

)

Disaster charges

 

 

 

7

 

 

 

Acquisition, disposition and other related charges (b)

 

(563

)

 

(84

)

 

(24

)

Separation costs (d)

 

 

 

 

 

2

 

Interest and other, net

 

(70

)

 

(18

)

 

(64

)

Tax indemnification adjustments (c)

 

(134

)

 

4

 

 

2

 

Non-service net periodic benefit credit (d)

 

12

 

 

17

 

 

26

 

Earnings from equity interests

 

3

 

 

3

 

 

11

 

Total Hewlett Packard Enterprise consolidated (loss) earnings from continuing operations before taxes

 

$

(265

)

 

$

440

 

 

$

465

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions)

 

 

 

 

 

Nine months ended July 31,

 

 

2019

 

2018

Net revenue: (a)(i)

 

 

 

 

Hybrid IT

 

$

17,155

 

 

$

18,160

 

Intelligent Edge

 

2,114

 

 

2,147

 

Financial Services

 

2,703

 

 

2,732

 

Corporate Investments

 

373

 

 

404

 

Total segment net revenue

 

22,345

 

 

23,443

 

Elimination of intersegment net revenue and other

 

(425

)

 

(537

)

Total Hewlett Packard Enterprise consolidated net revenue

 

$

21,920

 

 

$

22,906

 

 

 

 

 

 

Earnings from continuing operations before taxes: (d)(i)

 

 

 

 

Hybrid IT

 

$

2,024

 

 

$

1,787

 

Intelligent Edge

 

66

 

 

191

 

Financial Services

 

231

 

 

215

 

Corporate Investments

 

(82

)

 

(79

)

Total segment earnings from operations

 

2,239

 

 

2,114

 

 

 

 

 

 

Unallocated corporate costs and eliminations (d)

 

(179

)

 

(169

)

Unallocated stock-based compensation expense

 

(42

)

 

(64

)

Amortization of intangible assets

 

(199

)

 

(222

)

Restructuring charges (d)

 

 

 

(14

)

Transformation costs (d)

 

(302

)

 

(491

)

Disaster charges

 

7

 

 

 

Acquisition, disposition and other related charges (b)

 

(710

)

 

(70

)

Interest and other, net

 

(139

)

 

(163

)

Tax indemnification adjustments (c)

 

89

 

 

(1,342

)

Non-service net periodic benefit credit (d)

 

45

 

 

90

 

Earnings from equity interests

 

21

 

 

23

 

Total Hewlett Packard Enterprise consolidated earnings (loss) from continuing operations before taxes

 

$

830

 

 

$

(308

)

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT/BUSINESS UNIT INFORMATION

(Unaudited)

(In millions, except percentages)

 

 

 

 

 

Three months ended

 

Change (%)

 

July 31,
2019

 

April 30,
2019

 

July 31,
2018

 

Q/Q

 

Y/Y

Net revenue: (a)(i)

 

 

 

 

 

 

 

 

 

Hybrid IT

 

 

 

 

 

 

 

 

 

Hybrid IT Product

 

 

 

 

 

 

 

 

 

Compute

$

3,151

 

 

$

3,093

 

 

$

3,569

 

 

2

%

 

(12

%)

Storage

844

 

 

942

 

 

887

 

 

(10

%)

 

(5

%)

Total Hybrid IT Product

3,995

 

 

4,035

 

 

4,456

 

 

(1

%)

 

(10

%)

HPE Pointnext

1,554

 

 

1,601

 

 

1,653

 

 

(3

%)

 

(6

%)

Total Hybrid IT

5,549

 

 

5,636

 

 

6,109

 

 

(2

%)

 

(9

%)

Intelligent Edge

 

 

 

 

 

 

 

 

 

HPE Aruba Product

668

 

 

577

 

 

703

 

 

16

%

 

(5

%)

HPE Aruba Services

94

 

 

89

 

 

82

 

 

6

%

 

15

%

Total Intelligent Edge

762

 

 

666

 

 

785

 

 

14

%

 

(3

%)

Financial Services

888

 

 

896

 

 

928

 

 

(1

%)

 

(4

%)

Corporate Investments

130

 

 

125

 

 

134

 

 

4

%

 

(3

%)

Total segment net revenue

7,329

 

 

7,323

 

 

7,956

 

 

%

 

(8

%)

Elimination of intersegment net revenue and other

(112

)

 

(173

)

 

(192

)

 

(35

%)

 

(42

%)

Total Hewlett Packard Enterprise consolidated net revenue

$

7,217

 

 

$

7,150

 

 

$

7,764

 

 

1

%

 

(7

%)

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT/BUSINESS UNIT INFORMATION

(Unaudited)

(In millions, except percentages)

 

 

 

Nine months ended July 31,

 

2019

 

2018

 

Y/Y

Net revenue: (a)(i)

 

 

 

 

 

Hybrid IT

 

 

 

 

 

Hybrid IT Product

 

 

 

 

 

Compute

$

9,646

 

 

$

10,350

 

 

(7

%)

Storage

2,761

 

 

2,747

 

 

1

%

Total Hybrid IT Product

12,407

 

 

13,097

 

 

(5

%)

HPE Pointnext

4,748

 

 

5,063

 

 

(6

%)

Total Hybrid IT

17,155

 

 

18,160

 

 

(6

%)

Intelligent Edge

 

 

 

 

 

HPE Aruba Product

1,842

 

 

1,914

 

 

(4

%)

HPE Aruba Services

272

 

 

233

 

 

17

%

Total Intelligent Edge

2,114

 

 

2,147

 

 

(2

%)

Financial Services

2,703

 

 

2,732

 

 

(1

%)

Corporate Investments

373

 

 

404

 

 

(8

%)

Total segment net revenue

22,345

 

 

23,443

 

 

(5

%)

Elimination of intersegment net revenue and other

(425

)

 

(537

)

 

(21

%)

Total Hewlett Packard Enterprise consolidated net revenue

$

21,920

 

 

$

22,906

 

 

(4

%)

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT OPERATING MARGIN SUMMARY DATA

(Unaudited)

 

 

 

 

 

 

 

Three months ended

 

Change in Operating
Margin (pts)

 

 

July 31, 2019

 

Q/Q

 

Y/Y

Segment operating margin: (d)(i)

 

 

 

 

 

 

Hybrid IT

 

12.7

%

 

1.3 pts

 

2.5 pts

Intelligent Edge

 

4.9

%

 

1.9 pts

 

(8.0) pts

Financial Services

 

8.7

%

 

0.1 pts

 

0.9 pts

Corporate Investments

 

(19.2

)%

 

4.0 pts

 

(0.6) pts

Total segment operating margin

 

10.8

%

 

1.1 pts

 

1.1 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

 

July 31,

 

April 30,

 

July 31,

2019

 

2019

 

2018

Numerator:

 

 

 

 

 

GAAP net (loss) earnings from continuing operations

$

(27

)

 

$

419

 

 

$

452

 

GAAP net loss from discontinued operations

$

 

 

$

 

 

$

(1

)

Non-GAAP net earnings from continuing operations

$

603

 

 

$

579

 

 

$

639

 

Non-GAAP net earnings from discontinued operations

$

 

 

$

 

 

$

 

 

Denominator:

 

 

 

 

 

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

1,334

 

 

1,367

 

 

1,513

 

Dilutive effect of employee stock plans (k)

 

 

15

 

 

18

 

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

1,334

 

 

1,382

 

 

1,531

 

 

GAAP net (loss) earnings per share from continuing operations

 

 

 

 

 

Basic

$

(0.02

)

 

$

0.31

 

 

$

0.30

 

Diluted (k)

$

(0.02

)

 

$

0.30

 

 

$

0.29

 

 

GAAP net loss per share from discontinued operations

 

 

 

 

 

Basic

$

 

 

$

 

 

$

 

Diluted

$

 

 

$

 

 

$

 

 

Non-GAAP net earnings per share from continuing operations

 

 

 

 

 

Basic

$

0.45

 

 

$

0.42

 

 

$

0.42

 

Diluted (l)

$

0.45

 

 

$

0.42

 

 

$

0.42

 

 

Non-GAAP net earnings per share from discontinued operations

 

 

 

 

 

Basic

$

 

 

$

 

 

$

 

Diluted

$

 

 

$

 

 

$

 

 

Total Hewlett Packard Enterprise GAAP basic net (loss) earnings per share

$

(0.02

)

 

$

0.31

 

 

$

0.30

 

Total Hewlett Packard Enterprise GAAP diluted net (loss) earnings per share

$

(0.02

)

 

$

0.30

 

 

$

0.29

 

Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share

$

0.45

 

 

$

0.42

 

 

$

0.42

 

Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share

$

0.45

 

 

$

0.42

 

 

$

0.42

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE

(Unaudited)

(In millions, except per share amounts)

 

 

 

Nine months ended July 31,

 

2019

 

2018

Numerator:

 

 

 

GAAP net earnings from continuing operations

$

569

 

 

$

2,784

 

GAAP net loss from discontinued operations

$

 

 

$

(119

)

Non-GAAP net earnings from continuing operations

$

1,772

 

 

$

1,665

 

Non-GAAP net earnings from discontinued operations

$

 

 

$

 

 

 

 

 

Denominator:

 

 

 

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

1,367

 

 

1,552

 

Dilutive effect of employee stock plans (k)

13

 

 

26

 

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

1,380

 

 

1,578

 

 

 

 

 

GAAP net earnings per share from continuing operations

 

 

 

Basic

$

0.42

 

 

$

1.79

 

Diluted (k)

$

0.41

 

 

$

1.76

 

 

 

 

 

GAAP net loss per share from discontinued operations

 

 

 

Basic

$

 

 

$

(0.07

)

Diluted (m)

$

 

 

$

(0.07

)

 

 

 

 

Non-GAAP net earnings per share from continuing operations

 

 

 

Basic

$

1.30

 

 

$

1.07

 

Diluted (l)

$

1.28

 

 

$

1.06

 

 

 

 

 

Non-GAAP net earnings per share from discontinued operations

 

 

 

Basic

$

 

 

$

 

Diluted

$

 

 

$

 

 

 

 

 

Total Hewlett Packard Enterprise GAAP basic net earnings per share

$

0.42

 

 

$

1.72

 

Total Hewlett Packard Enterprise GAAP diluted net earnings per share

$

0.41

 

 

$

1.69

 

Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share

$

1.30

 

 

$

1.07

 

Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share

$

1.28

 

 

$

1.06

 

(a)

The Company adopted the new revenue recognition accounting standard (ASC 606) on a modified retrospective basis effective the first quarter of fiscal 2019. Fiscal 2019 results are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the prior revenue recognition accounting standard (ASC 605).

 

(b)

For the three and nine months ended July 31, 2019, this amount primarily included a charge related to a one-time arbitration settlement.

 

(c)

For the three and nine months ended July 31, 2019, the amount was due primarily from the effective settlement of the U.S. federal income tax audit of fiscal years 2013 through 2015 for HP Inc. The nine month period ended July 31, 2019 also included the effects of U.S. tax reform on tax attributes related to fiscal periods prior to the Separation.

 

For the nine months ended July 31, 2018 this amount primarily represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc.

 

(d)

Effective at the beginning of the first quarter of fiscal 2019, subsequent to the adoption of the accounting standards update for retirement benefits (Topic 715), the Company reclassified its non-service net periodic benefit credit from operating expense to other income and expense in its Condensed Consolidated Statements of Earnings. The Company reflected these changes retrospectively, by transferring the non-service net periodic benefit credit, a portion of which was previously allocated to the segments, and the remainder of which was reported within Unallocated corporate costs and eliminations, Transformation costs, Restructuring charges and Separation costs, to Non-service net periodic benefit credit as other income and expense for periods in fiscal 2018.

 

These changes had no impact on Hewlett Packard Enterprise's previously reported condensed consolidated GAAP net earnings, non-GAAP net earnings, GAAP net earnings per share, or non-GAAP net earnings per share.

 

(e)

For the three and nine months ended July 31, 2019, the amounts included $308 million and $264 million, respectively, of income tax benefits related to the change in pre- Separation tax liabilities for which the Company shares joint and several liability with HP Inc. and for which the Company is partially indemnified by HP Inc. under the Tax Matters Agreement. The nine month period also included $365 million of income tax charges, related to changes in U.S. federal and state valuation allowances as a result of impacts of the Tax Act and $75 million of income tax benefits on transformation costs and acquisition, disposition and other related charges.

 

For the nine months ended July 31, 2018, this amount includes a $2.0 billion benefit in connection with the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc., a $228 million benefit primarily from foreign tax credits and from the release of non U.S. valuation allowances on deferred taxes established in connection with the Everett Transaction, a $203 million benefit as a result of the liquidation of an insolvent non U.S. subsidiary, and an estimated tax benefit of $1.8 billion from the provisional application of the new tax rules including a lower federal tax rate to deferred tax assets and liabilities, partially offset by a provisional estimate of $1.1 billion of transition tax expense on accumulated non U.S. earnings.

 

(f)

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

 

(g)

Effective the first quarter of fiscal 2019, the Company uses a structural tax rate based on long-term non-GAAP financial projections.

 

(h)

The Company adopted the guidance for the classification and presentation of restricted cash in the statement of cash flows in the first quarter of fiscal 2019, beginning November 1, 2018, using the retrospective method. As a result of the adoption of this accounting standard update, as of July 31, 2019, the restricted cash balance included in cash, cash equivalents and restricted cash as disclosed in the Statements of Cash Flows above was $318 million, which was included in Other current assets in the Condensed Consolidated Balance Sheets.

 

(i)

Effective at the beginning of the first quarter of fiscal 2019, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the data center networking ("DC Networking") business, which was previously reported within the Hybrid IT Product business unit in the Hybrid IT segment, to the HPE Aruba Product and HPE Aruba Services business units within the Intelligent Edge segment; (ii) the transfer of the edge compute business, which was previously reported within the HPE Aruba Product business unit in the Intelligent Edge segment, to the Hybrid IT Product business unit within the Hybrid IT segment; and (iii) the transfer of the Communications and Media Solutions ("CMS") business, which was previously reported within the HPE Pointnext business unit in the Hybrid IT segment, to the Corporate Investments segment.

 

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, earnings from operations, net earnings or net earnings per share.

 

(j)

The Company adopted the accounting standard update for income taxes related to intra-entity transfers of assets other than inventory, using the modified retrospective method. As a result, the Company recognized $2.3 billion of income taxes as an adjustment to accumulated deficit in the first quarter of fiscal 2019.

 

(k)

GAAP 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 when it would be anti-dilutive.

 

(l)

Non-GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards.

 

(m)

Earnings/loss per share for discontinued operations was calculated by deducting the earnings per share from continuing operations from the total earnings per share.


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