HPE Reports Fiscal 2019 Fourth Quarter and Full-Year Results

Fiscal 2020 outlook:

Hewlett Packard Enterprise maintains GAAP diluted net earnings per share outlook of $1.01 to $1.17 and non-GAAP diluted net earnings per share outlook of $1.78 to $1.94. Fiscal 2020 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.77 per diluted share, primarily related to transformation costs and the amortization of intangible assets.

Reiterates free cash flow1 guidance range of $1.9 to $2.1 billion.

1Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis, as the company cannot predict some elements that are included in reported GAAP results. Refer to the discussion of non-GAAP financial measures below for more information.

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 and revenue adjusted for Tier 1 server sales and currency, as well as non-GAAP gross margin, non-GAAP operating expense, non-GAAP operating profit, non-GAAP operating margin, non-GAAP income tax rate, non-GAAP net earnings from continuing operations, non-GAAP net earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations, non-GAAP diluted net earnings per share from discontinued operations, 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 margin, operating profit, operating margin, net earnings from continuing operations, net earnings from discontinued operations, diluted net earnings per share from continuing operations, diluted net earnings per share from discontinued operations, 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 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, 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 or restructuring charges; 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, 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; 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; 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 implementing 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, 2018 and subsequent Quarterly Reports on Form 10-Q.

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 Annual Report on Form 10-K for the fiscal year ended October 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

 

October 31,
2019

 

July 31,
2019

 

October 31,
2018

Net revenue(a)

$

7,215

 

 

$

7,217

 

 

$

7,946

 

Costs and expenses:

 

 

 

 

 

Cost of sales

4,822

 

 

4,768

 

 

5,507

 

Research and development

438

 

 

481

 

 

440

 

Selling, general and administrative

1,229

 

 

1,253

 

 

1,237

 

Amortization of intangible assets

68

 

 

58

 

 

72

 

Impairment of goodwill

 

 

 

 

88

 

Restructuring charges

 

 

 

 

5

 

Transformation costs

151

 

 

170

 

 

(77

)

Acquisition, disposition and other related charges (b)

47

 

 

563

 

 

12

 

Separation costs

 

 

 

 

9

 

Total costs and expenses

6,755

 

 

7,293

 

 

7,293

 

Earnings (loss) from continuing operations

460

 

 

(76

)

 

653

 

Interest and other, net

(38

)

 

(70

)

 

(111

)

Tax indemnification adjustments (c)

288

 

 

(134

)

 

(12

)

Non-service net periodic benefit credit (d)

14

 

 

12

 

 

31

 

(Loss) earnings from equity interests

(1

)

 

3

 

 

15

 

Earnings (loss) from continuing operations before taxes

723

 

 

(265

)

 

576

 

(Provision) benefit for taxes (e)

(243

)

 

238

 

 

(1,348

)

Net earnings (loss) from continuing operations

480

 

 

(27

)

 

(772

)

Net earnings from discontinued operations

 

 

 

 

15

 

Net earnings (loss)

$

480

 

 

$

(27

)

 

$

(757

)

Net earnings (loss) per share:

 

 

 

 

 

Basic

 

 

 

 

 

Continuing operations

$

0.37

 

 

$

(0.02

)

 

$

(0.53

)

Discontinued operations

 

 

 

 

0.01

 

Total basic net earnings (loss) per share

$

0.37

 

 

$

(0.02

)

 

$

(0.52

)

Diluted

 

 

 

 

 

Continuing operations

$

0.36

 

 

$

(0.02

)

 

$

(0.53

)

Discontinued operations

 

 

 

 

0.01

 

Total diluted net earnings (loss) per share

$

0.36

 

 

$

(0.02

)

 

$

(0.52

)

Cash dividends declared per share

$

0.1200

 

 

$

0.1125

 

 

$

0.1125

 

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

 

 

 

 

 

Basic

1,308

 

 

1,334

 

 

1,459

 

Diluted (m)

1,323

 

 

1,334

 

 

1,459

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In millions, except per share amounts)

 

 

 

Twelve months ended October 31,

 

2019

 

2018

Net revenue (a)

$

29,135

 

 

$

30,852

 

Costs and expenses:

 

 

 

Cost of sales

19,642

 

 

21,621

 

Research and development

1,842

 

 

1,667

 

Selling, general and administrative

4,907

 

 

4,921

 

Amortization of intangible assets

267

 

 

294

 

Impairment of goodwill

 

 

88

 

Restructuring charges

 

 

19

 

Transformation costs

453

 

 

414

 

Disaster charges

(7

)

 

 

Acquisition, disposition and other related charges (b)

757

 

 

82

 

Separation costs

 

 

9

 

Total costs and expenses

27,861

 

 

29,115

 

Earnings from continuing operations

1,274

 

 

1,737

 

Interest and other, net

(177

)

 

(274

)

Tax indemnification adjustments (c)

377

 

 

(1,354

)

Non-service net periodic benefit credit (d)

59

 

 

121

 

Earnings from equity interests

20

 

 

38

 

Earnings from continuing operations before taxes

1,553

 

 

268

 

(Provision) benefit for taxes (e)

(504

)

 

1,744

 

Net earnings from continuing operations

1,049

 

 

2,012

 

Net loss from discontinued operations

 

 

(104

)

Net earnings

$

1,049

 

 

$

1,908

 

Net earnings (loss) per share:

 

 

 

Basic

 

 

 

Continuing operations

$

0.78

 

 

$

1.32

 

Discontinued operations

 

 

(0.07

)

Total basic net earnings per share

$

0.78

 

 

$

1.25

 

Diluted

 

 

 

Continuing operations

$

0.77

 

 

$

1.30

 

Discontinued operations

 

 

(0.07

)

Total diluted net earnings per share

$

0.77

 

 

$

1.23

 

Cash dividends declared per share

$

0.4575

 

 

$

0.4875

 

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

 

 

 

Basic

1,353

 

 

1,529

 

Diluted

1,366

 

 

1,553

 

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 October
31, 2019

 

Diluted net
earnings
per share

 

Three months
ended
July 31, 2019

 

Diluted net
earnings
per share

 

Three months
ended October
31, 2018

 

Diluted net
earnings
per share

GAAP net earnings (loss) from continuing operations

$

480

 

 

$

0.36

 

 

$

(27

)

 

$

(0.02

)

 

$

(772

)

 

$

(0.53

)

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

68

 

 

0.05

 

 

58

 

 

0.04

 

 

72

 

 

0.05

 

Impairment of goodwill

 

 

 

 

 

 

 

 

88

 

 

0.06

 

Restructuring charges

 

 

 

 

 

 

 

 

5

 

 

 

Transformation costs (f)

151

 

 

0.11

 

 

170

 

 

0.13

 

 

(57

)

 

(0.04

)

Acquisition, disposition and other related charges (b)(g)

54

 

 

0.04

 

 

563

 

 

0.42

 

 

12

 

 

0.01

 

Separation costs

 

 

 

 

 

 

 

 

9

 

 

0.01

 

Tax indemnification adjustments (c)

(288

)

 

(0.22

)

 

134

 

 

0.10

 

 

12

 

 

0.01

 

Non-service net periodic benefit credit (d)

(14

)

 

(0.01

)

 

(12

)

 

(0.01

)

 

(31

)

 

(0.02

)

Loss from equity interests (h)

38

 

 

0.03

 

 

38

 

 

0.03

 

 

38

 

 

0.03

 

Adjustments for taxes (e)(i)

155

 

 

0.13

 

 

(321

)

 

(0.24

)

 

1,257

 

 

0.85

 

Non-GAAP net earnings from continuing operations

$

644

 

 

$

0.49

 

 

$

603

 

 

$

0.45

 

 

$

633

 

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP earnings (loss) from continuing operations

$

460

 

 

 

 

$

(76

)

 

 

 

$

653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments related to continuing operations:

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

68

 

 

 

 

58

 

 

 

 

72

 

 

 

Impairment of goodwill

 

 

 

 

 

 

 

 

88

 

 

 

Restructuring charges

 

 

 

 

 

 

 

 

5

 

 

 

Transformation costs

151

 

 

 

 

170

 

 

 

 

(77

)

 

 

Acquisition, disposition and other related charges (b)(g)

54

 

 

 

 

563

 

 

 

 

12

 

 

 

Separation costs

 

 

 

 

 

 

 

 

9

 

 

 

Non-GAAP earnings from continuing operations

$

733

 

 

 

 

$

715

 

 

 

 

$

762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin from continuing operations

6

%

 

 

 

(1

)%

 

 

 

8

%

 

 

Non-GAAP adjustments from continuing operations

4

%

 

 

 

11

%

 

 

 

2

%

 

 

Non-GAAP operating margin from continuing operations

10

%

 

 

 

10

%

 

 

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net earnings from discontinued operations

$

 

 

$

 

 

$

 

 

$

 

 

$

15

 

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments related to discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax indemnification adjustments

 

 

 

 

 

 

 

 

(11

)

 

(0.01

)

Adjustments for taxes

 

 

 

 

 

 

 

 

(4

)

 

 

Non-GAAP net earnings from discontinued operations

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Total GAAP net earnings (loss)

$

480

 

 

$

0.36

 

 

$

(27

)

 

$

(0.02

)

 

$

(757

)

 

$

(0.52

)

Total Non-GAAP net earnings

$

644

 

 

$

0.49

 

 

$

603

 

 

$

0.45

 

 

$

633

 

 

$

0.43

 

 

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)

 

 

 

 

 

 

 

 

 

Twelve months
ended October
31, 2019

 

Diluted net
earnings per
share

 

Twelve months
ended October
31, 2018

 

Diluted net
earnings per
share

GAAP net earnings from continuing operations

$

1,049

 

 

$

0.77

 

 

$

2,012

 

 

$

1.30

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Amortization of intangible assets

267

 

 

0.20

 

 

294

 

 

0.19

 

Impairment of goodwill

 

 

 

 

88

 

 

0.06

 

Restructuring charges

 

 

 

 

19

 

 

0.01

 

Transformation costs (f)

453

 

 

0.33

 

 

434

 

 

0.28

 

Disaster charges

(7

)

 

(0.01

)

 

 

 

 

Acquisition, disposition and other related charges (b)(g)

764

 

 

0.56

 

 

82

 

 

0.05

 

Separation costs

 

 

 

 

9

 

 

0.01

 

Tax indemnification adjustments (c)

(377

)

 

(0.28

)

 

1,354

 

 

0.87

 

Non-service net periodic benefit credit (d)

(59

)

 

(0.04

)

 

(121

)

 

(0.08

)

Loss from equity interests (h)

152

 

 

0.11

 

 

151

 

 

0.10

 

Adjustments for taxes (e)(i)

174

 

 

0.13

 

 

(2,024

)

 

(1.31

)

Non-GAAP net earnings from continuing operations

$

2,416

 

 

$

1.77

 

 

$

2,298

 

 

$

1.48

 

 

 

 

 

 

 

 

 

GAAP earnings from continuing operations

$

1,274

 

 

 

 

$

1,737

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments related to continuing operations:

 

 

 

 

 

 

 

Amortization of intangible assets

267

 

 

 

 

294

 

 

 

Impairment of goodwill

 

 

 

 

88

 

 

 

Restructuring charges

 

 

 

 

19

 

 

 

Transformation costs

453

 

 

 

 

414

 

 

 

Disaster charges

(7

)

 

 

 

 

 

 

Acquisition, disposition and other related charges (b)(g)

764

 

 

 

 

82

 

 

 

Separation costs

 

 

 

 

9

 

 

 

Non-GAAP earnings from continuing operations

$

2,751

 

 

 

 

$

2,643

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin from continuing operations

4

%

 

 

 

6

%

 

 

Non-GAAP adjustments from continuing operations

5

%

 

 

 

3

%

 

 

Non-GAAP operating margin from continuing operations

9

%

 

 

 

9

%

 

 

 

 

 

 

 

 

 

 

GAAP net loss from discontinued operations

$

 

 

$

 

 

$

(104

)

 

$

(0.07

)

 

 

 

 

 

 

 

 

Non-GAAP adjustments related to discontinued operations:

 

 

 

 

 

 

 

Separation costs

 

 

 

 

51

 

 

0.03

 

Tax indemnification adjustments

 

 

 

 

58

 

 

0.04

 

Adjustments for taxes

 

 

 

 

(5

)

 

 

Non-GAAP net earnings from discontinued operations

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

Total GAAP net earnings

$

1,049

 

 

$

0.77

 

 

$

1,908

 

 

$

1.23

 

Total Non-GAAP net earnings

$

2,416

 

 

$

1.77

 

 

$

2,298

 

 

$

1.48

 

 

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

 

 

 

As of

 

October 31, 2019

 

October 31, 2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

3,753

 

 

$

4,880

 

Accounts receivable, net of allowance for doubtful accounts

2,957

 

 

3,263

 

Financing receivables

3,572

 

 

3,396

 

Inventory

2,387

 

 

2,447

 

Assets held for sale

46

 

 

6

 

Other current assets (j)

2,428

 

 

3,280

 

Total current assets

15,143

 

 

17,272

 

Property, plant and equipment

6,054

 

 

6,138

 

Long-term financing receivables and other assets

8,918

 

 

11,359

 

Investments in equity interests

2,254

 

 

2,398

 

Goodwill and intangible assets

19,434

 

 

18,326

 

Total assets

$

51,803

 

 

$

55,493

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Notes payable and short-term borrowings

$

4,425

 

 

$

2,005

 

Accounts payable

5,595

 

 

6,092

 

Employee compensation and benefits

1,522

 

 

1,412

 

Taxes on earnings

186

 

 

378

 

Deferred revenue

3,234

 

 

3,177

 

Accrued restructuring

195

 

 

294

 

Other accrued liabilities

4,002

 

 

3,840

 

Total current liabilities

19,159

 

 

17,198

 

Long-term debt

9,395

 

 

10,136

 

Other non-current liabilities

6,100

 

 

6,885

 

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; 1,294 and 1,423 issued and outstanding at October 31, 2019 and October 31, 2018, respectively)

13

 

 

14

 

Additional paid-in capital

28,444

 

 

30,342

 

Accumulated deficit (l)

(7,632

)

 

(5,899

)

Accumulated other comprehensive loss

(3,727

)

 

(3,218

)

Total HPE stockholders’ equity

17,098

 

 

21,239

 

Non-controlling interests

51

 

 

35

 

Total stockholders’ equity

17,149

 

 

21,274

 

Total liabilities and stockholders’ equity

$

51,803

 

 

$

55,493

 

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

 

 

 

 

 

Three months ended
October 31, 2019

 

Twelve months ended
October 31, 2019

Cash flows from operating activities:

 

 

 

Net earnings

$

480

 

 

$

1,049

 

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

 

 

 

Depreciation and amortization

616

 

 

2,535

 

Stock-based compensation expense

61

 

 

268

 

Provision for doubtful accounts and inventory

59

 

 

240

 

Restructuring charges

75

 

 

221

 

Deferred taxes on earnings

194

 

 

1,079

 

Earnings from equity interests

1

 

 

(20

)

Dividends received from equity investees

85

 

 

156

 

Other, net

70

 

 

204

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

59

 

 

374

 

Financing receivables

(85

)

 

(410

)

Inventory

(20

)

 

46

 

Accounts payable

301

 

 

(525

)

Taxes on earnings

28

 

 

(1,093

)

Restructuring

(70

)

 

(331

)

Other assets and liabilities

(422

)

 

204

 

Net cash provided by operating activities

1,432

 

 

3,997

 

Cash flows from investing activities:

 

 

 

Investment in property, plant and equipment

(703

)

 

(2,856

)

Proceeds from sale of property, plant and equipment

149

 

 

597

 

Purchases of available-for-sale securities and other investments

(6

)

 

(39

)

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

14

 

 

26

 

Financial collateral posted

(71

)

 

(403

)

Financial collateral received

4

 

 

744

 

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

(1,445

)

 

(1,526

)

Net cash used in investing activities

(2,058

)

 

(3,457

)

Cash flows from financing activities:

 

 

 

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

(78

)

 

(53

)

Proceeds from debt, net of issuance costs

2,507

 

 

3,517

 

Payment of debt

(1,331

)

 

(2,203

)

Net proceeds related to stock-based award activities

24

 

 

48

 

Repurchase of common stock

(284

)

 

(2,249

)

Cash dividends paid

(147

)

 

(608

)

Net cash provided by (used in) financing activities

691

 

 

(1,548

)

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

65

 

 

(1,008

)

Cash, cash equivalents and restricted cash at beginning of period

4,011

 

 

5,084

 

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

$

4,076

 

 

$

4,076

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions)

 

 

 

 

 

Three months ended

 

 

October 31,
2019

 

July 31,
2019

 

October 31,
2018

Net revenue: (a)(k)

 

 

 

 

 

 

Hybrid IT

 

$

5,670

 

 

$

5,549

 

 

$

6,338

 

Intelligent Edge

 

723

 

 

762

 

 

773

 

Financial Services

 

878

 

 

888

 

 

939

 

Corporate Investments

 

134

 

 

130

 

 

139

 

Total segment net revenue

 

7,405

 

 

7,329

 

 

8,189

 

Elimination of intersegment net revenue and other

 

(190

)

 

(112

)

 

(243

)

Total Hewlett Packard Enterprise consolidated net revenue

 

$

7,215

 

 

$

7,217

 

 

$

7,946

 

 

 

 

 

 

 

 

Earnings from continuing operations before taxes: (k)

 

 

 

 

 

 

Hybrid IT

 

$

780

 

 

$

704

 

 

$

716

 

Intelligent Edge

 

29

 

 

37

 

 

86

 

Financial Services

 

74

 

 

77

 

 

71

 

Corporate Investments

 

(26

)

 

(25

)

 

(12

)

Total segment earnings from operations

 

857

 

 

793

 

 

861

 

 

 

 

 

 

 

 

Unallocated corporate costs and eliminations

 

(107

)

 

(65

)

 

(90

)

Unallocated stock-based compensation expense

 

(17

)

 

(13

)

 

(9

)

Amortization of intangible assets

 

(68

)

 

(58

)

 

(72

)

Impairment of goodwill

 

 

 

 

 

(88

)

Restructuring charges

 

 

 

 

 

(5

)

Transformation costs

 

(151

)

 

(170

)

 

77

 

Acquisition, disposition and other related charges (b)(g)

 

(54

)

 

(563

)

 

(12

)

Separation costs

 

 

 

 

 

(9

)

Interest and other, net

 

(38

)

 

(70

)

 

(111

)

Tax indemnification adjustments (c)

 

288

 

 

(134

)

 

(12

)

Non-service net periodic benefit credit (d)

 

14

 

 

12

 

 

31

 

(Loss) earnings from equity interests

 

(1

)

 

3

 

 

15

 

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

 

$

723

 

 

$

(265

)

 

$

576

 

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

 

 

 

 

 

Twelve months ended October 31,

 

 

2019

 

2018

Net revenue: (a)(k)

 

 

 

 

Hybrid IT

 

$

22,825

 

 

$

24,498

 

Intelligent Edge

 

2,837

 

 

2,920

 

Financial Services

 

3,581

 

 

3,671

 

Corporate Investments

 

507

 

 

543

 

Total segment net revenue

 

29,750

 

 

31,632

 

Elimination of intersegment net revenue and other

 

(615

)

 

(780

)

Total Hewlett Packard Enterprise consolidated net revenue

 

$

29,135

 

 

$

30,852

 

 

 

 

 

 

Earnings from continuing operations before taxes: (k)

 

 

 

 

Hybrid IT

 

$

2,804

 

 

$

2,503

 

Intelligent Edge

 

95

 

 

277

 

Financial Services

 

305

 

 

286

 

Corporate Investments

 

(108

)

 

(91

)

Total segment earnings from operations

 

3,096

 

 

2,975

 

 

 

 

 

 

Unallocated corporate costs and eliminations

 

(286

)

 

(259

)

Unallocated stock-based compensation expense

 

(59

)

 

(73

)

Amortization of intangible assets

 

(267

)

 

(294

)

Impairment of goodwill

 

 

 

(88

)

Restructuring charges

 

 

 

(19

)

Transformation costs

 

(453

)

 

(414

)

Acquisition, disposition and other related charges (b)(g)

 

(764

)

 

(82

)

Separation costs

 

 

 

(9

)

Disaster charges

 

7

 

 

 

Interest and other, net

 

(177

)

 

(274

)

Tax indemnification adjustments (c)

 

377

 

 

(1,354

)

Non-service net periodic benefit credit (d)

 

59

 

 

121

 

Earnings from equity interests

 

20

 

 

38

 

Total Hewlett Packard Enterprise consolidated earnings from continuing operations before taxes

 

$

1,553

 

 

$

268

 

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

 

 

 

 

 

Three months ended

 

Change (%)

 

October 31,
2019

 

July 31
2019

 

October 31,
2018

 

Q/Q

 

Y/Y

Net revenue: (a)(k)

 

 

 

 

 

 

 

 

 

Hybrid IT

 

 

 

 

 

 

 

 

 

Hybrid IT Product

 

 

 

 

 

 

 

 

 

Compute

$

3,233

 

 

$

3,151

 

 

$

3,707

 

 

3

%

 

(13

%)

Storage

848

 

 

844

 

 

959

 

 

 

 

(12

%)

Total Hybrid IT Product

4,081

 

 

3,995

 

 

4,666

 

 

2

%

 

(13

%)

HPE Pointnext

1,589

 

 

1,554

 

 

1,672

 

 

2

%

 

(5

%)

Total Hybrid IT

5,670

 

 

5,549

 

 

6,338

 

 

2

%

 

(11

%)

Intelligent Edge

 

 

 

 

 

 

 

 

 

HPE Aruba Product

620

 

 

668

 

 

685

 

 

(7

%)

 

(9

%)

HPE Aruba Services

103

 

 

94

 

 

88

 

 

10

%

 

17

%

Total Intelligent Edge

723

 

 

762

 

 

773

 

 

(5

%)

 

(6

%)

Financial Services

878

 

 

888

 

 

939

 

 

(1

%)

 

(6

%)

Corporate Investments

134

 

 

130

 

 

139

 

 

3

%

 

(4

%)

Total segment net revenue

7,405

 

 

7,329

 

 

8,189

 

 

1

%

 

(10

%)

Elimination of intersegment net revenue and other

(190

)

 

(112

)

 

(243

)

 

70

%

 

(22

%)

Total Hewlett Packard Enterprise consolidated net revenue

$

7,215

 

 

$

7,217

 

 

$

7,946

 

 

 

 

(9

%)

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

 

 

 

Twelve months ended October 31,

 

2019

 

2018

 

Y/Y

Net revenue: (a)(k)

 

 

 

 

 

Hybrid IT

 

 

 

 

 

Hybrid IT Product

 

 

 

 

 

Compute

$

12,879

 

 

$

14,057

 

 

(8

%)

Storage

3,609

 

 

3,706

 

 

(3

%)

Total Hybrid IT Product

16,488

 

 

17,763

 

 

(7

%)

HPE Pointnext

6,337

 

 

6,735

 

 

(6

%)

Total Hybrid IT

22,825

 

 

24,498

 

 

(7

%)

Intelligent Edge

 

 

 

 

 

HPE Aruba Product

2,462

 

 

2,599

 

 

(5

%)

HPE Aruba Services

375

 

 

321

 

 

17

%

Total Intelligent Edge

2,837

 

 

2,920

 

 

(3

%)

Financial Services

3,581

 

 

3,671

 

 

(2

%)

Corporate Investments

507

 

 

543

 

 

(7

%)

Total segment net revenue

29,750

 

 

31,632

 

 

(6

%)

Elimination of intersegment net revenue and other

(615

)

 

(780

)

 

(21

%)

Total Hewlett Packard Enterprise consolidated net revenue

$

29,135

 

 

$

30,852

 

 

(6

%)

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

 

 

 

 

 

 

 

Three months ended

 

Change in Operating
Margin (pts)

 

 

October 31, 2019

 

Q/Q

 

Y/Y

Segment operating margin: (k)

 

 

 

 

 

 

Hybrid IT

 

13.8

%

 

1.1 pts

 

2.5 pts

Intelligent Edge

 

4.0

%

 

(0.9) pts

 

(7.1) pts

Financial Services

 

8.4

%

 

(0.3) pts

 

0.8 pts

Corporate Investments

 

(19.4

)%

 

(0.2) pts

 

(10.8) pts

Total segment operating margin

 

11.6

%

 

0.8 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

 

October 31,
2019

 

July 31,
2019

 

October 31,
2018

Numerator:

 

 

 

 

 

GAAP net earnings (loss) from continuing operations

$

480

 

 

$

(27

)

 

$

(772

)

GAAP net earnings from discontinued operations

$

 

 

$

 

 

$

15

 

Non-GAAP net earnings from continuing operations

$

644

 

 

$

603

 

 

$

633

 

Non-GAAP net earnings from discontinued operations

$

 

 

$

 

 

$

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

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

1,308

 

 

1,334

 

 

1,459

 

Dilutive effect of employee stock plans (m)

15

 

 

13

 

 

17

 

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

1,323

 

 

1,347

 

 

1,476

 

 

 

 

 

 

 

GAAP net earnings (loss) per share from continuing operations

 

 

 

 

 

Basic

$

0.37

 

 

$

(0.02

)

 

$

(0.53

)

Diluted (m)

$

0.36

 

 

$

(0.02

)

 

$

(0.53

)

 

 

 

 

 

 

GAAP net earnings per share from discontinued operations

 

 

 

 

 

Basic

$

 

 

$

 

 

$

0.01

 

Diluted (m)

$

 

 

$

 

 

$

0.01

 

 

 

 

 

 

 

Non-GAAP net earnings per share from continuing operations

 

 

 

 

 

Basic

$

0.49

 

 

$

0.45

 

 

$

0.43

 

Diluted (n)

$

0.49

 

 

$

0.45

 

 

$

0.43

 

 

 

 

 

 

 

Non-GAAP net earnings per share from discontinued operations

 

 

 

 

 

Basic

$

 

 

$

 

 

$

 

Diluted

$

 

 

$

 

 

$

 

 

 

 

 

 

 

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

$

0.37

 

 

$

(0.02

)

 

$

(0.52

)

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

$

0.36

 

 

$

(0.02

)

 

$

(0.52

)

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

$

0.49

 

 

$

0.45

 

 

$

0.43

 

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

$

0.49

 

 

$

0.45

 

 

$

0.43

 

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

 

 

 

Twelve months ended October 31,

 

2019

 

2018

Numerator:

 

 

 

GAAP net earnings from continuing operations

$

1,049

 

 

$

2,012

 

GAAP net loss from discontinued operations

$

 

 

$

(104

)

Non-GAAP net earnings from continuing operations

$

2,416

 

 

$

2,298

 

Non-GAAP net earnings from discontinued operations

$

 

 

$

 

 

 

 

 

Denominator:

 

 

 

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

1,353

 

 

1,529

 

Dilutive effect of employee stock plans (m)

13

 

 

24

 

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

1,366

 

 

1,553

 

 

 

 

 

GAAP net earnings per share from continuing operations

 

 

 

Basic

$

0.78

 

 

$

1.32

 

Diluted (m)

$

0.77

 

 

$

1.30

 

 

 

 

 

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

$

1.79

 

 

$

1.50

 

Diluted (n)

$

1.77

 

 

$

1.48

 

 

 

 

 

Non-GAAP net earnings per share from discontinued operations

 

 

 

Basic

$

 

 

$

 

Diluted

$

 

 

$

 

 

 

 

 

Total Hewlett Packard Enterprise GAAP basic net earnings per share

$

0.78

 

 

$

1.25

 

Total Hewlett Packard Enterprise GAAP diluted net earnings per share

$

0.77

 

 

$

1.23

 

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

$

1.79

 

 

$

1.50

 

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

$

1.77

 

 

$

1.48

 

(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 months ended July 31, 2019 and the twelve months ended October 31, 2019, this amount primarily included a charge related to a one-time arbitration settlement.

 

(c)

For the three and twelve months ended October 31, 2019, the amount was due primarily to the termination of the Tax Matters Agreement with HP Inc. The twelve month period ended October 31, 2019 also included the impact of the effective settlement of the U.S. federal income tax audit of fiscal years 2013 through 2015 for HP Inc. and the effects of U.S. tax reform attributes related to fiscal periods prior to the separation from HP Inc.

 

For the three and twelve months ended October 31, 2018 this amount 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.

 

While these changes had no impact on Hewlett Packard Enterprise's previously reported GAAP consolidated net earnings or GAAP net earnings per share, however, the company reflected the change resulting from the reclassification of its non-service net periodic benefit credit by restating its non-GAAP consolidated net earnings and non-GAAP net earnings per share for the previously reported period.

 

(e)

The three and twelve months ended October 31, 2019, include $123 million and $488 million of net income tax charges, respectively, related to changes in U.S. federal and state valuation allowances as a result of impacts of the Tax Act and a change in the Company's forecasts. The three months ended July 31, 2019 and the twelve months ended October 31, 2019 includes $308 million and $274 million, of income tax benefits, respectively, related to the change in pre- Separation tax liabilities for which the Company shared joint and several liability with HP Inc. and for which the Company was partially indemnified by HP Inc. under the Tax Matters Agreement and continues to be indemnified under the Termination and Mutual Release Agreement in limited circumstances.
 

For the three months ended October 31, 2018, this amount primarily includes $1.3 billion expense as a result of the impact of U.S. tax reform.

 
For the twelve months ended October 31, 2018, this amount primarily 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 $2.0 billion tax benefit, as the result of U.S. Tax Reform, from the application of the new tax rules including a lower federal tax rate to deferred tax assets and liabilities and a $208 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, partially offset by a provisional estimate of $1.7 billion of transition tax expense on accumulated non U.S. earnings, and a provisional estimate of $687 million of tax expense on valuation allowance on foreign tax credits.
 

(f)

For the three and twelve months ended October 31, 2018, includes transformation costs of $20 million related to cumulative translation adjustments resulting from country exits associated with the HPE Next initiative, which was recorded within Interest and other, net.

 

(g)

For the three and twelve months ended October 31, 2019, includes acquisition, disposition and other related charges of $7 million related to a non-cash inventory fair value adjustment in connection with the acquisition of Cray, Inc., which was included in Cost of Sales.

 

(h)

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

 

(i)

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

 

(j)

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 October 31, 2019 and October 31, 2018, the restricted cash balance included in cash, cash equivalents and restricted cash as disclosed in the Statements of Cash Flows above was $323 million and $204 million, respectively, which was included in Other current assets in the Condensed Consolidated Balance Sheets.

 

(k)

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.

 

(l)

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.

 

(m)

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.

 

(n)

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


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