Strong rebound in revenue; raising FY21 EPS outlook
Q4 2020 Financial Highlights:
- Revenue: returned to pre-pandemic levels of $7.2
billion, up 6% from the prior quarter and flat from the prior-year
period
- Significant acceleration in growth businesses and strong
as-a-service momentum
- HPC & MCS revenue: $975 million, up 50% from the
prior quarter and 25% from the prior-year period
- Intelligent Edge revenue: $786 million, up 15% from the
prior quarter and 6% from the prior-year period
- Annualized revenue run-rate (ARR): $585 million, up 11%
from the prior quarter and 30% from the prior-year period
- Diluted net earnings per share:
- GAAP of $0.12, above the previously provided outlook of $0.02
to $0.06 per share
- Non-GAAP of $0.37, above the previously provided outlook of
$0.32 to $0.36 per share
- Dividend: declared a regular cash dividend of $0.12 per
share, payable on January 6, 2021
Outlook:
- Fiscal 2021 First quarter: Estimates GAAP diluted net
earnings per share to be in the range of $0.02 to $0.06 and
non-GAAP diluted net EPS to be in the range of $0.40 to $0.44
- Fiscal 2021 earnings per share: Raises GAAP diluted net
earnings per share outlook to $0.38 to $0.56 and non-GAAP diluted
net earnings per share outlook to $1.60 to $1.78
- Fiscal 2021 free cash flow1: Reiterates free cash flow
guidance of $0.9 to $1.1 billion
Hewlett Packard Enterprise (NYSE: HPE) today announced financial
results for the fourth quarter, ended October 31, 2020.
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“Hewlett Packard Enterprise finished the year with a very strong
performance,” said Antonio Neri, president and CEO of Hewlett
Packard Enterprise. “In Q4 we saw a notable rebound in our overall
revenue, with particular acceleration in key growth areas of our
business.”
“The global pandemic has forced businesses to rethink everything
from remote work and collaboration to business continuity and data
insight,” he continued. “Over the last several months, customers
have increasingly turned to HPE for our unique capabilities from
edge to cloud that help them empower their workforces, deploy
resilient new IT solutions and extract insights from critical data,
while consuming these solutions more flexibly as a service.”
“Our focused strategy and disciplined execution are delivering
results,” said Tarek Robbiati, EVP and CFO of Hewlett Packard
Enterprise. “Based on the strong finish to FY20 and increased
confidence in profitability going into Q1, we are raising our FY21
EPS guidance.”
Fourth Quarter Fiscal Year 2020 Results
Net revenue of $7.2 billion, flat from the prior-year
period. Revenue grew 6% sequentially or 5% when adjusted for
currency to pre-pandemic levels as our growth businesses of HPC
& MCS and Intelligent Edge executed strongly.
Annualized revenue run-rate (ARR) of $585 million, up 30%
from the prior-year period. Based on strong customer demand and
recent wins, we are reiterating our 2019 Securities Analyst Meeting
ARR guidance of 30-40% Compounded Annual Growth Rate from fiscal
year 2019 to fiscal year 2022.
GAAP gross margins of 30.6%, down 260 basis points from
the prior-year period and Non-GAAP of 30.6%, down 270 basis points
from the prior-year period.
GAAP diluted net earnings per share (“EPS”) was $0.12,
compared to $0.36 in the prior-year period and above the previously
provided outlook of $0.02 to $0.06 per share.
Non-GAAP diluted net EPS was $0.37, compared to $0.49 in
the prior-year period and above the previously provided outlook of
$0.32 to $0.36 per share. Fourth quarter non-GAAP net earnings and
non-GAAP diluted net EPS exclude after-tax adjustments of $329
million and $0.25 per diluted share, respectively, primarily
related to transformation costs and amortization of purchased
intangible assets.
Cash flow from operations of $747 million, down $685
million from the prior-year period.
Free cash flow of $223 million, down $655 million from
the prior-year period and in-line with our guidance.
Segment Results
- Intelligent Edge revenue was $786 million, up 6% year
over year or 5% when adjusted for currency, with 10.1% operating
profit margin, compared to 6.2% from the prior-year period. Revenue
grew 15% sequentially or 14% when adjusted for currency.
Intelligent Edge best-in-class portfolio was recognized as a leader
for the 15th year in the Gartner Magic Quadrant for wired and WLAN
access infrastructure. The Company also expects to take share in
both campus switching and WLAN.
- High Performance Compute & Mission Critical Systems (HPC
& MCS) revenue was $975 million, up 25% year over year,
with 12.2% operating profit margin, compared to 10.2% from the
prior-year period. Revenue grew 50% sequentially driven by strong
performance in Cray, HPC-Apollo and MCS.
- Compute revenue was $3.2 billion, down 5% year over year
or down 4% when adjusted for currency, with 6.1% operating profit
margin, compared to 13.9% from the prior-year period. Revenue was
down 6% sequentially or 7% when adjusted for currency but was up
low single-digits when adjusted for backlog conversion.
- Storage revenue was $1.2 billion, down 3% year over
year, with 16.7% operating profit margin, compared to 17.4% from
the prior-year period. Revenue grew 8% sequentially or 7% when
adjusted for currency driven by strong operational execution,
reduction of backlog and momentum in key areas of the
portfolio.
- Advisory & Professional Services (A&PS) revenue
was $245 million, down 9% year over year or 10% when adjusted for
currency, with (0.4%) operating profit margin, compared to 0.4%
from the prior-year period. Revenue was up 8% sequentially or 6%
when adjusted for currency even as COVID-19 impacted consulting
activities and chargeability levels of our team members. A&PS
is a strategic business that pulls through significant
infrastructure and operational services sales.
- Financial Services revenue was $849 million, down 3%
year over year or 4% when adjusted for currency. Revenue grew 5%
sequentially or 2% when adjusted for currency, with 7.7% operating
profit margin, compared to 8.4% from the prior-year period. Net
portfolio assets were up 2% year over year and flat sequentially.
Financing volume was down 6% year over year and up 8% sequentially
or up 6% when adjusted for currency despite the impact of COVID-19.
The business delivered return on equity of 12.6%, down 2.7 points
from the prior-year period.
Relocating Headquarters
HPE has made the decision to relocate its headquarters from San
Jose, California, to Houston, Texas. HPE’s largest U.S. employment
hub, Houston is an attractive market to recruit and retain future
diverse talent, and is where the company is currently constructing
a state-of-the-art new campus. The Bay Area will continue to be a
strategic hub for HPE innovation, and the company will consolidate
a number of sites in the Bay Area to its San Jose campus. No
layoffs are associated with this move.
Dividend
Board of Directors have declared a regular cash dividend of
$0.12 per share on the company's common stock. This dividend, the
first in Hewlett Packard Enterprise's fiscal year 2021, is payable
on January 6, 2021, to stockholders of record as of the close of
business on December 9, 2020.
Fiscal 2021 first quarter outlook:
Hewlett Packard Enterprise estimates GAAP diluted net EPS to be
in the range of $0.02 to $0.06 and non-GAAP diluted net EPS to be
in the range of $0.40 to $0.44. Fiscal 2021 first quarter non-GAAP
diluted net EPS estimates exclude after-tax costs of approximately
$0.38 per diluted share, primarily related to transformation costs,
stock-based compensation and the amortization of intangible
assets.
Fiscal 2021 outlook:
Hewlett Packard Enterprise raises GAAP diluted net earnings per
share outlook to $0.38 to $0.56 from $0.34 to $0.54 and non-GAAP
diluted net earnings per share outlook to $1.60 to $1.78 from $1.56
to $1.76. Fiscal 2021 non-GAAP diluted net EPS estimates exclude
after-tax costs of approximately $1.22 per diluted share, primarily
related to transformation costs, stock-based compensation and the
amortization of intangible assets.
Reiterates free cash flow1 guidance range of $0.9 to $1.1
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 as
well as non-GAAP gross profit, 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, 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 COVID-19 pandemic); 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, April 30,
2020, and July 31, 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 Annual Report on Form 10-K for the fiscal year
ended October 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
October 31, 2020
July 31, 2020
October 31, 2019
Net revenue
$
7,208
$
6,816
$
7,215
Costs and expenses:
Cost of sales
5,002
4,749
4,822
Research and development
484
455
438
Selling, general and administrative
1,166
1,131
1,229
Amortization of intangible assets
80
95
68
Transformation costs
304
357
151
Disaster charges (a)
2
2
—
Acquisition, disposition and other related
charges
25
15
47
Total costs and expenses
7,063
6,804
6,755
Earnings from operations
145
12
460
Interest and other, net
(57
)
(71
)
(38
)
Tax indemnification adjustments
(15
)
(30
)
288
Non-service net periodic benefit
credit
35
28
14
Earnings (loss) from equity interests
17
27
(1)
Earnings (loss) before taxes
125
(34
)
723
(Provision) benefit from taxes
32
43
(243
)
Net earnings
$
157
$
9
$
480
Net earnings per share:
Basic
$
0.12
$
0.01
$
0.37
Diluted (b)
$
0.12
$
0.01
$
0.36
Cash dividends declared per share
$
0.1200
$
—
$
0.1200
Weighted-average shares used to compute
net earnings per share:
Basic
1,293
1,292
1,308
Diluted (b)
1,306
1,300
1,323
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS
OF EARNINGS (Unaudited) (In millions, except per
share amounts)
Twelve months ended October
31,
2020
2019
Net revenue
$
26,982
$
29,135
Costs and expenses:
Cost of sales
18,513
19,642
Research and development
1,874
1,842
Selling, general and administrative
4,624
4,907
Amortization of intangible assets
379
267
Impairment of goodwill (c)
865
—
Transformation costs
950
453
Disaster charges (recovery) (a)
26
(7
)
Acquisition, disposition and other related
charges
80
757
Total costs and expenses
27,311
27,861
Earnings (loss) from operations
(329
)
1,274
Interest and other, net
(215
)
(177
)
Tax indemnification adjustments
(101
)
377
Non-service net periodic benefit
credit
136
59
Earnings from equity interests
67
20
Earnings (loss) before taxes
(442
)
1,553
(Provision) benefit for taxes
120
(504
)
Net earnings (loss)
$
(322
)
$
1,049
Net earnings (loss) per share:
Basic
$
(0.25
)
$
0.78
Diluted (b)
$
(0.25
)
$
0.77
Cash dividends declared per share
$
0.3600
$
0.4575
Weighted-average shares used to compute
net earnings (loss) per share:
Basic
1,294
1,353
Diluted (b)
1,294
1,366
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 October 31,
2020
Diluted net earnings per
share
Three months ended July 31,
2020
Diluted net earnings per
share
Three months ended October 31,
2019
Diluted net earnings per
share
GAAP net earnings
$
157
$
0.12
$
9
$
0.01
$
480
$
0.36
Non-GAAP adjustments:
Amortization of initial direct costs
1
—
3
—
—
—
Amortization of intangible assets
80
0.06
95
0.07
68
0.05
Transformation costs
304
0.23
357
0.27
151
0.11
Disaster charges (a)
2
—
2
—
—
—
Acquisition, disposition and other related
charges
25
0.02
15
0.01
54
0.04
Tax indemnification adjustments
15
0.02
30
0.03
(288
)
(0.22
)
Non-service net periodic benefit
credit
(35
)
(0.03
)
(28
)
(0.02
)
(14
)
(0.01
)
Earnings from equity interests (d)
35
0.03
36
0.03
38
0.03
Adjustments for taxes
$
(98
)
(0.08
)
$
(100
)
(0.08
)
$
155
0.13
Non-GAAP net earnings
$
486
$
0.37
$
419
$
0.32
$
644
$
0.49
GAAP earnings from operations
$
145
$
12
$
460
Non-GAAP adjustments
Amortization of initial direct costs
1
3
—
Amortization of intangible assets
80
95
68
Transformation costs
304
357
151
Disaster charges (a)
2
2
—
Acquisition, disposition and other related
charges
25
15
54
Non-GAAP earnings from
operations
$
557
$
484
$
733
GAAP operating profit margin
2.0
%
0.2
%
6.4
%
Non-GAAP adjustments
5.7
%
6.9
%
3.8
%
Non-GAAP operating profit
margin
7.7
%
7.1
%
10.2
%
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
October 31, 2020
Three months ended July 31,
2020
Three months ended
October 31, 2019
GAAP net revenue
$
7,208
$
6,816
$
7,215
GAAP cost of sales
5,002
4,749
4,822
GAAP gross profit
$
2,206
$
2,067
$
2,393
Non-GAAP adjustments
Amortization of initial direct costs
$
1
$
3
$
—
Acquisition, disposition and other related
charges(e)
—
—
7
Non-GAAP gross profit
$
2,207
$
2,070
$
2,400
GAAP gross profit margin
30.6
%
30.3
%
33.2
%
Non-GAAP adjustments
—
%
0.1
%
0.1
%
Non-GAAP gross profit margin
30.6
%
30.4
%
33.3
%
Net cash provided by operating
activities
$
747
$
1,472
$
1,432
Investment in property, plant and
equipment
(604
)
(620
)
(703
)
Proceeds from sale of property, plant and
equipment
80
72
149
Free cash flow
$
223
$
924
$
878
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP
MEASURES (Unaudited) (In millions, except percentages
and per share amounts)
Twelve months ended October
31, 2020
Diluted net earnings per
share
Twelve months ended October
31, 2019
Diluted net earnings per
share
GAAP net earnings (loss)
$
(322
)
$
(0.25
)
$
1,049
$
0.77
Non-GAAP adjustments:
Amortization of initial direct costs
10
0.01
—
—
Amortization of intangible assets
379
0.29
267
0.20
Impairment of goodwill(c)
865
0.67
—
—
Transformation costs
950
0.74
453
0.33
Disaster charges (recovery)(a)
26
0.02
(7
)
(0.01
)
Acquisition, disposition and other related
charges
107
0.08
764
0.56
Tax indemnification adjustments
101
0.08
(377
)
(0.28)
Non-service net periodic benefit
credit
(136
)
(0.11
)
(59
)
(0.04
)
Earnings from equity interests(d)
145
0.11
152
0.11
Adjustments for taxes
$
(360
)
(0.29
)
$
174
0.13
Non-GAAP net earnings
$
1,765
$
1.35
$
2,416
$
1.77
GAAP (loss) earnings from
operations
$
(329
)
$
1,274
Non-GAAP adjustments
Amortization of initial direct costs
10
—
Amortization of intangible assets
379
267
Impairment of goodwill(c)
865
—
Transformation costs
950
453
Disaster charges (recovery)(a)
26
(7
)
Acquisition, disposition and other related
charges
107
764
Non-GAAP earnings from
operations
$
2,008
$
2,751
GAAP operating profit margin
(1.2
%)
4.4
%
Non-GAAP adjustments
8.6
%
5.0
%
Non-GAAP operating profit
margin
7.4
%
9.4
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP
MEASURES (Unaudited) (In millions, except percentages
and per share amounts)
Twelve months ended October
31, 2020
Twelve months ended
October 31, 2019
GAAP net revenue
$
26,982
$
29,135
GAAP cost of sales
18,513
19,642
GAAP gross profit
$
8,469
$
9,493
Non-GAAP adjustments
Amortization of initial direct costs
$
10
$
—
Acquisition, disposition and other related
charges(e)
27
7
Non-GAAP gross profit
$
8,506
$
9,500
GAAP gross profit margin
31.4
%
32.6
%
Non-GAAP adjustments
0.1
%
—
%
Non-GAAP gross profit margin
31.5
%
32.6
%
Net cash provided by operating
activities
$
2,240
$
3,997
Investment in property, plant and
equipment
(2,383
)
(2,856
)
Proceeds from sale of property, plant and
equipment
703
597
Free cash flow
$
560
$
1,738
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited) (In millions, except par
value)
As of
October 31, 2020
October 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
4,233
$
3,753
Accounts receivable, net of allowance for
doubtful accounts
3,386
2,957
Financing receivables, net of allowance
for doubtful accounts
3,794
3,572
Inventory
2,674
2,387
Assets held for sale
77
46
Other current assets
2,392
2,428
Total current assets
16,556
15,143
Property, plant and equipment
5,625
6,054
Long-term financing receivables and other
assets(f)
10,544
8,918
Investments in equity interests
2,170
2,254
Goodwill and intangible assets
19,120
19,434
Total assets
$
54,015
$
51,803
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Notes payable and short-term
borrowings
$
3,755
$
4,425
Accounts payable
5,383
5,595
Employee compensation and benefits
1,391
1,522
Taxes on earnings
148
186
Deferred revenue
3,430
3,234
Accrued restructuring
366
195
Other accrued liabilities(f)
4,265
4,002
Total current liabilities
18,738
19,159
Long-term debt
12,186
9,395
Other non-current liabilities(f)
6,995
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; 1,287 and 1,294 issued and outstanding at
October 31, 2020 and October 31, 2019, respectively)
13
13
Additional paid-in capital
28,350
28,444
Accumulated deficit(g)
(8,375
)
(7,632
)
Accumulated other comprehensive
loss(g)
(3,939
)
(3,727
)
Total HPE stockholders’ equity
16,049
17,098
Non-controlling interests
47
51
Total stockholders’ equity
16,096
17,149
Total liabilities and stockholders’
equity
$
54,015
$
51,803
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited) (In millions)
Three months ended October 31,
2020
Twelve months ended October
31, 2020
Cash flows from operating activities:
Net earnings (loss)
$
157
$
(322
)
Adjustments to reconcile net earnings
(loss) to net cash provided by operating activities:
Depreciation and amortization
652
2,625
Impairment of goodwill
—
865
Stock-based compensation expense
59
274
Provision for doubtful accounts and
inventory
100
308
Restructuring charges
216
769
Deferred taxes on earnings
(80
)
(294
)
Earnings from equity interests
(17
)
(67
)
Dividends received from equity
investees
130
165
Other, net
48
163
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable
(530
)
(461
)
Financing receivables
(76
)
(487
)
Inventory
726
(527
)
Accounts payable
(656
)
(225
)
Taxes on earnings
(37
)
(122
)
Restructuring
(128
)
(478
)
Other assets and liabilities
183
54
Net cash provided by operating
activities
747
2,240
Cash flows from investing activities:
Investment in property, plant and
equipment
(604
)
(2,383
)
Proceeds from sale of property, plant and
equipment
80
703
Purchases of available-for-sale securities
and other investments
(23
)
(101
)
Maturities and sales of available-for-sale
securities and other investments
19
48
Financial collateral posted
(71
)
(644
)
Financial collateral received
28
665
Payments made in connection with business
acquisitions, net of cash acquired
(853
)
(866
)
Net cash used in investing activities
(1,424
)
(2,578
)
Cash flows from financing activities:
Short-term borrowings with original
maturities less than 90 days, net
(45
)
(9
)
Proceeds from debt, net of issuance
costs
262
7,007
Payment of debt
(3,700
)
(5,099
)
Net payments related to stock-based award
activities
(2
)
(36
)
Repurchase of common stock
—
(355
)
Cash dividends paid to non-controlling
interests, net of contributions
—
(7
)
Cash dividends paid
(154
)
(618
)
Net cash provided by (used in) financing
activities
(3,639
)
883
Increase (decrease) in cash, cash
equivalents and restricted cash
(4,316
)
545
Cash, cash equivalents and restricted cash
at beginning of period
8,937
4,076
Cash, cash equivalents and restricted cash
at end of period
$
4,621
$
4,621
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES SEGMENT INFORMATION
(Unaudited) (In millions)
Three months ended
October 31, 2020
July 31, 2020
October 31, 2019
Net revenue:(h)
Compute
$
3,175
$
3,389
$
3,349
HPC & MCS
975
649
777
Storage
1,217
1,128
1,256
A & PS
245
226
269
Intelligent Edge
786
684
742
Financial Services
849
811
878
Corporate Investments
126
119
134
Total segment net revenue
7,373
7,006
7,405
Elimination of intersegment net
revenue
(165
)
(190
)
(190
)
Total Hewlett Packard Enterprise
consolidated net revenue
$
7,208
$
6,816
$
7,215
Earnings before taxes:(h)
Compute
$
194
$
288
$
464
HPC & MCS
119
36
79
Storage
203
145
219
A & PS
(1
)
(4
)
1
Intelligent Edge
79
59
46
Financial Services
65
65
74
Corporate Investments
(18
)
(27
)
(26
)
Total segment earnings from operations
641
562
857
Unallocated corporate costs and
eliminations
(73
)
(65
)
(107
)
Unallocated stock-based compensation
expense
(11
)
(13
)
(17
)
Amortization of initial direct costs
(1
)
(3
)
—
Amortization of intangible assets
(80
)
(95
)
(68
)
Transformation costs
(304
)
(357
)
(151
)
Disaster charges(a)
(2
)
(2
)
—
Acquisition, disposition and other related
charges
(25
)
(15
)
(54
)
Interest and other, net
(57
)
(71
)
(38
)
Tax indemnification adjustments
(15
)
(30
)
288
Non-service net periodic benefit
credit
35
28
14
Earnings (loss) from equity interests
17
27
(1
)
Total Hewlett Packard Enterprise
consolidated earnings (loss) before taxes
$
125
$
(34
)
$
723
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES SEGMENT INFORMATION
(Unaudited) (In millions)
Twelve months ended October
31,
2020
2019
Net revenue:(h)
Compute
$
12,215
$
13,642
HPC & MCS
3,036
2,910
Storage
4,681
5,185
A & PS
951
1,012
Intelligent Edge
2,855
2,913
Financial Services
3,352
3,581
Corporate Investments
490
507
Total segment net revenue
27,580
29,750
Elimination of intersegment net
revenue
(598
)
(615
)
Total Hewlett Packard Enterprise
consolidated net revenue
$
26,982
$
29,135
Earnings before taxes:(h)
Compute
$
893
$
1,550
HPC & MCS
237
320
Storage
719
924
A & PS
(5
)
(54
)
Intelligent Edge
281
159
Financial Services
278
305
Corporate Investments
(100
)
(108
)
Total segment earnings from operations
2,303
3,096
Unallocated corporate costs and
eliminations
(238
)
(286
)
Unallocated stock-based compensation
expense
(57
)
(59
)
Amortization of initial direct costs
(10
)
—
Amortization of intangible assets
(379
)
(267
)
Impairment of goodwill(c)
(865
)
—
Transformation costs
(950
)
(453
)
Disaster (charges) recoveries(a)
(26
)
7
Acquisition, disposition and other related
charges
(107
)
(764
)
Interest and other, net
(215
)
(177
)
Tax indemnification adjustments
(101
)
377
Non-service net periodic benefit
credit
136
59
Earnings from equity interests
67
20
Total Hewlett Packard Enterprise
consolidated earnings (loss) before taxes
$
(442
)
$
1,553
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES SEGMENT INFORMATION
(Unaudited) (In millions, except percentages)
Three months ended
Change (%)
October 31, 2020
July 31 2020
October 31, 2019
Q/Q
Y/Y
Net revenue:(h)
Compute
$
3,175
$
3,389
$
3,349
(6
%)
(5
%)
HPC & MCS
975
649
777
50
%
25
%
Storage
1,217
1,128
1,256
8
%
(3
%)
A & PS
245
226
269
8
%
(9
%)
Intelligent Edge
786
684
742
15
%
6
%
Financial Services
849
811
878
5
%
(3
%)
Corporate Investments
126
119
134
6
%
(6
%)
Total segment net revenue
7,373
7,006
7,405
5
%
—
%
Elimination of intersegment net revenue
and other
(165
)
(190
)
(190
)
(13
%)
(13
%)
Total Hewlett Packard Enterprise
consolidated net revenue
$
7,208
$
6,816
$
7,215
6
%
—
%
Twelve months ended October
31,
2020
2019
Y/Y
Net revenue:(h)
Compute
$
12,215
$
13,642
(10
%)
HPC & MCS
3,036
2,910
4
%
Storage
4,681
5,185
(10
%)
A & PS
951
1,012
(6
%)
Intelligent Edge
2,855
2,913
(2
%)
Financial Services
3,352
3,581
(6
%)
Corporate Investments
490
507
(3
%)
Total segment net revenue
27,580
29,750
(7
%)
Elimination of intersegment net revenue
and other
(598
)
(615
)
(3
%)
Total Hewlett Packard Enterprise
consolidated net revenue
$
26,982
$
29,135
(7
%)
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY
DATA (Unaudited)
Three months ended
Change in Operating
Margin (pts)
October 31, 2020
Q/Q
Y/Y
Segment operating margin:(h)
Compute
6.1
%
-2.4
-7.8
HPC & MCS
12.2
%
6.7
2.0
Storage
16.7
%
3.8
-0.7
A & PS
(0.4
%)
1.4
-0.8
Intelligent Edge
10.1
%
1.5
3.9
Financial Services
7.7
%
-0.3
-0.7
Corporate Investments
(14.3
%)
8.4
5.1
Total segment operating margin
8.7
%
0.7
-2.9
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, 2020
July 31, 2020
October 31, 2019
Numerator:
GAAP net earnings
$
157
$
9
$
480
Non-GAAP net earnings
$
486
$
419
$
644
Denominator:
Weighted-average shares used to compute
basic net earnings per share
1,293
1,292
1,308
Dilutive effect of employee stock
plans(b)
13
8
15
Weighted-average shares used to compute
diluted net earnings per share
1,306
1,300
1,323
GAAP net earnings per share
Basic
$
0.12
$
0.01
$
0.37
Diluted(b)
$
0.12
$
0.01
$
0.36
Non-GAAP net earnings per share
Basic
$
0.38
$
0.32
$
0.49
Diluted(b)
$
0.37
$
0.32
$
0.49
Twelve months ended October
31,
2020
2019
Numerator:
GAAP net earnings (loss)
$
(322
)
$
1,049
Non-GAAP net earnings
$
1,765
$
2,416
Denominator:
Weighted-average shares used to compute
basic net earnings (loss) per share and diluted net loss per
share
1,294
1,353
Dilutive effect of employee stock
plans(b)
11
13
Weighted-average shares used to compute
diluted net earnings per share
1,305
1,366
GAAP net earnings (loss) per share
Basic
$
(0.25
)
$
0.78
Diluted(b)
$
(0.25
)
$
0.77
Non-GAAP net earnings per share
Basic
$
1.36
$
1.79
Diluted(b)
$
1.35
$
1.77
(a)
Disaster charges (recovery) for fiscal
2020 include direct costs resulting from COVID-19. For fiscal 2019,
represents insurance recoveries in relation to damage to our
facilities in Houston, Texas due to Hurricane Harvey in fiscal
2017.
(b)
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.
(c)
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.
(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 Professional 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").
Use of non-GAAP financial measures
To supplement Hewlett Packard Enterprise’s condensed
consolidated financial statement information presented on a GAAP
basis, Hewlett Packard Enterprise provides revenue on a constant
currency basis, non-GAAP gross profit, 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.
These non-GAAP financial measures are not computed in accordance
with, or as an alternative to, generally accepted accounting
principles in the United States. The GAAP measure most directly
comparable to revenue on a constant currency basis is revenue. The
GAAP measure most directly comparable to non-GAAP gross profit is
gross profit. The GAAP measure most directly comparable to non-GAAP
gross profit margin is gross profit margin. The GAAP measure most
directly comparable to non-GAAP operating profit (non-GAAP earnings
from operations) is operating profit (earnings from operations).
The GAAP measure most directly comparable to non-GAAP operating
profit margin is operating profit margin. The GAAP measure most
directly comparable to non-GAAP income tax rate is income tax rate.
The GAAP measure most directly comparable to non-GAAP net earnings
is net earnings. The GAAP measure most directly comparable to
non-GAAP diluted net earnings per share is diluted net earnings per
share. The GAAP measure most directly comparable to gross cash is
cash and cash equivalents. The GAAP measure most directly
comparable to free cash flow is cash flow from operations. The GAAP
measure most directly comparable to net debt and operating company
net debt is total company debt. The GAAP measure most directly
comparable to each of net cash and operating company net cash is
cash and cash equivalents. Reconciliations of each of these
non-GAAP financial measures to GAAP information are included in the
tables above or elsewhere in the materials accompanying this news
release.
Use and economic substance of non-GAAP financial measures
used by Hewlett Packard Enterprise
Revenue on a constant currency basis assumes no change in the
foreign exchange rate from the prior-year period. Non-GAAP gross
profit and non-GAAP gross profit margin is defined to exclude
charges relating to the amortization of initial direct costs and
certain acquisition, disposition and other related charges.
Non-GAAP operating profit (non-GAAP earnings from operations), and
non-GAAP operating profit margin are defined to exclude any charges
relating to the amortization of intangible assets, amortization of
initial direct costs, impairment of goodwill, transformation costs,
disaster charges (recovery) and acquisition, disposition and other
related charges. Non-GAAP net earnings and non-GAAP diluted net
earnings per share consist of net earnings or diluted net earnings
per share excluding those same charges, as well as an adjustment to
earnings in equity interests, non-service net periodic benefit
credit, tax indemnification adjustments, certain income tax
valuation allowances and excess tax benefit from stock-based
compensation. In addition, non-GAAP net earnings and non-GAAP
diluted net earnings per share are adjusted by the amount of
additional taxes or tax benefits associated with each non-GAAP
item.
Hewlett Packard Enterprise’s management uses these non-GAAP
financial measures for purposes of evaluating Hewlett Packard
Enterprise’s historical and prospective financial performance, as
well as Hewlett Packard Enterprise’s performance relative to its
competitors. Hewlett Packard Enterprise’s management also uses
these non-GAAP measures to further its own understanding of Hewlett
Packard Enterprise’s segment operating performance. Hewlett Packard
Enterprise believes that excluding the items mentioned above from
these non-GAAP financial measures allows Hewlett Packard
Enterprise’s management to better understand Hewlett Packard
Enterprise’s consolidated financial performance in relation to the
operating results of Hewlett Packard Enterprise’s segments, as
Hewlett Packard Enterprise’s management does not believe that the
excluded items are reflective of ongoing operating results. More
specifically, Hewlett Packard Enterprise’s management excludes each
of those items mentioned above for the following reasons:
- Amortization of initial direct costs represents the portion of
lease origination costs incurred in prior fiscal years that do not
qualify for capitalization under the new leasing standard. Hewlett
Packard Enterprise excludes these costs as the Company elected the
practical expedient under the new leasing standard. As a result,
the company did not adjust these historical costs to accumulated
deficit. We believe that most financing companies did not elect
this practical expedient and therefore we excluded these costs to
facilitate a more meaningful evaluation of our current operating
performance and comparisons to our peers.
- Hewlett Packard Enterprise incurs charges relating to the
amortization of intangible assets. Those charges are included in
Hewlett Packard Enterprise’s GAAP earnings from operations,
operating profit margin, net earnings and diluted net earnings per
share. Such charges are significantly impacted by the timing and
magnitude of Hewlett Packard Enterprise’s acquisitions and any
related impairment charges. Consequently, Hewlett Packard
Enterprise excludes these charges for purposes of calculating these
non-GAAP measures to facilitate a more meaningful evaluation of
Hewlett Packard Enterprise’s current operating performance and
comparisons to Hewlett Packard Enterprise’s operating performance
in other periods.
- In the second quarter of fiscal 2020, Hewlett Packard
Enterprise recorded an impairment charge for the goodwill
associated with its HPC & MCS reporting unit following an
impairment review. Hewlett Packard Enterprise excludes these
charges for purposes of calculating these non-GAAP measures to
facilitate a more meaningful evaluation of Hewlett Packard
Enterprise’s current operating performance and comparisons to
Hewlett Packard Enterprise’s operating performance in other
periods.
- Transformation costs represent net costs related to the Cost
Optimization and Prioritization Plan and HPE Next initiative and
include restructuring charges, program design and execution costs,
costs incurred to transform Hewlett Packard Enterprise's IT
infrastructure and gains from the sale of real-estate identified as
part of the initiative as well as any impairment charges on
real-estate assets identified as part of the initiative. Hewlett
Packard Enterprise believes that eliminating such expenses and
gains for purposes of calculating these non-GAAP measures
facilitates a more meaningful evaluation of Hewlett Packard
Enterprise’s current operating performance and comparisons to
Hewlett Packard Enterprise’s past operating performance.
- Disaster charges (recovery) for fiscal 2020 include direct
costs resulting from COVID-19, primarily relating to HPE hosted,
co-hosted, or sponsored event cancellations and shift to a virtual
format and donations. For fiscal 2019, represents insurance
recoveries in relation to damage to our facilities in Houston,
Texas due to Hurricane Harvey in fiscal 2017. Hewlett Packard
Enterprise believes that eliminating these amounts for purposes of
calculating non-GAAP operating profit (non-GAAP earnings from
operations) facilitates a more meaningful evaluation of Hewlett
Packard Enterprise’s current operating performance and comparisons
to Hewlett Packard Enterprise’s operating performance in other
periods.
- Hewlett Packard Enterprise incurs costs related to its
acquisitions, disposition and other related charges, most of which
are treated as non-cash or non-capitalized expenses. The charges
are direct expenses such as professional fees and retention costs,
as well as non-cash adjustments to the fair value of certain
acquired assets such as inventory. Charges may also include
expenses associated with disposal activities including legal and
arbitration settlements in connection with certain dispositions.
Because non-cash or non-capitalized acquisition-related expenses
are inconsistent in amount and frequency and are significantly
impacted by the timing and nature of Hewlett Packard Enterprise’s
acquisitions and divestitures, Hewlett Packard Enterprise believes
that eliminating such expenses for purposes of calculating these
non-GAAP measures facilitates a more meaningful evaluation of
Hewlett Packard Enterprise’s current operating performance and
comparisons to Hewlett Packard Enterprise’s past operating
performance.
- Adjustment to earnings from equity interests includes the
amortization of the basis difference in relation to the H3C
divestiture and the resulting equity method investment in H3C.
Hewlett Packard Enterprise believes that eliminating this amount
for purposes of calculating non-GAAP measures facilitates a more
meaningful evaluation of Hewlett Packard Enterprise’s current
operating performance and comparisons to Hewlett Packard
Enterprise’s operating performance in other periods.
- Non-service net periodic benefit credit includes certain
market-related factors such as (i) interest cost, (ii) expected
return on plan assets, (iii) amortization of prior plan amendments,
(iv) amortized actuarial gains or losses, (v) the impacts of any
plan settlements/curtailments and (vi) impacts from other
market-related factors associated with Hewlett Packard Enterprise's
defined benefit pension and post-retirement benefit plans. These
market-driven retirement-related adjustments are primarily due to
the change in pension plan assets and liabilities which are tied to
financial market performance. Hewlett Packard Enterprise excludes
these adjustments and considers them to be outside the operational
performance of the business.
- Tax indemnification adjustments are related to changes in the
indemnification positions between Hewlett Packard Enterprise and HP
Inc., DXC and Micro Focus that are recorded by Hewlett Packard
Enterprise as pre-tax income or expense and not considered tax
expense. Hewlett Packard Enterprise excludes these income or
charges and the associated tax impact for the purpose of
calculating these non-GAAP measures to facilitate a more meaningful
evaluation of Hewlett Packard Enterprise’s current operating
performance and comparisons to Hewlett Packard Enterprise’s
operating performance in other periods.
- Hewlett Packard Enterprise utilizes a structural long-term
projected non-GAAP tax rate in order to provide better consistency
across the interim reporting periods and to eliminate the effects
of items not directly related to the Company’s operating structure
that can vary in size and frequency. When projecting this long-term
rate, Hewlett Packard Enterprise evaluated a three-year financial
projection. The projected rate assumes no incremental acquisitions
in the three-year projection period, and considers other factors
including Hewlett Packard Enterprise’s expected tax structure, its
tax positions in various jurisdictions and current impacts from key
legislation implemented in major jurisdictions where Hewlett
Packard Enterprise operates. For fiscal 2020, the Company used a
projected non-GAAP tax rate of 12%, which reflected currently
available information, including the impact of the Tax Act and
interpretations thereof, as well as other factors and assumptions.
The non-GAAP tax rate could be subject to change for a variety of
reasons, including the rapidly evolving global tax environment,
significant changes in Hewlett Packard Enterprise’s geographic
earnings mix including due to acquisition activity, or other
changes to the Company’s strategy or business operations. The
Company will re-evaluate its long-term rate as appropriate. Hewlett
Packard Enterprise believes that making these adjustments
facilitates a better evaluation of our current operating
performance and comparisons to past operating results.
Material limitations associated with use of non-GAAP
financial measures
These non-GAAP financial measures have limitations as analytical
tools, and these measures should not be considered in isolation or
as a substitute for analysis of Hewlett Packard Enterprise’s
results as reported under GAAP. Some of the limitations in relying
on these non-GAAP financial measures are:
- Amortization of initial direct cost is excluded from non-GAAP
gross profit, non-GAAP gross profit margin, non-GAAP operating
profit (non-GAAP earnings from operations), non-GAAP operating
profit margin, non-GAAP net earnings and non-GAAP diluted net
earnings per share can have an impact on the equivalent GAAP
earnings measure and HPE Financial Services Segment results.
- Amortization of intangible assets, though not directly
affecting Hewlett Packard Enterprise’s cash position, represent the
loss in value of intangible assets over time. The expense
associated with this loss in value is non-GAAP operating profit
(non-GAAP earnings from operations), non-GAAP operating profit
margin, non-GAAP net earnings and non-GAAP diluted net earnings per
share, and therefore does not reflect the full economic effect of
the loss in value of those intangible assets.
- Items such as impairment of goodwill, transformation costs,
disaster charges (recovery) and acquisition, and disposition and
other related costs that are excluded from non-GAAP gross profit,
non-GAAP gross profit margin, non-GAAP operating expenses, non-GAAP
operating profit (non-GAAP earnings from operations), non-GAAP
operating profit margin, non-GAAP net earnings and non-GAAP diluted
net earnings per share can have a material impact on the equivalent
GAAP earnings measure.
- Items such as adjustment to earnings from equity interests and
non-service net periodic benefit credit that are excluded from
non-GAAP net earnings, and non-GAAP diluted net earnings per share
can have a material impact on the equivalent GAAP earnings
measure.
- Items such as tax indemnification adjustments, certain income
tax valuation allowances, excess tax benefits from stock-based
compensation and the related tax impacts from other non-GAAP
measures that are excluded from the non-GAAP tax rate, non-GAAP net
earnings and non-GAAP diluted net earnings per share can also have
a material impact on the equivalent GAAP earnings measures.
- Hewlett Packard Enterprise may not be able to immediately
liquidate the short-term and long-term investments included in
gross cash, which may limit the usefulness of gross cash as a
liquidity measure.
- Other companies may calculate revenue on a constant currency
basis, non-GAAP gross profit, non-GAAP gross profit margin,
non-GAAP operating profit (non-GAAP earnings from operations),
non-GAAP operating profit margin, non-GAAP net earnings and
non-GAAP diluted net earnings per share differently than Hewlett
Packard Enterprise does, limiting the usefulness of those measures
for comparative purposes.
Compensation for limitations associated with use of non-GAAP
financial measures
Hewlett Packard Enterprise compensates for the limitations on
its use of non-GAAP financial measures by relying primarily on its
GAAP results and using non-GAAP financial measures only as a
supplement. Hewlett Packard Enterprise also provides a
reconciliation of each non-GAAP financial measure to its most
directly comparable GAAP measure within this news release and in
other written materials that include these non-GAAP financial
measures, and Hewlett Packard Enterprise encourages investors to
review carefully those reconciliations.
Usefulness of non-GAAP financial measures to
investors
Hewlett Packard Enterprise believes that providing revenue on a
constant currency basis, 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 to investors in
addition to the related GAAP measures provides investors with
greater transparency to the information used by Hewlett Packard
Enterprise’s management in its financial and operational decision
making and allows investors to see Hewlett Packard Enterprise’s
results “through the eyes” of management. Hewlett Packard
Enterprise further believes that providing this information better
enables Hewlett Packard Enterprise’s investors to understand
Hewlett Packard Enterprise’s operating performance and to evaluate
the efficacy of the methodology and information used by Hewlett
Packard Enterprise’s management to evaluate and measure such
performance. Disclosure of these non-GAAP financial measures also
facilitates comparisons of Hewlett Packard Enterprise’s operating
performance with the performance of other companies in Hewlett
Packard Enterprise’s industry that supplement their GAAP results
with non-GAAP financial measures that may be calculated in a
similar manner.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201201006019/en/
Editorial contact Stefanie Notaney
stefanie.notaney@hpe.com
Investor contact Andrew Simanek
investor.relations@hpe.com
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