Hewlett Packard Enterprise Reports Fiscal 2024 First Quarter Results
Exceeds profitability expectations and continues to scale recurring revenue, advancing long-term strategy
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240229327637/en/
"HPE exceeded our profitability expectations and drove near-record year-over-year growth in our recurring revenue in the face of market headwinds, demonstrating the relevance of our strategy,” said
“HPE drove momentum in annualized revenue run-rate and gross margins in Q1 despite challenges brought by the softening of the networking market and GPU deal timing,” said
First Quarter Fiscal 2024 Financial Results
-
Revenue:
$6.8 billion , down 14% from the prior-year period in actual dollars and in constant currency(1) -
Annualized revenue run-rate (“ARR”)
(2):
$1.4 billion , up 42% from the prior-year period and 41% in constant currency(1) -
Gross margins:
- GAAP of 36.4%, up 240 basis points from the prior-year period and up 160 basis points sequentially
- Non-GAAP(1) of 36.2%, up 200 basis points from the prior-year period and up 140 basis points sequentially
-
Diluted net earnings per share (“EPS”):
-
GAAP of
$0.29 , down 24% from the prior-year period, and down 41% sequentially, above the midpoint of our guidance range of$0.24 to$0.32 -
Non-GAAP(1) of
$0.48 , down 24% from the prior-year period and down 8% sequentially, at the high end of our guidance range of$0.42 to$0.50
-
GAAP of
-
Cash flow from operations:
$64 million , an increase of$893 million from the prior-year period -
Free cash flow (“FCF”)
(1)(3):
$(482) million , an increase of$844 million from the prior-year period -
Capital returns to shareholders:
$172 million in the form of dividends and share repurchases
First Quarter Fiscal 2024 Segment Results
-
Server revenue was
$3.4 billion , down 23% from the prior-year period in actual dollars and in constant currency(1), with 11.4% operating profit margin, compared to 15.7% from the prior-year period. The Server business segment combines the previously separately reported Compute and HPC & AI business segments, with adjustments for certain product lines that are now reported in Hybrid Cloud. The merged Server segment more accurately reflects HPE’s position in the market as well as recent organizational and leadership changes that were implemented in Q1 FY24. -
Intelligent Edge revenue was
$1.2 billion , up 3% from the prior-year period in actual dollars and 2% in constant currency(1), with 29.4% operating profit margin, compared to 19.4% in the prior-year period. -
Hybrid Cloud revenue was
$1.2 billion , down 10% from the prior-year period in actual dollars and in constant currency(1), with 3.8% operating profit margin, compared to 5.8% from the prior-year period. -
Financial Services revenue was
$873 million , flat from the prior-year period in actual dollars and down 2% in constant currency(1), with 8.5% operating profit margin, compared to 7.2% from the prior-year period. Net portfolio assets of$13.2 billion , up 0.3% from the prior-year period in actual dollars and up 0.7% in constant currency(1). The business delivered return on equity of 15.4%, down 2.4 points from the prior-year period.
Dividend
The HPE Board of Directors declared a regular cash dividend of
Fiscal 2024 Second Quarter Outlook
HPE estimates revenue to be in the range of
Fiscal 2024 Outlook
HPE estimates fiscal 2024 revenue growth to be flat to 2%, in constant currency(1)(5), and fiscal 2024 GAAP operating profit growth to be in the range of 7% to 11% and non-GAAP operating profit(1)(4) growth to be flat to 2%. HPE estimates GAAP diluted net EPS to be in the range of
1 |
A description of HPE’s use of non-GAAP financial information is provided below under “Use of non-GAAP financial information and key performance metrics.” |
|
|
|
|
2 |
Annualized Revenue Run-Rate (“ARR”) is a financial metric used to assess the growth of the Consumption Services offerings. ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-Service, software consumption revenue, and other as-a-Service offerings, recognized during a quarter and multiplied by four. We use ARR as a performance metric. ARR should be viewed independently of net revenue and is not intended to be combined with it. |
|
|
|
|
3 |
FCF represents cash flow from operations, less net capital expenditures (investments in property, plant & equipment (“PP&E”) less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash. |
|
|
|
|
4 |
FY24 non-GAAP operating profit excludes costs of approximately |
|
|
|
|
5 |
|
About
Use of non-GAAP financial information and key performance metrics
To supplement Hewlett Packard Enterprise’s condensed consolidated financial statement information presented on a generally accepted accounting principles (“GAAP”) basis,
In addition to the supplemental non-GAAP financial information,
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
Risks, uncertainties and assumptions include the need to address the many challenges facing
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 COMPANY AND SUBSIDIARIES |
||||||||||||
Condensed Consolidated Statements of Earnings |
||||||||||||
(Unaudited) |
||||||||||||
|
|
|
||||||||||
|
|
For the three months ended |
||||||||||
|
|
|
|
|
|
|
||||||
|
|
In millions, except per share amounts |
||||||||||
Net revenue |
$ |
6,755 |
|
$ |
7,351 |
|
$ |
7,809 |
|
|||
Costs and Expenses: |
|
|
|
|||||||||
Cost of sales |
|
4,298 |
|
|
4,792 |
|
|
5,151 |
|
|||
Research and development |
|
582 |
|
|
578 |
|
|
623 |
|
|||
Selling, general and administrative |
|
1,216 |
|
|
1,332 |
|
|
1,257 |
|
|||
Amortization of intangible assets |
|
71 |
|
|
72 |
|
|
73 |
|
|||
Transformation costs |
|
20 |
|
|
56 |
|
|
102 |
|
|||
Disaster (recovery) charges |
|
— |
|
|
(4 |
) |
|
1 |
|
|||
Acquisition, disposition and other related charges |
|
43 |
|
|
18 |
|
|
11 |
|
|||
Total costs and expenses |
|
6,230 |
|
|
6,844 |
|
|
7,218 |
|
|||
Earnings from operations |
|
525 |
|
|
507 |
|
|
591 |
|
|||
Interest and other, net(1) |
|
(88 |
) |
|
(23 |
) |
|
(26 |
) |
|||
Earnings from equity interests |
|
46 |
|
|
65 |
|
|
58 |
|
|||
Earnings before provision for taxes |
|
483 |
|
|
549 |
|
|
623 |
|
|||
(Provision) benefit for taxes |
|
(96 |
) |
|
93 |
|
|
(122 |
) |
|||
Net earnings |
$ |
387 |
|
$ |
642 |
|
$ |
501 |
|
|||
Net Earnings Per Share: |
|
|
|
|||||||||
Basic |
$ |
0.30 |
|
$ |
0.50 |
|
$ |
0.39 |
|
|||
Diluted |
$ |
0.29 |
|
$ |
0.49 |
|
$ |
0.38 |
|
|||
Cash dividends declared per share |
$ |
0.13 |
|
$ |
0.12 |
|
$ |
0.12 |
|
|||
Weighted-average Shares Used to Compute Net Earnings Per Share: |
|
|
|
|||||||||
Basic |
|
1,301 |
|
|
1,295 |
|
|
1,298 |
|
|||
Diluted |
|
1,316 |
|
|
1,315 |
|
|
1,315 |
|
|||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES |
||||||||||||
Reconciliation of GAAP to Non-GAAP measures |
||||||||||||
(Unaudited) |
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
For the three months ended |
||||||||||
|
|
|
|
|
|
|
||||||
|
|
Dollars in millions |
||||||||||
GAAP net revenue |
$ |
6,755 |
|
|
$ |
7,351 |
|
|
$ |
7,809 |
|
|
GAAP cost of sales |
|
4,298 |
|
|
|
4,792 |
|
|
|
5,151 |
|
|
GAAP gross profit |
|
2,457 |
|
|
|
2,559 |
|
|
|
2,658 |
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|||||||
Stock-based compensation expense |
|
16 |
|
|
|
9 |
|
|
|
16 |
|
|
Disaster recovery |
|
(25 |
) |
|
|
(10 |
) |
|
|
— |
|
|
Non-GAAP gross profit |
$ |
2,448 |
|
|
$ |
2,558 |
|
|
$ |
2,674 |
|
|
|
|
|
|
|
|
|||||||
GAAP gross profit margin |
|
36.4 |
% |
|
|
34.8 |
% |
|
|
34.0 |
% |
|
Non-GAAP adjustments |
|
(0.2 |
)% |
|
|
— |
% |
|
|
0.2 |
% |
|
Non-GAAP gross profit margin |
|
36.2 |
% |
|
|
34.8 |
% |
|
|
34.2 |
% |
|
|
For the three months ended |
|||||||||||
|
|
|
|
|
|
|||||||
|
Dollars in millions |
|||||||||||
GAAP earnings from operations |
$ |
525 |
|
|
$ |
507 |
|
|
$ |
591 |
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|||||||
Amortization of intangible assets |
|
71 |
|
|
|
72 |
|
|
|
73 |
|
|
Transformation costs |
|
20 |
|
|
|
56 |
|
|
|
102 |
|
|
Disaster (recovery) charges |
|
(25 |
) |
|
|
(14 |
) |
|
|
1 |
|
|
Stock-based compensation expense |
|
141 |
|
|
|
71 |
|
|
|
140 |
|
|
Acquisition, disposition and other related charges |
|
43 |
|
|
|
18 |
|
|
|
11 |
|
|
Non-GAAP earnings from operations |
$ |
775 |
|
|
$ |
710 |
|
|
$ |
918 |
|
|
|
|
|
|
|
|
|||||||
GAAP operating profit margin |
|
7.8 |
% |
|
|
6.9 |
% |
|
|
7.6 |
% |
|
Non-GAAP adjustments |
|
3.7 |
% |
|
|
2.8 |
% |
|
|
4.2 |
% |
|
Non-GAAP operating profit margin |
|
11.5 |
% |
|
|
9.7 |
% |
|
|
11.8 |
% |
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES |
||||||||||||||||||||||||
Reconciliation of GAAP to Non-GAAP measures |
||||||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||
|
|
For the three months ended |
||||||||||||||||||||||
|
|
|
|
Diluted net earnings per share |
|
|
|
Diluted net earnings per share |
|
|
|
Diluted net earnings per share |
||||||||||||
|
|
Dollars in millions, except per share amounts |
||||||||||||||||||||||
GAAP net earnings |
$ |
387 |
|
$ |
0.29 |
|
$ |
642 |
|
$ |
0.49 |
|
$ |
501 |
|
$ |
0.38 |
|
||||||
Non-GAAP Adjustments: |
|
|
|
|
|
|
||||||||||||||||||
Amortization of intangible assets |
|
71 |
|
|
0.05 |
|
|
72 |
|
|
0.05 |
|
|
73 |
|
|
0.06 |
|
||||||
Transformation costs |
|
20 |
|
|
0.02 |
|
|
56 |
|
|
0.05 |
|
|
102 |
|
|
0.07 |
|
||||||
Disaster (recovery) charges |
|
(25 |
) |
|
(0.02 |
) |
|
(14 |
) |
|
(0.01 |
) |
|
1 |
|
|
— |
|
||||||
Stock-based compensation expense |
|
141 |
|
|
0.11 |
|
|
71 |
|
|
0.05 |
|
|
140 |
|
|
0.11 |
|
||||||
Acquisition, disposition and other related charges |
|
43 |
|
|
0.03 |
|
|
18 |
|
|
0.01 |
|
|
11 |
|
|
0.01 |
|
||||||
Earnings from equity interests(2) |
|
(46 |
) |
|
(0.03 |
) |
|
2 |
|
|
— |
|
|
12 |
|
|
0.01 |
|
||||||
Loss on equity investments, net |
|
61 |
|
|
0.05 |
|
|
40 |
|
|
0.03 |
|
|
— |
|
|
— |
|
||||||
Adjustments for taxes |
|
(16 |
) |
|
(0.02 |
) |
|
(203 |
) |
|
(0.15 |
) |
|
(13 |
) |
|
(0.01 |
) |
||||||
Other adjustments(3) |
|
2 |
|
|
— |
|
|
(4 |
) |
|
— |
|
|
1 |
|
|
— |
|
||||||
Non-GAAP net earnings |
$ |
638 |
|
$ |
0.48 |
|
$ |
680 |
|
$ |
0.52 |
|
$ |
828 |
|
$ |
0.63 |
|
||||||
|
For the three months ended |
|||||||||||
|
|
|
|
|
|
|||||||
|
In millions |
|||||||||||
Net cash provided by (used in) operating activities |
$ |
64 |
|
|
$ |
2,843 |
|
|
$ |
(829 |
) |
|
Investment in property, plant and equipment |
|
(656 |
) |
|
|
(675 |
) |
|
|
(794 |
) |
|
Proceeds from sale of property, plant and equipment |
|
96 |
|
|
|
255 |
|
|
|
159 |
|
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
14 |
|
|
|
(102 |
) |
|
|
138 |
|
|
Free cash flow |
$ |
(482 |
) |
|
$ |
2,321 |
|
|
$ |
(1,326 |
) |
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES |
||||||||
Condensed Consolidated Balance Sheets |
||||||||
|
|
|
||||||
|
|
As of |
||||||
|
|
|
|
|
||||
|
|
(Unaudited) |
|
(Audited) |
||||
|
|
In millions, except par value |
||||||
ASSETS |
|
|
|
|
||||
Current Assets: |
|
|
|
|||||
Cash and cash equivalents |
$ |
3,758 |
|
|
$ |
4,270 |
|
|
Accounts receivable, net of allowances |
|
3,781 |
|
|
|
3,481 |
|
|
Financing receivables, net of allowances |
|
3,629 |
|
|
|
3,543 |
|
|
Inventory |
|
6,049 |
|
|
|
4,607 |
|
|
Other current assets |
|
3,027 |
|
|
|
3,047 |
|
|
Total current assets |
|
20,244 |
|
|
|
18,948 |
|
|
Property, plant and equipment, net |
|
5,997 |
|
|
|
5,989 |
|
|
Long-term financing receivables and other assets |
|
11,542 |
|
|
|
11,377 |
|
|
Investments in equity interests |
|
2,249 |
|
|
|
2,197 |
|
|
|
|
18,570 |
|
|
|
18,642 |
|
|
Total assets |
$ |
58,602 |
|
|
$ |
57,153 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|||||
Current Liabilities: |
|
|
|
|||||
Notes payable and short-term borrowings |
$ |
4,957 |
|
|
$ |
4,868 |
|
|
Accounts payable |
|
8,125 |
|
|
|
7,136 |
|
|
Employee compensation and benefits |
|
1,027 |
|
|
|
1,724 |
|
|
Taxes on earnings |
|
182 |
|
|
|
155 |
|
|
Deferred revenue |
|
3,718 |
|
|
|
3,658 |
|
|
Accrued restructuring |
|
121 |
|
|
|
180 |
|
|
Other accrued liabilities |
|
4,505 |
|
|
|
4,161 |
|
|
Total current liabilities |
|
22,635 |
|
|
|
21,882 |
|
|
Long-term debt |
|
7,840 |
|
|
|
7,487 |
|
|
Other non-current liabilities |
|
6,659 |
|
|
|
6,546 |
|
|
|
|
|
|
|||||
Stockholders’ Equity |
|
|
|
|||||
Common stock, |
|
13 |
|
|
|
13 |
|
|
Additional paid-in capital |
|
28,239 |
|
|
|
28,199 |
|
|
Accumulated deficit |
|
(3,728 |
) |
|
|
(3,946 |
) |
|
Accumulated other comprehensive loss |
|
(3,108 |
) |
|
|
(3,084 |
) |
|
Total HPE stockholders’ equity |
|
21,416 |
|
|
|
21,182 |
|
|
Non-controlling interests |
|
52 |
|
|
|
56 |
|
|
Total stockholders’ equity |
|
21,468 |
|
|
|
21,238 |
|
|
Total liabilities and stockholders’ equity |
$ |
58,602 |
|
|
$ |
57,153 |
|
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES |
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(Unaudited) |
||||||||
|
|
|
||||||
|
|
For the three months ended |
||||||
|
|
|
|
|
||||
|
|
In millions |
||||||
Cash Flows from Operating Activities: |
|
|
|
|||||
Net earnings |
$ |
387 |
|
|
$ |
501 |
|
|
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: |
|
|
|
|||||
Depreciation and amortization |
|
657 |
|
|
|
656 |
|
|
Stock-based compensation expense |
|
141 |
|
|
|
140 |
|
|
Provision for inventory and credit losses |
|
32 |
|
|
|
45 |
|
|
Restructuring charges |
|
7 |
|
|
|
72 |
|
|
Deferred taxes on earnings |
|
(22 |
) |
|
|
20 |
|
|
Earnings from equity interests |
|
(46 |
) |
|
|
(58 |
) |
|
Other, net |
|
72 |
|
|
|
(60 |
) |
|
Changes in Operating Assets and Liabilities, Net of Acquisitions: |
|
|
|
|||||
Accounts receivable |
|
(310 |
) |
|
|
(112 |
) |
|
Financing receivables |
|
(190 |
) |
|
|
(523 |
) |
|
Inventory |
|
(1,461 |
) |
|
|
495 |
|
|
Accounts payable |
|
1,041 |
|
|
|
(2,195 |
) |
|
Taxes on earnings |
|
67 |
|
|
|
46 |
|
|
Restructuring |
|
(78 |
) |
|
|
(96 |
) |
|
Other assets and liabilities |
|
(233 |
) |
|
|
240 |
|
|
Net cash provided by (used in) operating activities |
|
64 |
|
|
|
(829 |
) |
|
Cash Flows from Investing Activities: |
|
|
|
|||||
Investment in property, plant and equipment |
|
(656 |
) |
|
|
(794 |
) |
|
Proceeds from sale of property, plant and equipment |
|
96 |
|
|
|
159 |
|
|
Purchases of investments |
|
(16 |
) |
|
|
— |
|
|
Proceeds from maturities and sales of investments |
|
4 |
|
|
|
4 |
|
|
Financial collateral posted |
|
(439 |
) |
|
|
(682 |
) |
|
Financial collateral received |
|
271 |
|
|
|
108 |
|
|
Payments made in connection with business acquisitions, net of cash acquired |
|
— |
|
|
|
(32 |
) |
|
Net cash used in investing activities |
|
(740 |
) |
|
|
(1,237 |
) |
|
Cash Flows from Financing Activities: |
|
|
|
|||||
Short-term borrowings with original maturities less than 90 days, net |
|
(17 |
) |
|
|
745 |
|
|
Proceeds from debt, net of issuance costs |
|
859 |
|
|
|
261 |
|
|
Payment of debt |
|
(515 |
) |
|
|
(661 |
) |
|
Net payments related to stock-based award activities |
|
(94 |
) |
|
|
(107 |
) |
|
Repurchase of common stock |
|
(3 |
) |
|
|
(73 |
) |
|
Cash dividends paid to non-controlling interests, net of contributions |
|
(8 |
) |
|
|
— |
|
|
Cash dividends paid to shareholders |
|
(169 |
) |
|
|
(156 |
) |
|
Net cash provided by financing activities |
|
53 |
|
|
|
9 |
|
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
14 |
|
|
|
138 |
|
|
Decrease in cash, cash equivalents and restricted cash |
|
(609 |
) |
|
|
(1,919 |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
4,581 |
|
|
|
4,763 |
|
|
Cash, cash equivalents and restricted cash at end of period |
$ |
3,972 |
|
|
$ |
2,844 |
|
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES |
||||||||||||
Segment Information |
||||||||||||
(Unaudited) |
||||||||||||
|
|
|
||||||||||
|
|
For the three months ended |
||||||||||
|
|
|
|
|
|
|
||||||
|
|
In millions |
||||||||||
Net Revenue: |
|
|
|
|
|
|
||||||
Server(4) |
|
$ |
3,352 |
|
|
$ |
3,574 |
|
|
$ |
4,332 |
|
Hybrid Cloud(4) |
|
|
1,248 |
|
|
|
1,341 |
|
|
|
1,384 |
|
Intelligent Edge(4) |
|
|
1,201 |
|
|
|
1,410 |
|
|
|
1,169 |
|
Financial Services |
|
|
873 |
|
|
|
876 |
|
|
|
873 |
|
Corporate Investments and other(4) |
|
|
238 |
|
|
|
263 |
|
|
|
234 |
|
Total segment net revenue |
|
|
6,912 |
|
|
|
7,464 |
|
|
|
7,992 |
|
Elimination of intersegment net revenue |
|
|
(157 |
) |
|
|
(113 |
) |
|
|
(183 |
) |
Total consolidated net revenue |
|
$ |
6,755 |
|
|
$ |
7,351 |
|
|
$ |
7,809 |
|
|
|
|
|
|
|
|
||||||
Earnings Before Taxes(4): |
|
|
|
|
|
|
||||||
Server |
|
$ |
383 |
|
|
$ |
360 |
|
|
$ |
678 |
|
Hybrid Cloud |
|
|
47 |
|
|
|
51 |
|
|
|
80 |
|
Intelligent Edge |
|
|
353 |
|
|
|
382 |
|
|
|
227 |
|
Financial Services |
|
|
74 |
|
|
|
70 |
|
|
|
63 |
|
Corporate Investments and other |
|
|
(10 |
) |
|
|
(16 |
) |
|
|
(22 |
) |
Total segment earnings from operations |
|
|
847 |
|
|
|
847 |
|
|
|
1,026 |
|
|
|
|
|
|
|
|
||||||
Unallocated corporate costs and eliminations |
|
|
(72 |
) |
|
|
(137 |
) |
|
|
(108 |
) |
Stock-based compensation expense |
|
|
(141 |
) |
|
|
(71 |
) |
|
|
(140 |
) |
Amortization of intangible assets |
|
|
(71 |
) |
|
|
(72 |
) |
|
|
(73 |
) |
Transformation costs |
|
|
(20 |
) |
|
|
(56 |
) |
|
|
(102 |
) |
Disaster recovery (charges) |
|
|
25 |
|
|
|
14 |
|
|
|
(1 |
) |
Acquisition, disposition and other related charges |
|
|
(43 |
) |
|
|
(18 |
) |
|
|
(11 |
) |
Interest and other, net(1) |
|
|
(88 |
) |
|
|
(23 |
) |
|
|
(26 |
) |
Earnings from equity interests |
|
|
46 |
|
|
|
65 |
|
|
|
58 |
|
Total pretax earnings |
|
$ |
483 |
|
|
$ |
549 |
|
|
$ |
623 |
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES |
||||||||||||||||
Segment Information |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
|
|
|
||||||||||||
|
|
For the three months ended |
|
Change (%) |
||||||||||||
|
|
|
|
|
|
|
|
Q/Q |
|
Y/Y |
||||||
|
|
Dollars in millions |
||||||||||||||
Net Revenue: |
|
|
|
|
|
|||||||||||
Server(4) |
$ |
3,352 |
|
$ |
3,574 |
|
$ |
4,332 |
|
(6%) |
(23%) |
|||||
Hybrid Cloud(4) |
|
1,248 |
|
|
1,341 |
|
|
1,384 |
|
(7) |
(10) |
|||||
Intelligent Edge(4) |
|
1,201 |
|
|
1,410 |
|
|
1,169 |
|
(15) |
3 |
|||||
Financial Services |
|
873 |
|
|
876 |
|
|
873 |
|
— |
— |
|||||
Corporate Investments and other(4) |
|
238 |
|
|
263 |
|
|
234 |
|
(10) |
2 |
|||||
Total segment net revenue |
|
6,912 |
|
|
7,464 |
|
|
7,992 |
|
(7) |
(14) |
|||||
Elimination of intersegment net revenue |
|
(157 |
) |
|
(113 |
) |
|
(183 |
) |
39 |
(14) |
|||||
Total consolidated net revenue |
$ |
6,755 |
|
$ |
7,351 |
|
$ |
7,809 |
|
(8%) |
(14%) |
|||||
|
For the three months ended |
|
Change in operating profit margin (pts) |
||||||||||||
|
|
|
|
|
|
|
Q/Q |
|
Y/Y |
||||||
Segment Operating Profit Margin(4): |
|
|
|
|
|
|
|
|
|
||||||
Server |
11.4 |
% |
|
10.1 |
% |
|
15.7 |
% |
|
1.3 |
|
(4.3 |
) |
||
Hybrid Cloud |
3.8 |
% |
|
3.8 |
% |
|
5.8 |
% |
|
— |
|
|
(2.0 |
) |
|
Intelligent Edge |
29.4 |
% |
|
27.1 |
% |
|
19.4 |
% |
|
2.3 |
|
|
10.0 |
|
|
Financial Services |
8.5 |
% |
|
8.0 |
% |
|
7.2 |
% |
|
0.5 |
|
|
1.3 |
|
|
Corporate Investments and other |
(4.2 |
%) |
|
(6.1 |
%) |
|
(9.4 |
%) |
|
1.9 |
|
|
5.2 |
|
|
Total segment operating profit margin |
12.3 |
% |
|
11.3 |
% |
|
12.8 |
% |
|
1.0 |
|
|
(0.5 |
) |
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES |
||||||||||||
Calculation of Diluted Net Earnings Per Share |
||||||||||||
(Unaudited) |
||||||||||||
|
|
|
||||||||||
|
|
For the three months ended |
||||||||||
|
|
|
|
|
|
|
||||||
|
|
In millions, except per share amounts |
||||||||||
Numerator: |
|
|
|
|
|
|||||||
GAAP net earnings |
$ |
387 |
|
|
$ |
642 |
|
|
$ |
501 |
|
|
Non-GAAP net earnings |
$ |
638 |
|
|
$ |
680 |
|
|
$ |
828 |
|
|
|
|
|
|
|
|
|||||||
Denominator: |
|
|
|
|
|
|||||||
Weighted-average shares used to compute basic net earnings per share |
|
1,301 |
|
|
|
1,295 |
|
|
|
1,298 |
|
|
Dilutive effect of employee stock plans |
|
15 |
|
|
|
20 |
|
|
|
17 |
|
|
Weighted-average shares used to compute diluted net earnings per share |
|
1,316 |
|
|
|
1,315 |
|
|
|
1,315 |
|
|
|
|
|
|
|
|
|||||||
GAAP Net Earnings Per Share |
|
|
|
|
|
|||||||
Basic |
$ |
0.30 |
|
|
$ |
0.50 |
|
|
$ |
0.39 |
|
|
Diluted |
$ |
0.29 |
|
|
$ |
0.49 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
|
|||||||
Non-GAAP Net Earnings Per Share |
|
|
|
|
|
|||||||
Basic |
$ |
0.49 |
|
|
$ |
0.53 |
|
|
$ |
0.64 |
|
|
Diluted |
$ |
0.48 |
|
|
$ |
0.52 |
|
|
$ |
0.63 |
|
________________ | |||
(1) |
Interest and other, net includes tax indemnification and other adjustments, non-service net periodic benefit cost, and interest and other, net. |
||
|
|
||
(2) |
For the three months ended |
||
|
|
||
(3) |
Other adjustments includes non-service net periodic benefit cost and tax indemnification and other adjustments. |
||
|
|
||
(4) |
As previously disclosed, effective as of the beginning of the first quarter of fiscal 2024, in order to align the segment financial reporting more closely with its business structure, the Company established two new reportable segments, Hybrid Cloud and Server. Hybrid Cloud includes the historical Storage segment, HPE GreenLake Flex Solutions (which provides flexible as-a-service IT infrastructure through the HPE GreenLake edge-to-cloud platform and was previously reported under the Compute and the High Performance Computing & Artificial Intelligence ("HPC & AI") segments), Private Cloud, and Software (previously reported under the Corporate Investments and Other segment). The Server segment combines the previously separately reported Compute and HPC & AI segments, with adjustments for certain product lines that are now reported in Hybrid Cloud. Additionally, certain products and services previously reported in the financial results for the HPC & AI segment were moved to be reported in the Hybrid Cloud segment, and the Athonet business and certain components of the Communications and Media Solutions business, both previously reported in the financial results for Corporate Investments and Other, moved to be reported in the Intelligent Edge segment. |
||
|
|||
As a result, the Company’s new organizational structure consists of the following segments: (i) Server; (ii) Hybrid Cloud; (iii) Intelligent Edge; (iv) Financial Services; and (v) Corporate Investments and Other. The Company is reporting under this re-aligned segment structure beginning with the results of the first quarter of fiscal 2024. |
|||
|
|||
The Company has reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the realignment of net revenue and operating profit for each of the segments as described above. These changes had no impact on Hewlett Packard Enterprise’s previously reported consolidated net revenue, net earnings, net earnings per share or total assets. |
|||
Use of non-GAAP financial measures
To supplement Hewlett Packard Enterprise’s condensed consolidated financial statement information presented on a GAAP basis,
These non-GAAP financial measures are not computed in accordance with, or as an alternative to, GAAP in
Usefulness of non-GAAP financial measures to investors
Economic substance of and material limitations associated with non-GAAP financial measures used by
Net revenue on a constant currency basis assumes no change to the foreign exchange rate utilized in the comparable prior-year period. This measure assists investors with evaluating the Company’s past and future performance, without the impact of foreign exchange rates, as more than half of our revenue is generated outside of the
-
Hewlett Packard Enterprise incurs charges relating to the amortization of intangible assets and excludes these charges for purposes of calculating these non-GAAP measures. Such charges are significantly impacted by the timing and magnitude of Hewlett Packard Enterprise’s acquisitions.Hewlett Packard Enterprise excludes these charges for the purpose of calculating these non-GAAP measures, primarily because they are non-cash expenses and the Company’s internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding intangible asset amortization. Although this does not directly affect Hewlett Packard Enterprise’s cash position, the loss in value of intangible assets over time can have a material impact on the equivalent GAAP earnings measure. -
Transformation costs represent net costs related to the (i) HPE Next Plan and (ii) Cost Optimization and Prioritization Plan and include restructuring charges, program design and execution costs, costs incurred to transform the Company’s IT infrastructure, net gains from the sale of real estate and any impairment charges on real estate identified as part of the initiatives.
Hewlett Packard Enterprise excludes these costs as they are discrete costs related to two specific transformation programs that were announced in 2017 and 2020, respectively, as multi-year programs necessary to transform the business and IT infrastructure following material divestiture transactions in 2017 and in response to COVID-19 and an evolving product portfolio in fiscal 2020. The HPE Next Plan and the Cost Optimization and Prioritization Plan are substantially complete. The exclusion of the transformation program costs from the non-GAAP financial measures, as stated above, is to provide a supplemental measure of the Company’s operating results that do not include material HPE Next Plan and the Cost Optimization and Prioritization Plan costs as the Company’s management does not believe such costs to be reflective of its ongoing operating cost structure. Further, the transformation costs for these plans have materially fluctuated since 2017, have been materially declining since 2021 and the Company does not expect these costs to be material.Hewlett Packard Enterprise's management believes non-GAAP measures excluding these costs are useful to management and investors for comparing operating performance across multiple periods. -
Disaster (recovery) charges are primarily related to the exit of the Company’s businesses in
Russia andBelarus , and include credit losses of financing and trade receivables, employee severance and abandoned assets. Disaster charges also include direct costs or recovery of these costs related to COVID-19 as a result ofHewlett Packard Enterprise -hosted, co-hosted, or sponsored event cancellations and subsequent shift to a virtual format.Hewlett Packard Enterprise excludes Disaster (recovery) charges from these non-GAAP measures as the specific charges are non-recurring charges and not indicative of the operational performance of the Company’s business. -
Stock-based compensation expense consists of equity awards granted based on the estimated fair value of those awards at grant date. Although stock-based compensation is a key incentive offered to employees,
Hewlett Packard Enterprise excludes these charges for the purpose of calculating these non-GAAP measures, primarily because they are non-cash expenses, and the Company’s internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding stock-based compensation expense. -
Hewlett Packard Enterprise incurs costs related to its acquisition, disposition and other related charges. The charges are direct expenses, such as professional fees and retention costs, most of which are treated as non-cash or non-capitalized expenses. For the first quarter of 2024, these charges were driven by costs associated with the pending acquisition of Juniper Networks, in addition to prior acquisitions of Axis and Athonet. For the first quarter of 2023, these charges were driven by acquisitions ofZerto and Determined AI. Charges may also include expenses associated with disposal activities including legal and arbitration settlements in connection with certain dispositions. Hewlett Packard Enterprise’s management considers these acquisitions and divestitures to be discrete events. The Company excludes these costs as these expenses are inconsistent in amount and frequency and are significantly impacted by the timing and nature of its acquisitions and divestitures. In addition, the Company’s internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding these charges. -
For the first fiscal quarter of 2024 and prospectively, the adjustment to earnings from equity interests includes the equity in earnings from the H3C investment. In connection with the planned divestiture of the H3C investment, the Company stopped reporting H3C earnings in the non-GAAP results as the Company no longer receives dividends from this investment due to the Put Share Purchase Agreement described in Note 20 “Equity Method Investments” to the Consolidated Financial Statements in Item 8 of Part II of the Company Annual Report on Form 10-K for the fiscal year ended
October 31, 2023 . All periods presented include the amortization of the basis difference in this investment. For the first fiscal quarter of 2023, this adjustment also included the Company’s portion of intangible asset impairment charges from H3C. The Company believes that eliminating these amounts for purposes of calculating non-GAAP financial measures facilitates the evaluation of the current operating performance. -
Hewlett Packard Enterprise excludes gains and losses (including impairments) on its non-marketable equity investments because the Company does not believe they are reflective of normal continuing business operations. These adjustments are reflected in Interest and other, net in the Condensed Consolidated Statements of Earnings. The Company believes eliminating these adjustments for the purposes of calculating non-GAAP measures facilitates the evaluation of its current operating performance. -
Hewlett Packard Enterprise utilizes a structural long-term projected non-GAAP income tax rate in order to provide 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 whereHewlett Packard Enterprise operates. For fiscal 2024, the Company will use a projected non-GAAP income tax rate of 15%, which reflects currently available information as well as other factors and assumptions. The non-GAAP income 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. For fiscal 2023, the Company had a non-GAAP tax rate of 14%. Hewlett Packard Enterprise’s management believes that making these adjustments for purposes of calculating non-GAAP measures, facilitates a supplemental evaluation of the Company’s current operating performance and comparisons to past operating results. - FCF is defined as cash flow from operations, less net capital expenditures (investments in property, plant & equipment (“PP&E”) less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash. FCF does not represent the total increase or decrease in cash for the period. Hewlett Packard Enterprise’s management and investors can use FCF for the purpose of determining the amount of cash available for investment in the Company’s businesses, repurchasing stock and other purposes as well as evaluating its historical and prospective liquidity.
Compensation for material limitations 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 that they can have a material impact on the equivalent GAAP earnings measures and cash flows, they may be calculated differently by other companies (limiting the usefulness of those measures for comparative purposes) and may not reflect the full economic effect of the loss in value of certain assets.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240229327637/en/
Media Contact:
Laura.Keller@hpe.com
Investor Contact:
investor.relations@hpe.com
Source: