Exceeds FY21 commitments; Edge-to-cloud strategy driving
strong momentum across all businesses entering FY22
Fiscal 2021 Full-Year Financial Highlights:
- Orders: Strengthening demand through the year drives growth up
16% from the prior-year period
- Revenue: $27.8 billion, up 3% from the prior-year period
- Diluted net earnings per share (“EPS”):
- GAAP of $2.58, up $2.83 from prior-year period
- Non-GAAP of $1.96, up 27% from the prior-year period
- Cash flow from operations: $5.9 billion including $2.2 billion
of cash after-tax impact from Oracle’s satisfaction of the judgment
in the Itanium litigation, up $3.6 billion from the prior-year
period
- Free cash flow2, 3: $1.6 billion, up $1.0 billion from the
prior-year period
- Capital returns to shareholders: $838 million in the form of
dividends and share repurchases
Outlook:
- First quarter Fiscal 2022: Estimates GAAP diluted net EPS to be
in the range of $0.19 to $0.27 and non-GAAP diluted net EPS to be
in the range of $0.42 to $0.50
- Declaring Q1 dividend of $0.12 per share payable on January 7,
2022
- Fiscal 2022: Reiterates GAAP diluted net EPS to be in the range
of $1.24 to $1.38 and non-GAAP diluted net EPS to be in the range
of $1.96 to $2.10
- Fiscal 2022 free cash flow3: Reiterates free cash flow guidance
to be in the range of $1.8 to $2.0 billion
- Committed to returning at least $500 million in share buybacks
in Fiscal 2022
Hewlett Packard Enterprise (NYSE: HPE) today announced financial
results for fiscal year 2021 and the fourth quarter, ended October
31, 2021.
This press release features multimedia. View
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HPE Reports Q4 and FY21 Results
Infographic
“HPE ended fiscal year 2021 with record demand for our
edge-to-cloud portfolio, and we are well positioned to capitalize
on the significant opportunity in front of us,” said Antonio Neri,
president and CEO of Hewlett Packard Enterprise. “In 2021, we
accelerated our pivot to as a service, strengthened our core
capabilities, and invested in bold innovation in high-growth
segments. As our customers continue to demand greater connectivity,
access to solutions that allow them to extract value from their
data no matter where it lives, and a cloud-everywhere experience,
HPE is poised to accelerate our market leadership and provide
strong shareholder returns.”
“HPE executed with discipline and exceeded all of our key
financial targets in FY21,” said Tarek Robbiati, EVP and CFO of
Hewlett Packard Enterprise. “The demand environment has been
incredibly strong and accelerated in the second half of the year,
which gives us important momentum headed into next year. We are
operating with greater focus and more agility and are well
positioned to deliver against our FY22 outlook.”
Fourth Quarter Fiscal Year 2021 Results
Net revenue of $7.4 billion, up 7% sequentially and above
normal sequential seasonality; up 2% from the prior-year period or
flat when adjusted for currency.
Annualized revenue run-rate (ARR)1 of $796 million, up
36% from the prior-year period and total as-a-Service orders were
up 114% from the prior-year period. Based on strong customer demand
and growth in orders, we reiterate our 2021 Securities Analyst
Meeting ARR guidance of 35-45% Compounded Annual Growth Rate from
fiscal year 2021 to fiscal year 2024.
GAAP gross margins of 32.9%, up 230 basis points from the
prior-year period and Non-GAAP gross margins of 33.0%, up 230 basis
points from the prior-year period.
GAAP diluted net EPS was $1.91, compared to $0.12 in the
prior-year period and above the previously provided outlook of
$0.14 to $0.22 per share, primarily due to the judgment in the
Itanium litigation with Oracle.
Non-GAAP diluted net EPS was $0.52, compared to $0.41 in
the prior-year period and at the high end of the previously
provided outlook of $0.44 to $0.52 per share. Fourth quarter
non-GAAP diluted net EPS excludes after-tax adjustments of $1.39
per diluted share primarily related to the judgment in the Itanium
litigation with Oracle partially offset by transformation costs,
early debt redemption costs, stock-based compensation expense and
the amortization of intangible assets.
Cash flow from operations of $3.0 billion including $2.2
billion of cash after-tax impact from Oracle’s satisfaction of the
judgment in the Itanium litigation, up $2.2 billion from the
prior-year period.
Free cash flow2, 3 of $94 million, down $129 million from
the prior-year period.
Capital returns to shareholders of $157 million in
dividends and $213 million of share repurchases.
Segment Results
- Intelligent Edge revenue was $815 million, up 4% from the
prior-year period or 2% when adjusted for currency, with 10.7%
operating profit margin, compared to 12.3% from the prior-year
period. Aruba Services revenue was up high-single digits from the
prior-year period when adjusted for currency and Intelligent Edge
aaS ARR was up triple-digits from the prior-year period.
- High Performance Computing & Artificial Intelligence (HPC
& AI) revenue was $1.0 billion, up 1% from the prior-year
period or flat when adjusted for currency, with 14.3% operating
profit margin, compared to 13.0% from the prior-year period. We
remain on track to achieve 8-12% CAGR outlook from FY20 to
FY22.
- Compute revenue was $3.2 billion, up 1% from the prior-year
period or down 1% when adjusted for currency, with 9.4% operating
profit margin, compared to 6.6% from the prior-year period. Revenue
was up 4% from the prior-quarter period and 4% from the
prior-quarter period when adjusted for currency, and above normal
sequential seasonality.
- Storage revenue was $1.3 billion, up 3% from the prior-year
period or up 2% when adjusted for currency, with 13.8% operating
profit margin, compared to 18.2% from the prior-year period. All
flash Arrays grew 7% from the prior-year period led by Primera, up
strong double-digits from the prior-year period. Notable strength
in software-defined solutions, including Nimble, up 4% from the
prior-year period with strong momentum in dHCI growing
double-digits.
- Financial Services revenue was $858 million, up 1% from the
prior-year period or flat when adjusted for currency, with 14.1%
operating profit margin, compared to 7.8% from the prior-year
period. Net portfolio assets were flat from the prior-year period
or down 1% when adjusted for currency. The business delivered
return on equity of 23.8%, up 10.9 points from the prior-year
period.
Fiscal Year 2021 Full-Year Results
Net revenue of $27.8 billion, up 3% from the prior-year
period or up 1% when adjusted for currency.
GAAP gross margins of 33.7%, up 230 basis points from the
prior-year period and non-GAAP gross margins of 33.9%, up 220 basis
points from the prior-year period.
GAAP diluted net EPS was $2.58, compared to ($0.25) in
the prior-year period and above the previously provided outlook of
$0.80 to $0.88 per share, primarily due to the judgment in the
Itanium litigation with Oracle.
Non-GAAP diluted net EPS was $1.96, compared to $1.54 in
the prior-year period and at the high end of the previously
provided outlook of $1.88 to $1.96 per share. Fiscal year 2021
non-GAAP diluted net EPS excludes after-tax adjustments of $0.62
per diluted share primarily related to the judgment in the Itanium
litigation with Oracle offset by transformation costs, stock-based
compensation expense and the amortization of intangible assets.
Cash flow from operations of $5.9 billion including $2.2
billion of cash after-tax impact from Oracle’s satisfaction of the
judgment in the Itanium litigation, up $3.6 billion from the
prior-year period.
Free cash flow2, 3 of $1.6 billion, up $1.0 billion from
the prior-year period.
Capital returns to shareholders of $625 million in
dividends and $213 million of share repurchases.
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 2022, is payable
on January 7, 2022, to stockholders of record as of the close of
business on December 10, 2021.
Fiscal 2022 first quarter outlook:
Hewlett Packard Enterprise estimates GAAP diluted net EPS to be
in the range of $0.19 to $0.27 and non-GAAP diluted net EPS to be
in the range of $0.42 to $0.50. Fiscal 2022 first quarter non-GAAP
diluted net EPS estimates exclude after-tax adjustments of
approximately $0.23 per diluted share, primarily related to
transformation costs, stock-based compensation expense and the
amortization of intangible assets.
Fiscal 2022 outlook:
Hewlett Packard Enterprise reiterates GAAP diluted net EPS
outlook of $1.24 to $1.38 and non-GAAP diluted net EPS outlook of
$1.96 to $2.10. Fiscal 2022 non-GAAP diluted net EPS estimates
exclude after-tax adjustments of approximately $0.72 per diluted
share, primarily related to transformation costs, stock-based
compensation expense and the amortization of intangible assets.
Reiterates free cash flow3 guidance range to $1.8 to $2.0
billion.
1 Annualized Revenue Run-Rate (“ARR”) is a financial metric used
to assess the growth of the Consumption Services (“CS”) offerings.
ARR represents the annualized value of all recurring [net] HPE
GreenLake services revenue, related financial services revenue
(which includes rental income for operating leases and interest
income for capital leases), and Software-as-a-Service,
subscription, 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 deferred
revenue and is not intended to be combined with any of these items.
2Excludes $2,172 million of cash after-tax impact from Oracle’s
satisfaction of the judgment in the Itanium litigation. 3Hewlett
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 (NYSE: HPE) is the global
edge-to-cloud 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
people live and work, HPE delivers unique, open and intelligent
technology solutions as a service. With offerings spanning Cloud
Services, Compute, High Performance Computing & AI, Intelligent
Edge, Software, and Storage, HPE provides a consistent experience
across all clouds and edges, helping 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 and key performance
metrics
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,
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, cash
flow from operations and free cash flow, each excluding litigation
judgment, net of taxes paid, 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.
In addition to the supplemental non-GAAP financial information,
Hewlett Packard Enterprise also presents annualized revenue
run-rate ("ARR") and as-a-Service ("AAS") orders as performance
metrics. ARR is a financial metric used to assess the growth of the
Consumption Services ("CS") offerings. ARR represents the
annualized value of all recurring net GreenLake services revenue,
related financial services revenue (which includes rental income
for operating leases and interest income for capital leases), and
Software-as-a-Service ("SaaS"), subscription, and other
as-a-Service offerings recognized during a quarter and multiplied
by four. AAS orders are an overlay across all business segments
contributing to HPE's consumption-based services (both recurring
and non-recurring revenues), and includes hardware, as well as
GreenLake as-a-Service, Aruba SaaS, CMS SaaS, and other Software
assets. ARR & AAS orders should be viewed independently of net
revenue and deferred revenue and are not intended to be combined
with any of these items.
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 Company and its consolidated
subsidiaries ("Hewlett Packard Enterprise") 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, investments,
effective tax rates, interest rates, the impact of the U.S. Tax
Cuts and Jobs Act of 2017 and related guidance or regulations, net
earnings, net earnings per share, cash flows, liquidity and capital
resources, inventory, goodwill, impairment charges, hedges and
derivatives and related offsets, order backlog, benefit plan
funding, deferred tax assets, share repurchases, currency exchange
rates, repayments of debts including our asset-backed debt
securities, or other financial items; any projections of the
amount, execution, timing and results of any transformation or
impact of cost savings, restructuring plans, including estimates
and assumptions related to the anticipated benefits, cost savings,
or charges of implementing transformation and restructuring plans;
any statements of the plans, strategies and objectives of
management for future operations, as well as the execution of
corporate transactions or contemplated acquisitions, research and
development expenditures, and any resulting benefit, cost savings,
charges, or 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 of 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, the
distribution of Hewlett Packard Enterprise's products and the
delivery of Hewlett Packard Enterprise's services effectively; the
protection of Hewlett Packard Enterprise's intellectual property
assets, including intellectual property licensed from third parties
and intellectual property shared with its former parent; risks
associated with Hewlett Packard Enterprise's international
operations (including pandemics and public health problems, such as
the outbreak of COVID-19); the development and transition of new
products and services and the enhancement of existing products and
services to meet customer needs and respond to emerging
technological trends; the execution and performance of contracts by
Hewlett Packard Enterprise and its suppliers, customers, clients
and partners, including any impact thereon resulting from events
such as the COVID-19 pandemic; the hiring and retention of key
employees; the execution, integration, and other risks associated
with business combination and investment transactions; the impact
of changes to environmental, global trade, and other governmental
regulations; changes in our product, lease, intellectual property
or real estate portfolio; the payment or non-payment of a dividend
for any period; the efficacy of using non-GAAP, rather than GAAP,
financial measures in business projections and planning; the
judgments required in connection with determining revenue
recognition; impact of company policies and related compliance;
utility of segment realignments; allowances for recovery of
receivables and warranty obligations; provisions for, and
resolution of, pending investigations, claims and disputes; and
other risks that are described herein, 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, 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, 2021. Hewlett Packard Enterprise assumes no
obligation and does not intend to update these forward-looking
statements, except as required by applicable law.
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share
amounts)
Three months ended
October 31, 2021
July 31, 2021
October 31, 2020
Net revenue
$
7,354
$
6,897
$
7,208
Costs and expenses:
Cost of sales
4,935
4,515
5,002
Research and development
502
506
484
Selling, general and administrative
1,280
1,291
1,166
Amortization of intangible assets
78
82
80
Transformation costs
197
213
304
Disaster charges
10
5
2
Acquisition, disposition and other related
charges
2
3
25
Total costs and expenses
7,004
6,615
7,063
Earnings from operations
350
282
145
Interest and other, net
(106
)
(50
)
(57
)
Tax indemnification and related
adjustments
5
76
(15
)
Non-service net periodic benefit
credit
17
19
35
Litigation judgment
2,351
—
—
Earnings from equity interests
71
79
17
Earnings before (provision) benefit for
taxes
2,688
406
125
(Provision) benefit for taxes
(135
)
(14
)
32
Net earnings
$
2,553
$
392
$
157
Net earnings per share:
Basic
$
1.95
$
0.30
$
0.12
Diluted
$
1.91
$
0.29
$
0.12
Cash dividends declared per share
$
0.12
$
0.12
$
0.12
Weighted-average shares used to compute
net earnings per share:
Basic
1,312
1,314
1,293
Diluted
1,335
1,338
1,306
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share
amounts)
Twelve months ended October
31,
2021
2020
Net revenue
$
27,784
$
26,982
Costs and expenses:
Cost of sales
18,408
18,513
Research and development
1,979
1,874
Selling, general and administrative
4,929
4,624
Amortization of intangible assets
354
379
Impairment of goodwill
—
865
Transformation costs
930
950
Disaster charges
16
26
Acquisition, disposition and other related
charges
36
80
Total costs and expenses
26,652
27,311
Earnings (loss) from operations
1,132
(329
)
Interest and other, net
(211
)
(215
)
Tax indemnification and related
adjustments
65
(101
)
Non-service net periodic benefit
credit
70
136
Litigation judgment
2,351
—
Earnings from equity interests
180
67
Earnings (loss) before (provision) benefit
for taxes
3,587
(442
)
(Provision) benefit for taxes
(160
)
120
Net earnings (loss)
$
3,427
$
(322
)
Net earnings (loss) per share:
Basic
$
2.62
$
(0.25
)
Diluted
$
2.58
$
(0.25
)
Cash dividends declared per share
$
0.48
$
0.36
Weighted-average shares used to compute
net earnings (loss) per share:
Basic
1,309
1,294
Diluted
1,330
1,294
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,
2021
Diluted net earnings per
share
Three months ended July 31,
2021
Diluted net earnings per
share
Three months ended October 31,
2020
Diluted net earnings per
share
GAAP net earnings
$
2,553
$
1.91
$
392
$
0.29
$
157
$
0.12
Non-GAAP adjustments:
Amortization of initial direct costs
2
—
2
—
1
—
Amortization of intangible assets
78
0.06
82
0.06
80
0.06
Transformation costs
197
0.15
213
0.16
304
0.23
Disaster charges
10
0.01
5
—
2
—
Stock-based compensation expense (a)
78
0.06
86
0.06
59
0.05
Acquisition, disposition and other related
charges
2
—
3
—
25
0.02
Tax indemnification and related
adjustments
(5
)
—
(76
)
(0.05
)
15
0.02
Non-service net periodic benefit
credit
(17
)
(0.01
)
(19
)
(0.01
)
(35
)
(0.03
)
Litigation judgment
(2,351
)
(1.76
)
—
—
—
—
Early debt redemption costs
100
0.07
—
—
—
—
Earnings from equity interests (b)
18
0.01
23
0.02
35
0.03
Adjustments for taxes
$
23
0.02
$
(88
)
(0.06
)
$
(106
)
(0.09
)
Non-GAAP net earnings
$
688
$
0.52
$
623
$
0.47
$
537
$
0.41
GAAP earnings from operations
$
350
$
282
$
145
Non-GAAP adjustments
Amortization of initial direct costs
2
2
1
Amortization of intangible assets
78
82
80
Transformation costs
197
213
304
Disaster charges
10
5
2
Stock-based compensation expense (a)
78
86
59
Acquisition, disposition and other related
charges
2
3
25
Non-GAAP earnings from
operations
$
717
$
673
$
616
GAAP operating profit margin
4.8
%
4.1
%
2.0
%
Non-GAAP adjustments
4.9
%
5.7
%
6.5
%
Non-GAAP operating profit
margin
9.7
%
9.8
%
8.5
%
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, 2021
July 31, 2021
October 31, 2020
GAAP net revenue
$
7,354
$
6,897
$
7,208
GAAP cost of sales
4,935
4,515
5,002
GAAP gross profit
$
2,419
$
2,382
$
2,206
Non-GAAP adjustments
Amortization of initial direct costs
$
2
$
2
$
1
Stock-based compensation expense (a)
7
9
7
Non-GAAP gross profit
$
2,428
$
2,393
$
2,214
GAAP gross profit margin
32.9
%
34.5
%
30.6
%
Non-GAAP adjustments
0.1
%
0.2
%
0.1
%
Non-GAAP gross profit margin
33.0
%
34.7
%
30.7
%
Net cash provided by operating
activities
$
2,956
$
1,130
$
747
Litigation judgment, net of taxes paid
(2,172
)
—
—
Net cash provided by operating
activities, excluding litigation judgment, net of taxes
paid
784
1,130
747
Investment in property, plant and
equipment
(770
)
(684
)
(604
)
Proceeds from sale of property, plant and
equipment
80
80
80
Free Cash Flow
$
94
$
526
$
223
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, 2021
Diluted net earnings per
share
Twelve months ended October
31, 2020
Diluted net earnings per
share
GAAP net earnings (loss)
$
3,427
$
2.58
$
(322
)
$
(0.25
)
Non-GAAP adjustments:
Amortization of initial direct costs
8
0.01
10
0.01
Amortization of intangible assets
354
0.27
379
0.29
Impairment of goodwill
—
—
865
0.67
Transformation costs
930
0.70
950
0.74
Disaster charges
16
0.01
26
0.02
Stock-based compensation expense (a)
372
0.28
274
0.21
Acquisition, disposition and other related
charges
36
0.03
107
0.08
Tax indemnification and related
adjustments
(65
)
(0.05
)
101
0.08
Non-service net periodic benefit
credit
(70
)
(0.05
)
(136
)
(0.11
)
Litigation judgment
(2,351
)
(1.78
)
—
—
Early debt redemption costs
100
0.08
—
—
Earnings from equity interests(b)
109
0.08
145
0.11
Adjustments for taxes
$
(264
)
(0.20
)
$
(394
)
(0.31
)
Non-GAAP net earnings
$
2,602
$
1.96
$
2,005
$
1.54
GAAP earnings (loss) from
operations
$
1,132
$
(329
)
Non-GAAP adjustments
Amortization of initial direct costs
8
10
Amortization of intangible assets
354
379
Impairment of goodwill
—
865
Transformation costs
930
950
Disaster charges
16
26
Stock-based compensation expense (a)
372
274
Acquisition, disposition and other related
charges
36
107
Non-GAAP earnings from
operations
$
2,848
$
2,282
GAAP operating profit margin
4.1
%
(1.2
)%
Non-GAAP adjustments
6.2
%
9.7
%
Non-GAAP operating profit
margin
10.3
%
8.5
%
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,
2021
2020
GAAP net revenue
$
27,784
$
26,982
GAAP cost of sales
18,408
18,513
GAAP gross profit
$
9,376
$
8,469
Non-GAAP adjustments
Amortization of initial direct costs
$
8
$
10
Stock-based compensation expense (a)
40
37
Acquisition, disposition and other related
charges(c)
—
27
Non-GAAP gross profit
$
9,424
$
8,543
GAAP gross profit margin
33.7
%
31.4
%
Non-GAAP adjustments
0.2
%
0.3
%
Non-GAAP gross profit margin
33.9
%
31.7
%
Net cash provided by operating
activities
$
5,871
$
2,240
Litigation judgment, net of taxes paid
(2,172
)
—
Net cash provided by operating
activities, excluding litigation judgment, net of taxes
paid
3,699
2,240
Investment in property, plant and
equipment
(2,502
)
(2,383
)
Proceeds from sale of property, plant and
equipment
354
703
Free Cash Flow
$
1,551
$
560
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In millions, except par
value)
As of October 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
3,996
$
4,233
Accounts receivable, net of allowances
3,979
3,386
Financing receivables, net of
allowances
3,932
3,794
Inventory
4,511
2,674
Other current assets
2,460
2,469
Total current assets
18,878
16,556
Property, plant and equipment
5,613
5,625
Long-term financing receivables and other
assets
11,670
10,544
Investments in equity interests
2,210
2,170
Goodwill and intangible assets
19,328
19,120
Total assets
$
57,699
$
54,015
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Notes payable and short-term
borrowings
$
3,552
$
3,755
Accounts payable
7,004
5,383
Employee compensation and benefits
1,778
1,391
Taxes on earnings
169
148
Deferred revenue
3,408
3,430
Accrued restructuring
290
366
Other accrued liabilities
4,486
4,265
Total current liabilities
20,687
18,738
Long-term debt
9,896
12,186
Other non-current liabilities
7,099
6,995
Stockholders’ equity
HPE stockholders’ equity:
Common stock, $0.01 par value (9,600
shares authorized; 1,295 and 1,287 issued and outstanding at
October 31, 2021 and October 31, 2020, respectively)
13
13
Additional paid-in capital
28,470
28,350
Accumulated deficit
(5,597
)
(8,375
)
Accumulated other comprehensive loss
(2,915
)
(3,939
)
Total HPE stockholders’ equity
19,971
16,049
Non-controlling interests
46
47
Total stockholders’ equity
20,017
16,096
Total liabilities and stockholders’
equity
$
57,699
$
54,015
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months ended October 31,
2021
Twelve months ended October
31, 2021
Cash flows from operating activities:
Net earnings
$
2,553
$
3,427
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
641
2,597
Stock-based compensation expense
78
382
Provision for doubtful accounts and
inventory
27
176
Restructuring charges
128
620
Deferred taxes on earnings
(11
)
(167
)
Earnings from equity interests
(71
)
(180
)
Dividends received from equity
investees
146
184
Other, net
85
202
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable
(652
)
(591
)
Financing receivables
(191
)
(165
)
Inventory
(607
)
(1,959
)
Accounts payable
458
1,608
Taxes on earnings
(67
)
(73
)
Restructuring
(101
)
(527
)
Other assets and liabilities
540
337
Net cash provided by operating
activities
2,956
5,871
Cash flows from investing activities:
Investment in property, plant and
equipment
(770
)
(2,502
)
Proceeds from sale of property, plant and
equipment
80
354
Purchases of available-for-sale securities
and other investments
(16
)
(60
)
Maturities and sales of available-for-sale
securities and other investments
4
15
Financial collateral posted
(30
)
(903
)
Financial collateral received
25
805
Payments made in connection with business
acquisitions, net of cash acquired
(372
)
(505
)
Net cash used in investing activities
(1,079
)
(2,796
)
Cash flows from financing activities:
Short-term borrowings with original
maturities less than 90 days, net
(6
)
(36
)
Proceeds from debt, net of issuance
costs
324
3,022
Payment of debt
(3,124
)
(5,465
)
Net payments related to stock-based award
activities
(11
)
(29
)
Repurchase of common stock
(213
)
(213
)
Cash dividends paid to non-controlling
interests, net of contributions
(10
)
(18
)
Cash dividends paid
(157
)
(625
)
Net cash used in financing activities
(3,197
)
(3,364
)
Decrease in cash, cash equivalents and
restricted cash
(1,320
)
(289
)
Cash, cash equivalents and restricted cash
at beginning of period
5,652
4,621
Cash, cash equivalents and restricted cash
at end of period
$
4,332
$
4,332
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
October 31,
2021
July 31, 2021
October 31,
2020
Net revenue:(d)
Compute
$
3,226
$
3,104
$
3,191
HPC & AI
1,000
741
992
Storage
1,257
1,176
1,215
Intelligent Edge
815
867
786
Financial Services
858
844
849
Corporate Investments and Other
353
332
340
Total segment net revenue
7,509
7,064
7,373
Elimination of intersegment net
revenue
(155
)
(167
)
(165
)
Total consolidated net revenue
$
7,354
$
6,897
$
7,208
Earnings before taxes:(a)(d)
Compute
$
302
$
347
$
210
HPC & AI
143
29
129
Storage
174
178
221
Intelligent Edge
87
137
97
Financial Services
121
94
66
Corporate Investments and Other
(11
)
(28
)
(34
)
Total segment earnings from operations
816
757
689
Unallocated corporate costs and
eliminations
(99
)
(84
)
(73
)
Unallocated stock-based compensation
expense
(78
)
(86
)
(59
)
Amortization of initial direct costs
(2
)
(2
)
(1
)
Amortization of intangible assets
(78
)
(82
)
(80
)
Transformation costs
(197
)
(213
)
(304
)
Disaster charges
(10
)
(5
)
(2
)
Acquisition, disposition and other related
charges
(2
)
(3
)
(25
)
Interest and other, net
(6
)
(50
)
(57
)
Tax indemnification and related
adjustments
5
76
(15
)
Non-service net periodic benefit
credit
17
19
35
Litigation judgment
2,351
—
—
Early debt redemption costs
(100
)
—
—
Earning from equity interests
71
79
17
Total Income before benefit for taxes
$
2,688
$
406
$
125
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Twelve months ended October
31,
2021
2020
Net revenue:(d)
Compute
$
12,292
$
12,285
HPC & AI
3,188
3,105
Storage
4,763
4,685
Intelligent Edge
3,287
2,855
Financial Services
3,401
3,352
Corporate Investments and Other
1,356
1,298
Total segment net revenue
28,287
27,580
Elimination of intersegment net
revenue
(503
)
(598
)
Total consolidated net revenue
$
27,784
$
26,982
Earnings before taxes:(a)(d)
Compute
$
1,326
$
1,007
HPC & AI
234
285
Storage
778
813
Intelligent Edge
500
337
Financial Services
390
284
Corporate Investments and Other
(95
)
(206
)
Total segment earnings from operations
3,133
2,520
Unallocated corporate costs and
eliminations
(285
)
(238
)
Unallocated stock-based compensation
expense
(372
)
(274
)
Amortization of initial direct costs
(8
)
(10
)
Amortization of intangible assets
(354
)
(379
)
Impairment of goodwill
—
(865
)
Transformation costs
(930
)
(950
)
Disaster charges
(16
)
(26
)
Acquisition, disposition and other related
charges
(36
)
(107
)
Interest and other, net
(111
)
(215
)
Tax indemnification and related
adjustments
65
(101
)
Non-service net periodic benefit
credit
70
136
Litigation judgment
2,351
—
Early debt redemption costs
(100
)
—
Earnings from equity interests
180
67
Total earnings (loss) before (provision)
benefit for taxes
$
3,587
$
(442
)
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions, except
percentages)
Three months ended
Change (%)
October 31, 2021
July 31 2021
October 31, 2020
Q/Q
Y/Y
Net revenue:(d)
Compute
$
3,226
$
3,104
$
3,191
4
%
1
%
HPC & AI
1,000
741
992
35
%
1
%
Storage
1,257
1,176
1,215
7
%
3
%
Intelligent Edge
815
867
786
(6
%)
4
%
Financial Services
858
844
849
2
%
1
%
Corporate Investments and Other
353
332
340
6
%
4
%
Total segment net revenue
7,509
7,064
7,373
6
%
2
%
Elimination of intersegment net revenue
and other
(155
)
(167
)
(165
)
(7
%)
(6
%)
Total consolidated net revenue
$
7,354
$
6,897
$
7,208
7
%
2
%
Twelve months ended October
31,
2021
2020
Y/Y
Net revenue:(d)
Compute
$
12,292
$
12,285
—
%
HPC & AI
3,188
3,105
3
%
Storage
4,763
4,685
2
%
Intelligent Edge
3,287
2,855
15
%
Financial Services
3,401
3,352
1
%
Corporate Investments and Other
1,356
1,298
4
%
Total segment net revenue
28,287
27,580
3
%
Elimination of intersegment net revenue
and other
(503
)
(598
)
(16
%)
Total consolidated net revenue
$
27,784
$
26,982
3
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
SEGMENT OPERATING MARGIN
SUMMARY DATA
(Unaudited)
Three months ended
Change in Operating
Margin (pts)
October 31, 2021
Q/Q
Y/Y
Segment operating margin:(a)(d)
Compute
9.4
%
-1.8
2.8
HPC & AI
14.3
%
10.4
1.3
Storage
13.8
%
-1.3
-4.4
Intelligent Edge
10.7
%
-5.1
-1.6
Financial Services
14.1
%
3.0
6.3
Corporate Investments and Other
(3.1
%)
5.3
6.9
Total segment operating margin
10.9
%
0.2
1.6
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,
2021
July 31, 2021
October 31,
2020
Numerator:
GAAP net earnings
$
2,553
$
392
$
157
Non-GAAP net earnings
$
688
$
623
$
537
Denominator:
Weighted-average shares used to compute
basic net earnings per share
1,312
1,314
1,293
Dilutive effect of employee stock
plans
23
24
13
Weighted-average shares used to compute
diluted net earnings per share
1,335
1,338
1,306
GAAP net earnings per share
Basic
$
1.95
$
0.30
$
0.12
Diluted
$
1.91
$
0.29
$
0.12
Non-GAAP net earnings per share
Basic
$
0.52
$
0.47
$
0.42
Diluted
$
0.52
$
0.47
$
0.41
Twelve months ended October
31,
2021
2020
Numerator:
GAAP net earnings (loss)
$
3,427
$
(322
)
Non-GAAP net earnings
$
2,602
$
2,005
Denominator:
Weighted-average shares used to compute
basic net earnings (loss) per share and diluted net loss per
share
1,309
1,294
Dilutive effect of employee stock
plans
21
11
Weighted-average shares used to compute
diluted net earnings per share
1,330
1,305
GAAP net earnings (loss) per share
Basic
$
2.62
$
(0.25
)
Diluted
$
2.58
$
(0.25
)
Non-GAAP net earnings per share
Basic
$
1.99
$
1.55
Diluted
$
1.96
$
1.54
(a)
Effective at the beginning of the
first quarter of fiscal 2021, Hewlett Packard Enterprise Company
("the Company") excluded stock-based compensation expense
("Non-GAAP Stock-Based Compensation Adjustment") from its segment
earnings from operations and excluded stock-based compensation
expense from consolidated non-GAAP gross profit, non-GAAP gross
profit margin, non-GAAP earnings from operations, non-GAAP
operating profit margin, non-GAAP net earnings and non-GAAP net
earnings per share. The Company reflected the Non-GAAP Stock-Based
Compensation Adjustment to the earliest period presented. This
change had no impact on the Company's previously reported
consolidated GAAP results.
(b)
Represents the amortization of
basis difference adjustments related to the H3C divestiture.
(c)
Acquisition, disposition and
other related charges for the twelve months ended October 31, 2020
are related to a non-cash inventory fair value adjustment in
connection with the acquisition of Cray, Inc., which was included
in Cost of sales.
(d)
Effective at the beginning of the
first quarter of fiscal 2021, the Company implemented certain
organizational changes to align its segment financial reporting
more closely with its current business structure. These
organizational changes are: (i) the transfer of the lifecycle event
services business, previously reported within the Advisory and
Professional Services ("A & PS") reportable segment to Compute,
Storage and HPC & AI (previously known as HPC & MCS)
reportable segments; (ii) the transfer of certain software and
related services business, previously reported within the Compute,
Storage and A & PS reportable segments, to the Corporate
Investments and Other reportable segment, to form a new Software
operating segment; and (iii) the transfer of the remaining A &
PS operating segment, previously reported as a separate reportable
segment, to the Corporate Investments and Other reportable segment.
As a result of these changes, the Corporate Investments and Other
Segment now includes the A & PS operating segment, the
Communications and Media Solutions operating segment, the Software
operating segment, and Hewlett Packard Enterprise Labs which is
responsible for research and development.
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, cash flow from operations and free cash flow,
each excluding litigation judgment, net of taxes paid, 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 cash flow from operations and free cash flow, each
excluding litigation judgment, net of taxes paid, 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,
stock-based compensation expenses 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, stock-based compensation expenses 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 from equity interests,
non-service net periodic benefit credit, litigation judgment, early
debt redemption costs, tax indemnification and related adjustments,
certain income tax valuation allowances and separation taxes, the
impact of U.S. tax reform 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 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 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 & AI 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 primarily include direct costs resulting from
COVID-19 as a result of HPE hosted, co-hosted, or sponsored event
cancellations and shift to a virtual format. 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.
- 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 our employees, Hewlett Packard Enterprise excludes these charges
for purposes of calculating these non-GAAP measures, primarily
because they are non-cash expense and such exclusion 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 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 net earnings 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.
- In the fourth quarter of fiscal 2021, following the receipt of
litigation judgment proceeds, Hewlett Packard Enterprise received
$2.35 billion from Oracle Corporation towards satisfaction of
judgment related to the Itanium litigation. Hewlett Packard
Enterprise excludes this gain for purposes of calculating 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 fourth quarter of fiscal 2021, Hewlett Packard
Enterprise incurred early debt redemption costs of $100 million
relating to the early redemption of 4.65% Senior Notes with an
original maturity date of October 1, 2024. Hewlett Packard
Enterprise excludes these charges for purposes of calculating
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.
- Tax indemnification and related adjustments are primarily
related to changes in certain pre-Separation tax liabilities for
which Hewlett Packard Enterprise shared joint and several liability
with HP Inc. and for which Hewlett Packard Enterprise was
indemnified under the Termination and Mutual Release Agreement.
These adjustments also include changes to certain pre-Separation
and pre-divestiture tax liabilities and tax receivables for which
Hewlett Packard Enterprise remains liable on behalf of the
separated or divested business, but which may not be subject to
indemnification. Hewlett Packard Enterprise excludes these income
or charges and the associated tax impact for the purpose of
calculating 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 2021, the Company used a
projected non-GAAP tax rate of 14%, which reflected currently
available information 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. For
fiscal 2020, the Company had a non-GAAP tax rate of 12%. 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 excluded from 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 can have a material impact on the
equivalent GAAP earnings measure.
- Items such as impairment of goodwill, transformation costs,
disaster charges, stock-based compensation expense 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,
non-service net periodic benefit credit, litigation judgment, and
early debt redemption costs 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 and related adjustments,
certain income tax valuation allowances and separation taxes, the
impact of U.S. tax reform, 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, 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, cash flow from operations and free cash flow,
each excluding litigation judgment, net of taxes paid, 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/20211130006039/en/
Editorial contact Katherine Ducker
katherine.b.ducker@hpe.com
Investor contact Andrew Simanek
investor.relations@hpe.com
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