Persistent demand drives orders and sustained margins
Q2 2022 Financial Highlights:
- Orders: Strong customer demand drives order growth up 20% from
the prior-year period, the fourth consecutive quarter of 20% or
better order growth
- As-a-Service orders(1) increased 107% from the prior-year
period, the 3rd consecutive quarter of doubling
- Revenue: $6.7 billion, up 0.2% and 1.5% adjusted for
currency(2) from the prior-year period and in line with Q2
outlook
- Gross margins remain strong despite ongoing supply chain
constraints and inflationary environment
- GAAP of 32.4%, down 170 basis points from the prior-year period
primarily due to $105 million of Russia-related charges
- Non-GAAP of 34.2%, down 10 basis points from the prior-year
period
- Diluted net earnings per share (“EPS”):
- GAAP of $0.19, flat from the prior-year period primarily due to
$126 million of Russia-related charges
- Non-GAAP of $0.44, down 4% from the prior-year period due to
impact from Russia-related operations and currency
- Cash flow from operations of $379 million and free cash flow of
($211) million, in line with normal seasonality
Capital Returns:
- Returned $214 million to shareholders in the form of dividends
and share repurchases
- Declared a regular cash dividend of $0.12 per share, payable on
July 8, 2022
Outlook:
- Reiterates fiscal 2022 revenue growth of 3%-4% adjusted for
currency
- Third quarter fiscal 2022: Estimates GAAP diluted net EPS to be
in the range of $0.22 to $0.32 and non-GAAP diluted net EPS to be
in the range of $0.44 to $0.54
- Fiscal 2022: Updates GAAP diluted net EPS to be in the range of
$1.17 to $1.31 and non-GAAP diluted net EPS back to the original
outlook of $1.96 to $2.10 provided at the HPE October 2021
Securities Analyst Meeting reflecting unfavorable currency
movements and Russia exit
- Fiscal 2022 free cash flow(3): Reiterates free cash flow
guidance to be in the range of $1.8 to $2.0 billion
Hewlett Packard Enterprise (NYSE: HPE) today announced financial
results for the second quarter, ended April 30, 2022.
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HPE reports second quarter fiscal year
2022 results that show persistent demand leading to more orders,
steady revenue and sustained margins. (Graphic: Business Wire)
“Persistent demand led to another quarter of significant order
growth and higher revenue for HPE, underscoring the accelerating
interest customers have in our unique edge-to-cloud portfolio and
our HPE GreenLake platform,” said Antonio Neri, president, and CEO
of Hewlett Packard Enterprise. “I am optimistic that demand will
continue to be strong, given our customers’ needs to accelerate
their business resilience and competitiveness. We remain focused on
innovating for our customers and on executing with discipline so
that we translate that demand into profitable growth for HPE.”
“We are particularly pleased with the resiliency of our gross
margins despite the inflationary environment and ongoing supply
chain disruptions,” said Tarek Robbiati, EVP and CFO of Hewlett
Packard Enterprise. “With record levels of high-quality backlog, we
are well positioned for growth in FY22 and beyond, and confident in
realizing the financial commitments we set at our Securities
Analyst Meeting last October.”
Second Quarter Fiscal Year 2022 Results
Net revenue of $6.7 billion, up 0.2% and 1.5% adjusted
for currency(2) from the prior-year period and in line with
outlook.
Annualized revenue run-rate (“ARR”)(4) of $829 million,
up 25%(2) from the prior-year period and total as-a-Service
orders(1) were up 107% from the prior-year period, marking the
third consecutive quarter of orders doubling. We remain confident
in delivering our 2021 Securities Analyst Meeting ARR guidance of
35%-45% Compounded Annual Growth Rate from fiscal year 2021 to
fiscal year 2024.
GAAP gross margin of 32.4%, down 170 basis points from
the prior-year period, primarily due to $105 million of
Russia-related charges, and non-GAAP gross margin of 34.2%, down 10
basis points from the prior-year period, driven by disciplined
execution and pricing actions.
GAAP diluted net EPS was $0.19, flat from the prior-year
period and in line with our previously provided outlook of $0.18 to
$0.26 per share.
HPE announced in February that we stopped all shipments to and
sales in Russia and Belarus. During the second quarter of 2022, we
recorded total charges of $126 million related to the Russia
conflict’s impact on our business. Based on further assessment of
business risks and needs, we have determined that it is no longer
tenable to maintain operations in Russia and Belarus and are
proceeding with an orderly, managed exit of our remaining business
in these countries. We expect to record additional charges in the
third quarter of fiscal 2022 related to our decision to exit Russia
and Belarus, but do not expect these charges to be material.
Non-GAAP diluted net EPS was $0.44, compared to $0.46 in
the prior-year period and near the midpoint of our outlook range of
$0.41 to $0.49 per share. Second quarter non-GAAP net earnings and
non-GAAP diluted net EPS exclude after-tax adjustments of $333
million and $0.25 per diluted share, respectively, primarily for
Russia-related disaster charges, stock-based compensation expense,
transformation costs, and the amortization of intangible
assets.
Cash flow from operations of $379 million, down $443
million from the prior-year period.
Free cash flow of ($211) million, down $579 million from
the prior-year period reflecting normal seasonality and strategic
working capital actions due to strong customer demand.
Capital returns to shareholders of $214 million in the
form of share repurchases and dividends.
Segment Results
- Intelligent Edge revenue was $867 million, up 8% from the
prior-year period in actual dollars and 9% when adjusted for
currency, with 12.6% operating profit margin, compared to 15.7% in
the prior-year period. Aruba Services revenue was up double-digits
from the prior-year period and Intelligent Edge as-a-Service ARR4
was up 50%+ from the prior-year period.
- High Performance Computing & Artificial Intelligence (“HPC
& AI”) revenue was $710 million, up 4% from the prior-year
period in actual dollars and 5% when adjusted for currency, with
(5.6%) operating profit margin, compared to 2.6% from the
prior-year period. The operating loss was driven by supply
constraints and delayed customer acceptances. We remain on track to
exceed the expected 11% market CAGR from FY21-24.
- Compute revenue was $3.0 billion, flat from the prior-year
period in actual dollars and up 1% when adjusted for currency, with
13.9% operating profit margin, compared to 11.2% from the
prior-year period. Margin expansion was driven by strategic pricing
actions more than offsetting input cost increases.
- Storage revenue was $1.1 billion, down 3% from the prior-year
period in actual dollars and 2% when adjusted for currency, with
12.6% operating profit margin, compared to 16.8% from the
prior-year period reflecting higher supply chain costs and
unfavorable mix shift.
- Financial Services revenue was $823 million, down 2% from the
prior-year period in actual dollars and flat when adjusted for
currency, with 12.6% operating profit margin, compared to 10.8%
from the prior-year period. Net portfolio assets of approximately
$12.6 billion, down 4% from the prior-year period or up 1% when
adjusted for currency. The business delivered return on equity of
20.4%, up 2.1 points from the prior-year period, well above
pre-pandemic levels.
Dividend Board of Directors has declared a regular cash
dividend of $0.12 per share on the company’s common stock, payable
on July 8, 2022, to stockholders of record as of the close of
business on June 13, 2022.
Fiscal 2022 third quarter outlook: Hewlett Packard
Enterprise estimates GAAP diluted net EPS to be in the range of
$0.22 to $0.32 and non-GAAP diluted net EPS to be in the range of
$0.44 to $0.54. Fiscal 2022 third quarter non-GAAP diluted net EPS
estimates exclude after-tax adjustments of approximately $0.22 per
diluted share, primarily related to, transformation costs,
stock-based compensation expense and the amortization of intangible
assets.
Fiscal 2022 outlook: Hewlett Packard Enterprise updates
GAAP diluted net EPS outlook of $1.17 - $1.31 and full-year FY22
non-GAAP diluted net EPS outlook to the original outlook provided
at our 2021 Securities Analyst Meeting of $1.96 to $2.10. Fiscal
2022 non-GAAP diluted net EPS estimates exclude after-tax
adjustments of approximately $0.79 per diluted share, reflecting a
charge related to Russia and Belarus, transformation costs,
stock-based compensation expense and the amortization of intangible
assets.
Reiterates free cash flow(3) guidance of $1.8 to $2.0
billion.
1 As-a-Service (“AAS”) orders are an overlay across all business
segments contributing to HPE’s consumption-based services (both
recurring and non-recurring), and includes hardware, as well as
GreenLake as-a-Service, Aruba SaaS, CMS SaaS, and other Software
assets.
2 Adjusted to eliminate the effects of currency. A description
of HPE’s use of non-GAAP financial information is provided below
under “Use of non-GAAP financial information”.
3 Hewlett 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.
4 Annualized Revenue Run-Rate (“ARR”) is a financial metric used
to assess the growth of the Consumption Services (“CS”) offerings.
ARR represents the annualized revenue of all net HPE GreenLake
services revenue, related financial services revenue (which
includes rental income from operating leases and interest income
for capital 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.
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 financial measures, including revenue
on a constant currency basis, non-GAAP gross profit, non-GAAP gross
profit margin, non-GAAP operating profit (non-GAAP earnings from
operations), non-GAAP operating profit margin, non-GAAP income tax
rate, non-GAAP net earnings, non-GAAP diluted net earnings per
share, gross cash, free cash flow, net debt, net cash, operating
company net debt and operating company net cash financial measures.
Hewlett Packard Enterprise also provides forecasts of non-GAAP
diluted net earnings per share and free cash flow. 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 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 ("SaaS"), software consumption
revenue, 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 HPE 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"), our actions in response thereto,
and its and their impacts 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 tax law changes and related guidance
and 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, including but not limited to supply chain
constraints and the ongoing conflict between Russia and Ukraine;
the need to effectively manage third-party suppliers, distribute
Hewlett Packard Enterprise's products, and deliver Hewlett Packard
Enterprise's services; 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 of and transition to 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,
2021, Quarterly Reports on Form 10-Q, 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 Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 2022. 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)
For the three months
ended
April 30, 2022
January 31, 2022
April 30, 2021
In millions, except per share
amounts
Net revenue
$
6,713
$
6,961
$
6,700
Costs and expenses:
Cost of sales(1)
4,540
4,617
4,413
Research and development
517
504
503
Selling, general and administrative
1,249
1,201
1,199
Amortization of intangible assets
74
73
84
Transformation costs
98
111
209
Disaster charges
20
—
1
Acquisition, disposition and other related
charges
8
7
13
Total costs and expenses
6,506
6,513
6,422
Earnings from operations
207
448
278
Interest and other, net
—
(5
)
(11
)
Tax indemnification and related
adjustments
—
(17
)
—
Non-service net periodic benefit
credit
36
36
17
Earnings from equity interests
33
31
4
Earnings before (provision) benefit for
taxes
276
493
288
(Provision) benefit for taxes
(26
)
20
(29
)
Net earnings
$
250
$
513
$
259
Net earnings per share:
Basic
$
0.19
$
0.39
$
0.20
Diluted
$
0.19
$
0.39
$
0.19
Cash dividends declared per share
$
0.12
$
0.12
$
0.12
Weighted-average shares used to compute
net earnings per share:
Basic
1,307
1,304
1,309
Diluted
1,329
1,325
1,331
______________________
(1) The three and six months ended April 30, 2022 include
pre-tax charges of $105 million, primarily related to expected
financing receivable credit losses.
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated
Statements of Earnings
(Unaudited)
For the six months
ended
April 30, 2022
April 30, 2021
In millions, except per share
amounts
Net revenue
$
13,674
$
13,533
Costs and expenses:
Cost of sales(1)
9,157
8,958
Research and development
1,021
971
Selling, general and administrative
2,450
2,358
Amortization of intangible assets
147
194
Transformation costs
209
520
Disaster charges
19
1
Acquisition, disposition and other related
charges
16
31
Total costs and expenses
13,019
13,033
Earnings from operations
655
500
Interest and other, net
(5
)
(55
)
Tax indemnification and related
adjustments
(17
)
(16
)
Non-service net periodic benefit
credit
72
34
Earnings from equity interests
64
30
Earnings before provision for taxes
769
493
Provision for taxes
(6
)
(11
)
Net earnings
$
763
$
482
Net earnings per share:
Basic
$
0.58
$
0.37
Diluted
$
0.57
$
0.36
Cash dividends declared per share
$
0.24
$
0.24
Weighted-average shares used to compute
net earnings per share:
Basic
1,306
1,304
Diluted
1,327
1,323
_______________________
(1) The three and six months ended April 30, 2022 include
pre-tax charges of $105 million, primarily related to expected
financing receivable credit losses.
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
April 30, 2022
January 31, 2022
April 30, 2021
Dollars in millions
GAAP net revenue
$
6,713
$
6,961
$
6,700
GAAP cost of sales
4,540
4,617
4,413
GAAP gross profit
$
2,173
$
2,344
$
2,287
Non-GAAP adjustments
Amortization of initial direct costs
$
1
$
1
$
2
Stock-based compensation expense
14
15
11
Disaster charges(a)
105
—
—
Non-GAAP gross profit
$
2,293
$
2,360
$
2,300
GAAP gross profit margin
32.4
%
33.7
%
34.1
%
Non-GAAP adjustments
1.8
%
0.2
%
0.2
%
Non-GAAP gross profit margin
34.2
%
33.9
%
34.3
%
For the six months
ended
April 30, 2022
April 30, 2021
Dollars in millions
GAAP net revenue
$
13,674
$
13,533
GAAP cost of sales
9,157
8,958
GAAP gross profit
$
4,517
$
4,575
Non-GAAP adjustments
Amortization of initial direct costs
$
2
$
4
Stock-based compensation expense
29
24
Disaster charges(a)
105
—
Non-GAAP gross profit
$
4,653
$
4,603
GAAP gross profit margin
33.0
%
33.8
%
Non-GAAP adjustments
1.0
%
0.2
%
Non-GAAP gross profit margin
34.0
%
34.0
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
April 30, 2022
January 31, 2022
April 30, 2021
Dollars in millions
GAAP earnings from operations
$
207
$
448
$
278
Non-GAAP adjustments
Amortization of initial direct costs
1
1
2
Amortization of intangible assets
74
73
84
Transformation costs
98
111
209
Disaster charges(a)
125
—
1
Stock-based compensation expense
114
128
98
Acquisition, disposition and other related
charges
8
7
13
Non-GAAP earnings from
operations
$
627
$
768
$
685
GAAP operating profit margin
3.1
%
6.4
%
4.1
%
Non-GAAP adjustments
6.2
%
4.6
%
6.1
%
Non-GAAP operating profit
margin
9.3
%
11.0
%
10.2
%
For the six months
ended
April 30, 2022
April 30, 2021
Dollars in millions
GAAP earnings from operations
$
655
$
500
Non-GAAP adjustments
Amortization of initial direct costs
2
4
Amortization of intangible assets
147
194
Transformation costs
209
520
Disaster charges(a)
124
1
Stock-based compensation expense
242
208
Acquisition, disposition and other related
charges
16
31
Non-GAAP earnings from
operations
$
1,395
$
1,458
GAAP operating profit margin
4.8
%
3.7
%
Non-GAAP adjustments
5.4
%
7.1
%
Non-GAAP operating profit
margin
10.2
%
10.8
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
April 30, 2022
Diluted net earnings per
share
January 31, 2022
Diluted net earnings per
share
April 30, 2021
Diluted net earnings per
share
Dollars in millions, except
per share amounts
GAAP net earnings
$
250
$
0.19
$
513
$
0.39
$
259
$
0.19
Non-GAAP adjustments:
Amortization of initial direct costs
1
—
1
—
2
—
Amortization of intangible assets
74
0.06
73
0.06
84
0.06
Transformation costs
98
0.07
111
0.08
209
0.15
Disaster charges(a)
125
0.09
—
—
1
—
Stock-based compensation expense
114
0.09
128
0.10
98
0.08
Acquisition, disposition and other related
charges
8
0.01
7
0.01
13
0.01
Tax indemnification and related
adjustments
—
—
17
0.01
—
—
Non-service net periodic benefit
credit
(36
)
(0.03
)
(36
)
(0.03
)
(17
)
(0.01
)
Earnings from equity interests(b)
17
0.01
17
0.01
34
0.03
Adjustments for taxes
(68
)
(0.05
)
(134
)
(0.10
)
(71
)
(0.05
)
Non-GAAP net earnings
$
583
$
0.44
$
697
$
0.53
$
612
$
0.46
For the six months
ended
April 30, 2022
Diluted net earnings per
share
April 30, 2021
Diluted net earnings per
share
Dollars in millions, except
per share amounts
GAAP net earnings
$
763
$
0.57
$
482
$
0.36
Non-GAAP adjustments:
Amortization of initial direct costs
2
—
4
—
Amortization of intangible assets
147
0.11
194
0.15
Transformation costs
209
0.16
520
0.40
Disaster charges(a)
124
0.09
1
—
Stock-based compensation expense
242
0.18
208
0.16
Acquisition, disposition and other related
charges
16
0.01
31
0.02
Tax indemnification and related
adjustments
17
0.01
16
0.01
Non-service net periodic benefit
credit
(72
)
(0.05
)
(34
)
(0.03
)
Earnings from equity interests(b)
34
0.03
68
0.05
Adjustments for taxes
(202
)
(0.15
)
(199
)
(0.14
)
Non-GAAP net earnings
$
1,280
$
0.96
$
1,291
$
0.98
(a) In the second quarter of fiscal 2022, the Company recorded
total pre-tax charges of $126 million primarily related to expected
financing and trade receivables credit losses, $99 million of which
was included in Financing cost, $6 million in Cost of services and
$21 million in Disaster charges in the Condensed Consolidated
Statements of Earnings. During the three and six months ended April
30, 2022, Disaster charges also included a recovery of $1 million
and $2 million, respectively, related to COVID-19.
(b) Represents the amortization of basis difference adjustments
related to the H3C divestiture.
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
April 30, 2022
January 31, 2022
April 30, 2021
In millions
Net cash provided by (used in)
operating activities
$
379
$
(76
)
$
822
Investment in property, plant and
equipment
(725
)
(624
)
(535
)
Proceeds from sale of property, plant and
equipment
135
123
81
Free cash flow
$
(211
)
$
(577
)
$
368
For the six months
ended
April 30, 2022
April 30, 2021
In millions
Net cash provided by operating
activities
$
303
$
1,785
Investment in property, plant and
equipment
(1,349
)
(1,048
)
Proceeds from sale of property, plant and
equipment
258
194
Free cash flow
$
(788
)
$
931
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
As of
April 30, 2022
October 31, 2021
(Unaudited)
(Audited)
In millions, except par
value
ASSETS
Current assets:
Cash and cash equivalents
$
3,027
$
3,996
Accounts receivable, net of allowances
3,122
3,979
Financing receivables, net of
allowances
3,655
3,932
Inventory
5,322
4,511
Other current assets
3,046
2,460
Total current assets
18,172
18,878
Property, plant and equipment
5,508
5,613
Long-term financing receivables and other
assets
11,198
11,670
Investments in equity interests
2,262
2,210
Goodwill and intangible assets
19,184
19,328
Total assets
$
56,324
$
57,699
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Notes payable and short-term
borrowings
$
4,596
$
3,552
Accounts payable
5,671
7,004
Employee compensation and benefits
1,198
1,778
Taxes on earnings
153
169
Deferred revenue
3,448
3,408
Accrued restructuring
183
290
Other accrued liabilities
4,941
4,486
Total current liabilities
20,190
20,687
Long-term debt
8,905
9,896
Other non-current liabilities
6,647
7,099
Stockholders’ equity
HPE stockholders’ equity:
Common stock, $0.01 par value (9,600
shares authorized; 1,299 and 1,295 shares issued and outstanding at
April 30, 2022 and October 31, 2021, respectively)
13
13
Additional paid-in capital
28,473
28,470
Accumulated deficit
(5,145
)
(5,597
)
Accumulated other comprehensive loss
(2,809
)
(2,915
)
Total HPE stockholders’ equity
20,532
19,971
Non-controlling interests
50
46
Total stockholders’ equity
20,582
20,017
Total liabilities and stockholders’
equity
$
56,324
$
57,699
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
For the six months ended April
30,
2022
2021
In millions
Cash flows from operating activities:
Net earnings
$
763
$
482
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
1,242
1,313
Stock-based compensation expense
242
218
Provision for doubtful accounts and
inventory
213
98
Restructuring charges
68
366
Deferred taxes on earnings
(54
)
(95
)
Earnings from equity interests
(64
)
(30
)
Other, net
(46
)
62
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable
817
432
Financing receivables
470
(104
)
Inventory
(861
)
(497
)
Accounts payable
(1,323
)
164
Taxes on earnings
35
(30
)
Restructuring
(197
)
(324
)
Other assets and liabilities
(1,002
)
(270
)
Net cash provided by operating
activities
303
1,785
Cash flows from investing activities:
Investment in property, plant and
equipment
(1,349
)
(1,048
)
Proceeds from sale of property, plant and
equipment
258
194
Purchases of investments
(40
)
(19
)
Proceeds from maturities and sales of
investments
72
10
Financial collateral posted
(40
)
(631
)
Financial collateral received
272
297
Payments made in connection with business
acquisitions, net of cash acquired
—
(34
)
Net cash used in investing activities
(827
)
(1,231
)
Cash flows from financing activities:
Short-term borrowings with original
maturities less than 90 days, net
56
39
Proceeds from debt, net of issuance
costs
1,582
1,632
Payment of debt
(1,340
)
(1,744
)
Net payments related to stock-based award
activities
(60
)
(27
)
Repurchase of common stock
(187
)
—
Cash dividends paid to non-controlling
interests
—
(8
)
Cash dividends paid to shareholders
(311
)
(311
)
Net cash used in financing activities
(260
)
(419
)
(Decrease) increase in cash, cash
equivalents and restricted cash
(784
)
135
Cash, cash equivalents and restricted cash
at beginning of period
4,332
4,621
Cash, cash equivalents and restricted cash
at end of period
$
3,548
$
4,756
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the three months
ended
April 30, 2022
January 31, 2022
April 30, 2021
In millions
Net revenue:
Compute
$
2,985
$
3,016
$
2,974
High Performance Computing &
Artificial Intelligence
710
790
684
Storage
1,098
1,156
1,136
Intelligent Edge
867
901
803
Financial Services
823
842
839
Corporate Investments and Other
327
325
350
Total segment net revenue
6,810
7,030
6,786
Elimination of intersegment net
revenue
(97
)
(69
)
(86
)
Total consolidated net revenue
$
6,713
$
6,961
$
6,700
Earnings before taxes:
Compute
$
415
$
416
$
334
High Performance Computing &
Artificial Intelligence
(40
)
(7
)
18
Storage
138
168
191
Intelligent Edge
109
157
126
Financial Services
104
104
91
Corporate Investments and Other
(24
)
(11
)
(25
)
Total segment earnings from operations
702
827
735
Unallocated corporate costs and
eliminations
(75
)
(59
)
(50
)
Stock-based compensation expense
(114
)
(128
)
(98
)
Amortization of initial direct costs
(1
)
(1
)
(2
)
Amortization of intangible assets
(74
)
(73
)
(84
)
Transformation costs
(98
)
(111
)
(209
)
Disaster charges
(125
)
—
(1
)
Acquisition, disposition and other related
charges
(8
)
(7
)
(13
)
Interest and other, net
—
(5
)
(11
)
Tax indemnification and related
adjustments
—
(17
)
—
Non-service net periodic benefit
credit
36
36
17
Earnings from equity interests
33
31
4
Total consolidated earnings before
taxes
$
276
$
493
$
288
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the six months
ended
April 30, 2022
April 30, 2021
In millions
Net revenue:
Compute
$
6,001
$
5,958
High Performance Computing &
Artificial Intelligence
1,500
1,445
Storage
2,254
2,328
Intelligent Edge
1,768
1,613
Financial Services
1,665
1,699
Corporate Investments and Other
652
671
Total segment net revenue
13,840
13,714
Elimination of intersegment net
revenue
(166
)
(181
)
Total consolidated net revenue
$
13,674
$
13,533
Earnings before taxes:
Compute
$
831
$
675
High Performance Computing &
Artificial Intelligence
(47
)
61
Storage
306
425
Intelligent Edge
266
280
Financial Services
208
175
Corporate Investments and Other
(35
)
(56
)
Total segment earnings from operations
1,529
1,560
Unallocated corporate costs and
eliminations
(134
)
(102
)
Stock-based compensation expense
(242
)
(208
)
Amortization of initial direct costs
(2
)
(4
)
Amortization of intangible assets
(147
)
(194
)
Transformation costs
(209
)
(520
)
Disaster charges
(124
)
(1
)
Acquisition, disposition and other related
charges
(16
)
(31
)
Interest and other, net
(5
)
(55
)
Tax indemnification and related
adjustments
(17
)
(16
)
Non-service net periodic benefit
credit
72
34
Earnings from equity interests
64
30
Total consolidated earnings before
taxes
$
769
$
493
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the three months
ended
Change (%)
April 30, 2022
January 31, 2022
April 30, 2021
Q/Q
Y/Y
Dollars in millions
Net revenue:
Compute
$
2,985
$
3,016
$
2,974
(1
%)
—
%
High Performance Computing &
Artificial Intelligence
710
790
684
(10
%)
4
%
Storage
1,098
1,156
1,136
(5
%)
(3
%)
Intelligent Edge
867
901
803
(4
%)
8
%
Financial Services
823
842
839
(2
%)
(2
%)
Corporate Investments and Other
327
325
350
1
%
(7
%)
Total segment net revenue
6,810
7,030
6,786
(3
%)
—
%
Elimination of intersegment net
revenue
(97
)
(69
)
(86
)
41
%
13
%
Total consolidated net revenue
$
6,713
$
6,961
$
6,700
(4
%)
—
%
For the six months
ended
Change (%)
April 30, 2022
April 30, 2021
Y/Y
Dollars in millions
Net revenue:
Compute
$
6,001
$
5,958
1
%
High Performance Computing &
Artificial Intelligence
1,500
1,445
4
%
Storage
2,254
2,328
(3
%)
Intelligent Edge
1,768
1,613
10
%
Financial Services
1,665
1,699
(2
%)
Corporate Investments
652
671
(3
%)
Total segment net revenue
13,840
13,714
1
%
Elimination of intersegment net
revenue
(166
)
(181
)
(8
%)
Total consolidated net revenue
$
13,674
$
13,533
1
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Operating Margin
Summary Data
(Unaudited)
For the three months
ended
Change in Operating Profit
Margin (pts)
April 30, 2022
Q/Q
Y/Y
Segment operating profit margin:
Compute
13.9
%
0.1
2.7
High Performance Computing &
Artificial Intelligence
(5.6
) %
(4.7
)
(8.2
)
Storage
12.6
%
(1.9
)
(4.2
)
Intelligent Edge
12.6
%
(4.8
)
(3.1
)
Financial Services
12.6
%
0.2
1.8
Corporate Investments and Other
(7.3
%)
(3.9
)
(0.2
)
Total segment operating profit margin
10.3
%
(1.5
)
(0.5
)
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Calculation of Diluted Net
Earnings Per Share
(Unaudited)
For the three months
ended
April 30, 2022
January 31, 2022
April 30, 2021
In millions, except per share
amounts
Numerator:
GAAP net earnings
$
250
$
513
$
259
Non-GAAP net earnings
$
583
$
697
$
612
Denominator:
Weighted-average shares used to compute
basic net earnings per share
1,307
1,304
1,309
Dilutive effect of employee stock
plans
22
21
22
Weighted-average shares used to compute
diluted net earnings per share
1,329
1,325
1,331
GAAP net earnings per share
Basic
$
0.19
$
0.39
$
0.20
Diluted
$
0.19
$
0.39
$
0.19
Non-GAAP net earnings per share
Basic
$
0.45
$
0.53
$
0.47
Diluted
$
0.44
$
0.53
$
0.46
For the six months
ended
April 30, 2022
April 30, 2021
In millions, except per share
amounts
Numerator:
GAAP net earnings
$
763
$
482
Non-GAAP net earnings
$
1,280
$
1,291
Denominator:
Weighted-average shares used to compute
basic net earnings per share
1,306
1,304
Dilutive effect of employee stock
plans
21
19
Weighted-average shares used to compute
diluted net earnings per share
1,327
1,323
GAAP net earnings per share
Basic
$
0.58
$
0.37
Diluted
$
0.57
$
0.36
Non-GAAP net earnings per share
Basic
$
0.98
$
0.99
Diluted
$
0.96
$
0.98
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 financial measures
including revenue on a constant currency basis, non-GAAP gross
profit, non-GAAP gross profit margin, non-GAAP operating profit
(non-GAAP earnings from operations), non-GAAP operating profit
margin, non-GAAP income tax rate, non-GAAP net earnings, non-GAAP
diluted net earnings per share, gross cash, free cash flow, net
debt, net cash, operating company net debt and operating company
net cash financial measures. Hewlett Packard Enterprise also
provides forecasts of non-GAAP diluted net earnings per share and
free cash flow.
These non-GAAP financial measures are not computed in accordance
with, or as an alternative to, GAAP in the United States. The GAAP
measure most directly comparable to revenue on a constant currency
basis is revenue. The GAAP measure most directly comparable to
non-GAAP gross profit is gross profit. The GAAP measure most
directly comparable to non-GAAP gross profit margin is gross profit
margin. The GAAP measure most directly comparable to non-GAAP
operating profit (non-GAAP earnings from operations) is operating
profit (earnings from operations). The GAAP measure most directly
comparable to non-GAAP operating profit margin is operating profit
margin. The GAAP measure most directly comparable to non-GAAP
income tax rate is income tax rate. The GAAP measure most directly
comparable to non-GAAP net earnings is net earnings. The GAAP
measure most directly comparable to non-GAAP diluted net earnings
per share is diluted net earnings per share. The GAAP measure most
directly comparable to gross cash is cash and cash equivalents. The
GAAP measure most directly comparable to free cash flow is cash
flow from operations. The GAAP measure most directly comparable to
net debt and operating company net debt is total company debt. The
GAAP measure most directly comparable to each of net cash and
operating company net cash is cash and cash equivalents.
Reconciliations of each of these non-GAAP financial measures to
GAAP information are included in the tables above or elsewhere in
the materials accompanying this news release.
Use and economic substance of non-GAAP financial measures
used by Hewlett Packard Enterprise
Net 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 are defined to
exclude charges relating to the amortization of initial direct
costs, stock-based compensation expense and disaster 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 initial direct costs, amortization
of intangible assets, transformation costs, disaster charges,
stock-based compensation expense 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 tax indemnification and related adjustments,
non-service net periodic benefit credit, earnings from equity
interests, certain income tax valuation allowances and separation
taxes, the impact of U.S. tax reform, structural rate adjustment
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. The Company believes that most financing companies did not
elect this practical expedient and therefore the Company excludes
these costs to facilitate a more meaningful evaluation of its
current operating performance and comparisons to its 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.
- 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 net gains from the sale of real-estate and 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 represent credit losses of financing
receivables and trade receivables that may not be recoverable due
to the Russia/Ukraine conflict. Disaster charges also include
direct costs or recovery related to COVID-19 as a result of Hewlett
Packard Enterprise-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 measures facilitates a more meaningful
evaluation of Hewlett Packard Enterprise’s current operating
performance and comparisons to Hewlett Packard Enterprise’s
operating performance in other periods.
- 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 the purpose of calculating these non-GAAP measures, primarily
because they are non-cash expenses, and such an exclusion
facilitates a more meaningful evaluation of Hewlett Packard
Enterprise’s current operating performance and comparisons to
Hewlett Packard Enterprise’s operating performance in other
periods.
- Hewlett Packard Enterprise incurs costs related to its
acquisition, 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.
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.
- 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.
- 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 for purposes of calculating non-GAAP measures and
considers them to be outside the operational performance of the
business.
- Adjustment to earnings from equity interests includes the
amortization of the basis difference in relation to the H3C
divestiture and the resulting equity method investment in H3C.
Hewlett Packard Enterprise believes that eliminating this amount
for purposes of calculating non-GAAP measures facilitates a more
meaningful evaluation of Hewlett Packard Enterprise’s current
operating performance and comparisons to Hewlett Packard
Enterprise’s operating performance in other periods.
- Hewlett Packard Enterprise utilizes a structural long-term
projected non-GAAP income 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 2022, the Company will use a projected non-GAAP income
tax rate of 14%, 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 2021, the Company had a non-GAAP
income tax rate of 14%. Hewlett Packard Enterprise believes that
making these adjustments for purposes of calculating non-GAAP
measures, 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 and disaster charges are
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, which can have an impact
on the equivalent GAAP earnings measure and HPE Financial Services
segment results.
- Items such as stock-based compensation expense that is 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.
- Amortization of intangible assets, though not directly
affecting Hewlett Packard Enterprise’s cash position, represents
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 transformation costs, and acquisition, and
disposition and other related costs that are excluded from 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 measures and cash
flow.
- Items such as adjustment to non-service net periodic benefit
credit and earnings from equity interests 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,
excess tax benefits from stock-based compensation, and the related
tax impacts from other non-GAAP measures that are excluded from the
non-GAAP income 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.
- Free cash flow does not represent the total increase or
decrease in cash for the period.
- 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 those reconciliations carefully.
Usefulness of non-GAAP financial measures to
investors
Hewlett Packard Enterprise believes that providing financial
measures including revenue on a constant currency basis, non-GAAP
gross profit, non-GAAP gross profit margin, non-GAAP operating
profit (non-GAAP earnings from operations), non-GAAP operating
profit margin, non-GAAP income tax rate, non-GAAP net earnings,
non-GAAP diluted net earnings per share, gross cash, free cash
flow, net debt, net cash, operating company net debt and operating
company net cash financial measures, 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/20220601005601/en/
Editorial contact Laura Keller Laura.Keller@hpe.com
Investor contact Andrew Simanek
investor.relations@hpe.com
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