Revenue and margins grow with enduring demand
Q3 2022 Financial Highlights:
- Revenue: $7.0 billion, up 1% and 4% adjusted for currency(1)
from the prior-year period, above Q3 guidance
- Gross margins remain resilient despite ongoing supply chain
constraints and inflationary environment
- GAAP of 34.5%, flat from the prior-year period and up 210 basis
points sequentially
- Non-GAAP of 34.7%, flat from the prior-year period and up 50
basis points sequentially
- Diluted net earnings per share (“EPS”):
- GAAP of $0.31, up 7% from the prior-year period and up 63%
sequentially
- Non-GAAP of $0.48, up 2% from the prior-year period and up 9%
sequentially
- Cash flow from operations of $1.3 billion and free cash flow of
$587 million, in line with normal seasonality
Capital Returns:
- Returned $353 million to shareholders in the form of dividends
and share repurchases
- Declared a regular cash dividend of $0.12 per share, payable on
October 7, 2022
Outlook:
- Reiterates fiscal 2022 revenue growth of 3-4% adjusted for
currency
- Fourth quarter fiscal 2022 GAAP diluted net EPS to be in the
range of $0.32 to $0.40 and non-GAAP diluted net EPS to be in the
range of $0.52 to $0.60
- Fiscal 2022 GAAP diluted net EPS to be in the range of $1.20 to
$1.28 and non-GAAP diluted net EPS to be in the range of $1.96 to
$2.04, reflecting the unfavorable currency movements and
constrained supply environment
- Fiscal 2022 free cash flow(2) guidance to be in the range of
$1.7 to $1.9 billion
Hewlett Packard Enterprise (NYSE: HPE) today announced financial
results for the third quarter, ended July 31, 2022.
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“Our continued innovation and focus on execution resulted in
revenue and profit growth, which are particularly noteworthy in
such a dynamic market. Our growth in recurring revenue this fiscal
year is evidence of customers’ strong response to our HPE GreenLake
platform,” said Antonio Neri, president, and CEO of Hewlett Packard
Enterprise. “Customers continue to prioritize investments in IT and
are finding HPE’s industry-leading edge-to-cloud portfolio to be
particularly relevant in today’s complex macroeconomic environment,
where technology innovation is critical to accelerate business
transformation and deliver important business outcomes.”
“We executed well in Q3, delivering revenue above our guidance
while growing backlog sequentially to another record level,” said
Tarek Robbiati, EVP and CFO of Hewlett Packard Enterprise. “We are
also pleased with the expansion of our gross margins despite the
inflationary headwinds and challenged supply environment. We are
driving operating leverage expansion through strong pricing
discipline and shifting our mix towards higher-margin,
software-rich offerings through the HPE GreenLake platform.”
Third Quarter Fiscal Year 2022 Results
Net revenue of $7.0 billion, up 1% and 4% adjusted for
currency(1) from the prior-year period, above Q3 guidance.
Annualized revenue run-rate (“ARR”)(3) of $858 million,
up 22% and 28% adjusted for currency(1) from the prior-year period
and total as-a-Service orders(4) were up 39% from the prior-year
period, and up 86% year-to-date. 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 34.5%, flat from the prior-year
period and up 210 basis points sequentially, and non-GAAP gross
margin of 34.7%, flat from the prior-year period and up 50 basis
points sequentially, driven by favorable mix shift and strategic
pricing actions.
GAAP diluted net EPS was $0.31, up 7% from the prior-year
period and up 63% sequentially.
Hewlett Packard Enterprise announced in June that the company
would proceed with an orderly, managed exit of its remaining
business in Russia and Belarus. During the third quarter of 2022,
we recorded an additional pre-tax charge of $36 million related to
our exit.
Non-GAAP diluted net EPS was $0.48, up 2% from the
prior-year period and up 9% sequentially. Third quarter non-GAAP
net earnings and non-GAAP diluted net EPS exclude after-tax
adjustments of $220 million and $0.17 per diluted share,
respectively, primarily for transformation costs, stock-based
compensation expense, and the amortization of intangible
assets.
Cash flow from operations of $1.3 billion, up $124
million from the prior-year period.
Free cash flow of $587 million, up $61 million from the
prior-year period.
Capital returns to shareholders of $353 million in the
form of share repurchases and dividends.
Segment Results
- Intelligent Edge revenue was $941 million, up 8% from the
prior-year period in actual dollars and 12% when adjusted for
currency, with 16.5% operating profit margin, compared to 16.1% in
the prior-year period. Aruba Services revenue was up double-digits
from the prior-year period and Intelligent Edge as-a-Service ARR(3)
was up more than 60% from the prior-year period.
- High Performance Computing & Artificial Intelligence (“HPC
& AI”) revenue was $830 million, up 12% from the prior-year
period in actual dollars and 15% when adjusted for currency, with
3.4% operating profit margin, compared to 3.8% from the prior-year
period. HPC market share expanded to 39% and includes four of the
global top 10 supercomputers.
- Compute revenue was $3.0 billion, down 3% from the prior-year
period in actual dollars and down 1% when adjusted for currency,
with 13.3% 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 $1.2 billion, down 2% from the prior-year
period in actual dollars and up 1% when adjusted for currency, with
14.7% operating profit margin, compared to 15.1% from the
prior-year period, and up 210 basis points sequentially, with
favorable mix shift.
- Financial Services revenue was $817 million, down 3% from the
prior-year period in actual dollars and up 1% when adjusted for
currency, with 11.8% operating profit margin, compared to 11.1%
from the prior-year period. Net portfolio assets of approximately
$12.6 billion, down 4% from the prior-year period or up 2% when
adjusted for currency. Return on equity was 19.5%, up 1.3 points
from the prior-year period, and well above the target set at SAM
2021.
Dividend
Board of Directors has declared a regular cash dividend of $0.12
per share on the company’s common stock, payable on October 7,
2022, to stockholders of record as of the close of business on
September 12, 2022.
Fiscal 2022 fourth quarter outlook:
Hewlett Packard Enterprise GAAP diluted net EPS to be in the
range of $0.32 to $0.40 and non-GAAP diluted net EPS to be in the
range of $0.52 to $0.60. Fiscal 2022 fourth quarter non-GAAP
diluted net EPS excludes after-tax adjustments of $0.20 per diluted
share, primarily related to, transformation costs, stock-based
compensation expense and the amortization of intangible assets.
Fiscal 2022 outlook:
Hewlett Packard Enterprise GAAP diluted net EPS outlook of $1.20
- $1.28 and FY22 non-GAAP diluted net EPS outlook of $1.96 to
$2.04. Fiscal 2022 non-GAAP diluted net EPS excludes after-tax
adjustments of $0.76 per diluted share, primarily related to
transformation costs, stock-based compensation expense, the
amortization of intangible assets, and exiting from Russia and
Belarus.
Free cash flow(2) guidance of $1.7 to $1.9 billion, due to
exiting our Russia and Belarus business, and unfavorable currency
movements.
1 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”.
2 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.
3 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.
4 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.
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 research
& development (“R&D”) and field selling costs (“FSC”) as a
percentage of net revenue, 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, R&D and selling, general
and administrative (“SG&A”) expenses as a percentage of net
revenue, 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 revenue 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", "will", “may”, “could”, "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 the ongoing conflict between
Russia and Ukraine, our actions in response thereto, 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 such
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, the inflationary environment, and the ongoing conflict
between Russia and Ukraine; the need to effectively manage
third-party suppliers and distribute Hewlett Packard Enterprise's
products and 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, and
geopolitical events, such as the ongoing conflict between Russia
and Ukraine); 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; the impacts of the Inflation
Reduction Act of 2022 and related guidance or regulations; 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 July 31, 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
July 31, 2022
April 30, 2022
July 31, 2021
In millions, except per share
amounts
Net revenue
$
6,951
$
6,713
$
6,897
Costs and expenses:
Cost of sales(1)
4,555
4,540
4,515
Research and development
509
517
506
Selling, general and administrative
1,229
1,249
1,291
Amortization of intangible assets
73
74
82
Transformation costs
80
98
213
Disaster charges
30
20
5
Acquisition, disposition and other related
charges
9
8
3
Total costs and expenses
6,485
6,506
6,615
Earnings from operations
466
207
282
Interest and other, net
(74
)
—
(50
)
Tax indemnification and related
adjustments
(30
)
—
76
Non-service net periodic benefit
credit
34
36
19
Earnings from equity interests
68
33
79
Earnings before provision for taxes
464
276
406
Provision for taxes
(55
)
(26
)
(14
)
Net earnings
$
409
$
250
$
392
Net earnings per share:
Basic
$
0.31
$
0.19
$
0.30
Diluted
$
0.31
$
0.19
$
0.29
Cash dividends declared per share
$
0.12
$
0.12
$
0.12
Weighted-average shares used to compute
net earnings per share:
Basic
1,305
1,307
1,314
Diluted
1,323
1,329
1,338
(1) The three months ended April 30, 2022 include pre-tax
charges of $105 million, primarily related to expected financing
receivable credit losses due to the Company’s exit from Russia and
Belarus.
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated
Statements of Earnings
(Unaudited)
For the nine months
ended
July 31, 2022
July 31, 2021
In millions, except per share
amounts
Net revenue
$
20,625
$
20,430
Costs and expenses:
Cost of sales
13,712
13,473
Research and development
1,530
1,477
Selling, general and administrative
3,679
3,649
Amortization of intangible assets
220
276
Transformation costs
289
733
Disaster charges
49
6
Acquisition, disposition and other related
charges
25
34
Total costs and expenses
19,504
19,648
Earnings from operations
1,121
782
Interest and other, net
(79
)
(105
)
Tax indemnification and related
adjustments
(47
)
60
Non-service net periodic benefit
credit
106
53
Earnings from equity interests
132
109
Earnings before provision for taxes
1,233
899
Provision for taxes
(61
)
(25
)
Net earnings
$
1,172
$
874
Net earnings per share:
Basic
$
0.90
$
0.67
Diluted
$
0.88
$
0.66
Cash dividends declared per share
$
0.36
$
0.36
Weighted-average shares used to compute
net earnings per share:
Basic
1,306
1,308
Diluted
1,326
1,328
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
July 31, 2022
April 30, 2022
July 31, 2021
Dollars in millions
GAAP net revenue
$
6,951
$
6,713
$
6,897
GAAP cost of sales
4,555
4,540
4,515
GAAP gross profit
$
2,396
$
2,173
$
2,382
Non-GAAP adjustments
Amortization of initial direct costs
$
1
$
1
$
2
Stock-based compensation expense
9
14
9
Disaster charges(a)
6
105
—
Non-GAAP gross profit
$
2,412
$
2,293
$
2,393
GAAP gross profit margin
34.5
%
32.4
%
34.5
%
Non-GAAP adjustments
0.2
%
1.8
%
0.2
%
Non-GAAP gross profit margin
34.7
%
34.2
%
34.7
%
For the nine months
ended
July 31, 2022
July 31, 2021
Dollars in millions
GAAP net revenue
$
20,625
$
20,430
GAAP cost of sales
13,712
13,473
GAAP gross profit
$
6,913
$
6,957
Non-GAAP adjustments
Amortization of initial direct costs
$
3
$
6
Stock-based compensation expense
38
33
Disaster charges(a)
111
—
Non-GAAP gross profit
$
7,065
$
6,996
GAAP gross profit margin
33.5
%
34.1
%
Non-GAAP adjustments
0.8
%
0.1
%
Non-GAAP gross profit margin
34.3
%
34.2
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
July 31, 2022
April 30, 2022
July 31, 2021
Dollars in millions
GAAP earnings from operations
$
466
$
207
$
282
Non-GAAP adjustments
Amortization of initial direct costs
1
1
2
Amortization of intangible assets
73
74
82
Transformation costs
80
98
213
Disaster charges(a)
36
125
5
Stock-based compensation expense
64
114
86
Acquisition, disposition and other related
charges
9
8
3
Non-GAAP earnings from
operations
$
729
$
627
$
673
GAAP operating profit margin
6.7
%
3.1
%
4.1
%
Non-GAAP adjustments
3.8
%
6.2
%
5.7
%
Non-GAAP operating profit
margin
10.5
%
9.3
%
9.8
%
For the nine months
ended
July 31, 2022
July 31, 2021
Dollars in millions
GAAP earnings from operations
$
1,121
$
782
Non-GAAP adjustments
Amortization of initial direct costs
3
6
Amortization of intangible assets
220
276
Transformation costs
289
733
Disaster charges(a)
160
6
Stock-based compensation expense
306
294
Acquisition, disposition and other related
charges
25
34
Non-GAAP earnings from
operations
$
2,124
$
2,131
GAAP operating profit margin
5.4
%
3.8
%
Non-GAAP adjustments
4.9
%
6.6
%
Non-GAAP operating profit
margin
10.3
%
10.4
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
July 31, 2022
Diluted net earnings per
share
April 30, 2022
Diluted net earnings per
share
July 31, 2021
Diluted net earnings per
share
Dollars in millions, except
per share amounts
GAAP net earnings
$
409
$
0.31
$
250
$
0.19
$
392
$
0.29
Non-GAAP adjustments:
Amortization of initial direct costs
1
—
1
—
2
—
Amortization of intangible assets
73
0.05
74
0.06
82
0.06
Transformation costs
80
0.06
98
0.07
213
0.16
Disaster charges(a)
36
0.03
125
0.09
5
—
Stock-based compensation expense
64
0.05
114
0.09
86
0.06
Acquisition, disposition and other related
charges
9
0.01
8
0.01
3
—
Tax indemnification and related
adjustments
30
0.02
—
—
(76
)
(0.05
)
Non-service net periodic benefit
credit
(34
)
(0.03
)
(36
)
(0.03
)
(19
)
(0.01
)
Earnings from equity interests(b)
8
0.01
17
0.01
23
0.02
Adjustments for taxes
(47
)
(0.03
)
(68
)
(0.05
)
(88
)
(0.06
)
Non-GAAP net earnings
$
629
$
0.48
$
583
$
0.44
$
623
$
0.47
For the nine months
ended
July 31, 2022
Diluted net earnings per
share
July 31, 2021
Diluted net earnings per
share
Dollars in millions, except
per share amounts
GAAP net earnings
$
1,172
$
0.88
$
874
$
0.66
Non-GAAP adjustments:
Amortization of initial direct costs
3
—
6
—
Amortization of intangible assets
220
0.17
276
0.21
Transformation costs
289
0.22
733
0.56
Disaster charges(a)
160
0.12
6
0.01
Stock-based compensation expense
306
0.22
294
0.22
Acquisition, disposition and other related
charges
25
0.02
34
0.02
Tax indemnification and related
adjustments
47
0.04
(60
)
(0.05
)
Non-service net periodic benefit
credit
(106
)
(0.08
)
(53
)
(0.04
)
Earnings from equity interests(b)
42
0.03
91
0.07
Adjustments for taxes
(249
)
(0.18
)
(287
)
(0.22
)
Non-GAAP net earnings
$
1,909
$
1.44
$
1,914
$
1.44
(a) During the three and nine months ended July 31, 2022, the
Company recorded total pre-tax charges of $36 million and $162
million, respectively, primarily related to the Company's exit from
its Russia and Belarus business. For the three months ended July
31, 2022, the charges primarily related to employee severance and
abandoned assets, $6 million of which was included in Cost of
services and $30 million in Disaster charges in the Condensed
Consolidated Statements of Earnings. For the nine months ended July
31, 2022, the charges primarily related to expected credit losses
of financing and trade receivables, employee severance and
abandoned assets, $99 million of which was included in Financing
cost, $12 million in Cost of services, and $51 million in Disaster
charges in the Condensed Consolidated Statements of Earnings.
During the nine months ended July 31, 2022, Disaster charges also
included a recovery of $2 million, 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
July 31, 2022
April 30, 2022
July 31, 2021
In millions
Net cash provided by operating
activities
$
1,254
$
379
$
1,130
Investment in property, plant and
equipment
(773
)
(725
)
(684
)
Proceeds from sale of property, plant and
equipment
106
135
80
Free cash flow
$
587
$
(211
)
$
526
For the nine months
ended
July 31, 2022
July 31, 2021
In millions
Net cash provided by operating
activities
$
1,557
$
2,915
Investment in property, plant and
equipment
(2,122
)
(1,732
)
Proceeds from sale of property, plant and
equipment
364
274
Free cash flow
$
(201
)
$
1,457
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
As of
July 31, 2022
October 31, 2021
(Unaudited)
(Audited)
In millions, except par
value
ASSETS
Current assets:
Cash and cash equivalents
$
3,762
$
3,996
Accounts receivable, net of allowances
3,367
3,979
Financing receivables, net of
allowances
3,607
3,932
Inventory
5,554
4,511
Other current assets
3,231
2,460
Total current assets
19,521
18,878
Property, plant and equipment
5,626
5,613
Long-term financing receivables and other
assets
11,147
11,670
Investments in equity interests
2,267
2,210
Goodwill and intangible assets
19,114
19,328
Total assets
$
57,675
$
57,699
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Notes payable and short-term
borrowings
$
4,743
$
3,552
Accounts payable
6,861
7,004
Employee compensation and benefits
1,240
1,778
Taxes on earnings
142
169
Deferred revenue
3,479
3,408
Accrued restructuring
160
290
Other accrued liabilities
4,674
4,486
Total current liabilities
21,299
20,687
Long-term debt
9,137
9,896
Other non-current liabilities
6,575
7,099
Stockholders’ equity
HPE stockholders’ equity:
Common stock, $0.01 par value (9,600
shares authorized; 1,288 and 1,295 shares issued and outstanding at
July 31, 2022 and October 31, 2021, respectively)
13
13
Additional paid-in capital
28,351
28,470
Accumulated deficit
(4,891
)
(5,597
)
Accumulated other comprehensive loss
(2,862
)
(2,915
)
Total HPE stockholders’ equity
20,611
19,971
Non-controlling interests
53
46
Total stockholders’ equity
20,664
20,017
Total liabilities and stockholders’
equity
$
57,675
$
57,699
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
For the nine months
ended
July 31, 2022
July 31, 2021
In millions
Cash flows from operating activities:
Net earnings
$
1,172
$
874
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
1,862
1,956
Stock-based compensation expense
306
304
Provision for doubtful accounts and
inventory
237
149
Restructuring charges
102
492
Deferred taxes on earnings
(61
)
(156
)
Earnings from equity interests
(132
)
(109
)
Dividends received from equity
investees
38
38
Other, net
(6
)
117
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable
557
61
Financing receivables
573
26
Inventory
(1,100
)
(1,352
)
Accounts payable
(171
)
1,150
Taxes on earnings
39
(6
)
Restructuring
(267
)
(426
)
Other assets and liabilities
(1,592
)
(203
)
Net cash provided by operating
activities
1,557
2,915
Cash flows from investing activities:
Investment in property, plant and
equipment
(2,122
)
(1,732
)
Proceeds from sale of property, plant and
equipment
364
274
Purchases of investments
(54
)
(44
)
Proceeds from maturities and sales of
investments
254
11
Financial collateral posted
(40
)
(873
)
Financial collateral received
374
780
Payments made in connection with business
acquisitions, net of cash acquired
—
(133
)
Net cash used in investing activities
(1,224
)
(1,717
)
Cash flows from financing activities:
Short-term borrowings with original
maturities less than 90 days, net
114
(30
)
Proceeds from debt, net of issuance
costs
2,508
2,698
Payment of debt
(1,941
)
(2,341
)
Net payments related to stock-based award
activities
(46
)
(18
)
Repurchase of common stock
(384
)
—
Cash dividends paid to non-controlling
interests
—
(8
)
Cash dividends paid to shareholders
(467
)
(468
)
Net cash used in financing activities
(216
)
(167
)
Increase in cash, cash equivalents and
restricted cash
117
1,031
Cash, cash equivalents and restricted cash
at beginning of period
4,332
4,621
Cash, cash equivalents and restricted cash
at end of period
$
4,449
$
5,652
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the three months
ended
July 31, 2022
April 30, 2022
July 31, 2021
In millions
Net revenue:
Compute
$
3,004
$
2,985
$
3,102
High Performance Computing &
Artificial Intelligence
830
710
740
Storage
1,152
1,098
1,175
Intelligent Edge
941
867
871
Financial Services
817
823
844
Corporate Investments and Other
300
327
332
Total segment net revenue
7,044
6,810
7,064
Elimination of intersegment net
revenue
(93
)
(97
)
(167
)
Total consolidated net revenue
$
6,951
$
6,713
$
6,897
Earnings before taxes:
Compute
$
400
$
415
$
346
High Performance Computing &
Artificial Intelligence
28
(40
)
28
Storage
169
138
177
Intelligent Edge
155
109
140
Financial Services
96
104
94
Corporate Investments and Other
(31
)
(24
)
(28
)
Total segment earnings from operations
817
702
757
Unallocated corporate costs and
eliminations
(88
)
(75
)
(84
)
Stock-based compensation expense
(64
)
(114
)
(86
)
Amortization of initial direct costs
(1
)
(1
)
(2
)
Amortization of intangible assets
(73
)
(74
)
(82
)
Transformation costs
(80
)
(98
)
(213
)
Disaster charges
(36
)
(125
)
(5
)
Acquisition, disposition and other related
charges
(9
)
(8
)
(3
)
Interest and other, net
(74
)
—
(50
)
Tax indemnification and related
adjustments
(30
)
—
76
Non-service net periodic benefit
credit
34
36
19
Earnings from equity interests
68
33
79
Total consolidated earnings before
taxes
$
464
$
276
$
406
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the nine months
ended
July 31, 2022
July 31, 2021
In millions
Net revenue:
Compute
$
9,005
$
9,060
High Performance Computing &
Artificial Intelligence
2,330
2,185
Storage
3,406
3,503
Intelligent Edge
2,709
2,484
Financial Services
2,482
2,543
Corporate Investments and Other
952
1,003
Total segment net revenue
20,884
20,778
Elimination of intersegment net
revenue
(259
)
(348
)
Total consolidated net revenue
$
20,625
$
20,430
Earnings before taxes:
Compute
$
1,231
$
1,021
High Performance Computing &
Artificial Intelligence
(19
)
89
Storage
475
602
Intelligent Edge
421
420
Financial Services
304
269
Corporate Investments and Other
(66
)
(84
)
Total segment earnings from operations
2,346
2,317
Unallocated corporate costs and
eliminations
(222
)
(186
)
Stock-based compensation expense
(306
)
(294
)
Amortization of initial direct costs
(3
)
(6
)
Amortization of intangible assets
(220
)
(276
)
Transformation costs
(289
)
(733
)
Disaster charges
(160
)
(6
)
Acquisition, disposition and other related
charges
(25
)
(34
)
Interest and other, net
(79
)
(105
)
Tax indemnification and related
adjustments
(47
)
60
Non-service net periodic benefit
credit
106
53
Earnings from equity interests
132
109
Total consolidated earnings before
taxes
$
1,233
$
899
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the three months
ended
Change (%)
July 31, 2022
April 30, 2022
July 31, 2021
Q/Q
Y/Y
Dollars in millions
Net revenue:
Compute
$
3,004
$
2,985
$
3,102
1
%
(3
%)
High Performance Computing &
Artificial Intelligence
830
710
740
17
%
12
%
Storage
1,152
1,098
1,175
5
%
(2
%)
Intelligent Edge
941
867
871
9
%
8
%
Financial Services
817
823
844
(1
%)
(3
%)
Corporate Investments and Other
300
327
332
(8
%)
(10
%)
Total segment net revenue
7,044
6,810
7,064
3
%
—
%
Elimination of intersegment net
revenue
(93
)
(97
)
(167
)
(4
%)
(44
%)
Total consolidated net revenue
$
6,951
$
6,713
$
6,897
4
%
1
%
For the nine months
ended
Change (%)
July 31, 2022
July 31, 2021
Y/Y
Dollars in millions
Net revenue:
Compute
$
9,005
$
9,060
(1
%)
High Performance Computing &
Artificial Intelligence
2,330
2,185
7
%
Storage
3,406
3,503
(3
%)
Intelligent Edge
2,709
2,484
9
%
Financial Services
2,482
2,543
(2
%)
Corporate Investments
952
1,003
(5
%)
Total segment net revenue
20,884
20,778
1
%
Elimination of intersegment net
revenue
(259
)
(348
)
(26
%)
Total consolidated net revenue
$
20,625
$
20,430
1
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Operating Margin
Summary Data
(Unaudited)
For the three months
ended
Change in Operating
Profit
Margin (pts)
July 31, 2022
Q/Q
Y/Y
Segment operating profit margin:
Compute
13.3
%
(0.6
)
2.1
High Performance Computing &
Artificial Intelligence
3.4
%
9.0
(0.4
)
Storage
14.7
%
2.1
(0.4
)
Intelligent Edge
16.5
%
3.9
0.4
Financial Services
11.8
%
(0.8
)
0.7
Corporate Investments and Other
(10.3
%)
(3.0
)
(1.9
)
Total segment operating profit margin
11.6
%
1.3
0.9
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Calculation of Diluted Net
Earnings Per Share
(Unaudited)
For the three months
ended
July 31, 2022
April 30, 2022
July 31, 2021
In millions, except per share
amounts
Numerator:
GAAP net earnings
$
409
$
250
$
392
Non-GAAP net earnings
$
629
$
583
$
623
Denominator:
Weighted-average shares used to compute
basic net earnings per share
1,305
1,307
1,314
Dilutive effect of employee stock
plans
18
22
24
Weighted-average shares used to compute
diluted net earnings per share
1,323
1,329
1,338
GAAP net earnings per share
Basic
$
0.31
$
0.19
$
0.30
Diluted
$
0.31
$
0.19
$
0.29
Non-GAAP net earnings per share
Basic
$
0.48
$
0.45
$
0.47
Diluted
$
0.48
$
0.44
$
0.47
For the nine months
ended
July 31, 2022
July 31, 2021
In millions, except per share
amounts
Numerator:
GAAP net earnings
$
1,172
$
874
Non-GAAP net earnings
$
1,909
$
1,914
Denominator:
Weighted-average shares used to compute
basic net earnings per share
1,306
1,308
Dilutive effect of employee stock
plans
20
20
Weighted-average shares used to compute
diluted net earnings per share
1,326
1,328
GAAP net earnings per share
Basic
$
0.90
$
0.67
Diluted
$
0.88
$
0.66
Non-GAAP net earnings per share
Basic
$
1.46
$
1.46
Diluted
$
1.44
$
1.44
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 R&D and FSC as a percentage of net revenue,
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
R&D and FSC as a percentage of net revenue is R&D and
SG&A expenses as a percentage of net revenue. 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. 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. In addition, non-GAAP R&D and FSC exclude
stock-based compensation expense.
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, 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 are primarily related to the exit of the
Company’s business in Russia and Belarus, and include credit losses
of financing receivables and trade receivables, employee severance
and abandoned assets. 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 costs 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
R&D and FSC, 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,
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 R&D and FSC as a
percentage of net revenue, 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 R&D and FSC as a percentage of net
revenue, 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/20220830005428/en/
Editorial contact Laura Keller Laura.Keller@hpe.com
Investor contact Andrew Simanek
investor.relations@hpe.com
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