PALO ALTO, Calif., Nov. 21, 2017 (GLOBE NEWSWIRE) -- Hewlett Packard Enterprise (NYSE:HPE) today announced financial results for its fiscal 2017 and the fourth quarter, ended October 31, 2017.
Fourth Quarter Fiscal Year 2017 Results
Combined net revenue of $7.8 billion includes $7.7 billion from continuing operations and $174 million from Software, which is now included in discontinued operations.
Fourth quarter net revenue from continuing operations of $7.7 billion was up 5% from the prior year and up 5% when adjusted for divestitures and currency.
Fourth quarter GAAP diluted net EPS from continuing operations was $0.23, up from GAAP diluted net EPS from continuing operations of $0.19 in the prior year.
Fourth quarter non-GAAP diluted net EPS from continuing operations was $0.29, up from non-GAAP diluted net EPS from continuing operations of $0.23 in the prior-year period. Fourth quarter non-GAAP net earnings from continuing operations and non-GAAP diluted net EPS from continuing operations exclude after-tax costs of $95 million and $0.06 per diluted share, respectively, related to transformation costs, separation costs, restructuring costs, disaster charges, amortization of intangible assets, acquisition and other related charges, defined benefit plan settlement charges and remeasurement benefit, an adjustment to earnings from equity interests, tax indemnification adjustments and valuation allowances and separation taxes.
Fiscal Year 2017 Results
Combined net revenue of $37.4 billion includes $28.9 billion from continuing operations and $8.5 billion from Enterprise Services and Software, which is now included in discontinued operations.
Fiscal 2017 net revenue from continuing operations of $28.9 billion was down 5% from the prior year and up 1% when adjusted for divestitures and currency.
Fiscal 2017 GAAP diluted net EPS from continuing operations was $0.26, down from GAAP diluted net EPS from continuing operations of $1.86 in the prior year.
Fiscal 2017 non-GAAP diluted net EPS from continuing operations was $0.96, down from non-GAAP diluted net EPS from continuing operations of $1.09 in the prior year. Fiscal 2017 non-GAAP net earnings from continuing operations and non-GAAP diluted net EPS from continuing operations exclude after-tax costs of $1.2 billion and $0.70 per diluted share, respectively, related to restructuring costs, transformation costs, amortization of intangible assets, acquisition and other related charges, separation costs, disaster charges, defined benefit plan settlement charges and remeasurement benefit, an adjustment to earnings from equity interests, tax indemnification adjustments and valuation allowances and separation taxes.
“With strong top line revenue growth, earnings above our previous outlook and our second consecutive quarter of sequential margin improvement, our fourth quarter results are a reflection of the progress we have made over the past two years to transform HPE into a nimble, focused and innovative organization,” said Meg Whitman, CEO of HPE. “Today, HPE has a very strong balance sheet, an industry-leading product portfolio and a world-class leadership team ready to drive the next phase of shareholder value.”
HPE fiscal 2017 full-year and fourth quarter continuing operations financial performance
FY17 | FY16 | Y/Y | Q4 FY17 | Q4 FY16 | Y/Y | |||||||||||||
GAAP net revenue ($B) | $28.9 | $30.3 | (4.7% | ) | $7.7 | $7.3 | 4.6% | |||||||||||
GAAP operating margin | 2.2% | 12.9% | (10.7 pts. | ) | (2.9% | ) | 7.9% | (10.8 pts. | ) | |||||||||
GAAP net earnings ($B) | $0.4 | $3.2 | (86.5% | ) | $0.4 | $0.3 | 16.0% | |||||||||||
GAAP diluted net earnings per share | $0.26 | $1.86 | (86.0% | ) | $0.23 | $0.19 | 21.1% | |||||||||||
Non-GAAP operating margin | 7.6% | 8.8% | (1.2 pts. | ) | 8.2% | 9.2% | (1.0pts | ) | ||||||||||
Non-GAAP net earnings ($B) | $1.6 | $1.9 | (15.3% | ) | $0.5 | $0.4 | 21.6% | |||||||||||
Non-GAAP diluted net earnings per share | $0.96 | $1.09 | (11.9% | ) | $0.29 | $0.23 | 26.1% | |||||||||||
Cash flow from operations ($B) | $0.9 | $5.0 | ($4.1 | ) | $0.8 | $2.2 | ($1.4 | ) |
Information about HPE’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.
Outlook
For the fiscal 2018 first quarter, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.01 to $0.05 and non-GAAP diluted net EPS to be in the range of $0.20 to $0.24. Fiscal 2018 first quarter non-GAAP diluted net EPS from continuing operations estimates exclude after-tax costs of approximately $0.19 per diluted share, related primarily to transformation costs, separation costs, and the amortization of intangible assets.
Fiscal 2017 fourth quarter segment results
About Hewlett Packard Enterprise
Hewlett Packard Enterprise (HPE) is an industry leading technology company that enables customers to go further, faster. With the industry’s most comprehensive portfolio, spanning the cloud to the data center to workplace applications, our technology and services help customers around the world make IT more efficient, more productive and more secure.
Use of non-GAAP financial information
To supplement Hewlett Packard Enterprise’s condensed and consolidated financial statement information presented on a generally accepted accounting principles (GAAP) basis, Hewlett Packard Enterprise provides revenue on a constant currency basis and revenue adjusted for tier-1, divestitures and currency, as well as non-GAAP operating expense, non-GAAP operating profit, non-GAAP operating margin, non-GAAP income tax rate, non-GAAP net earnings from continuing operations, non-GAAP net (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations, adjusted non-GAAP diluted net earnings per share from continuing operations, non-GAAP diluted net (loss) earnings per share from discontinued operations, gross cash, free cash flow, net capital expenditures, 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, operating profit, operating margin, net earnings from continuing operations, net (loss) earnings from discontinued operations, diluted net earnings per share from continuing operations, diluted net (loss) earnings per share from discontinued operations, cash and cash equivalents, cash flow from operations, investments in property, plant and equipment, or total company debt prepared in accordance with GAAP.
Forward-looking statements
This press release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, including the completed separation transactions, the execution of restructuring plans and any resulting cost savings 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 or assumptions underlying any of the foregoing.
Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise’s businesses; the competitive pressures faced by Hewlett Packard Enterprise’s businesses; risks associated with executing Hewlett Packard Enterprise’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Hewlett Packard Enterprise’s products and the delivery of Hewlett Packard Enterprise’s services effectively; the protection of Hewlett Packard Enterprise’s intellectual property assets, including intellectual property licensed from third parties; risks associated with Hewlett Packard Enterprise’s international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the separation transactions or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of Hewlett Packard Enterprise’s business) and the anticipated benefits of the transactions or of implementing the restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016 and subsequent Quarterly Reports on Form 10-Q.
As in prior periods, the financial information set forth in this press release, including tax-related items, reflects estimates based on information available at this time. While Hewlett Packard Enterprise believes these estimates to be reasonable, these amounts could differ materially from reported amounts in the Hewlett Packard Enterprise Annual Report on Form 10-K for the fiscal year ended October 31, 2017. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) | |||||||||||
Three months ended | |||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | |||||||||
Net revenue | $ | 7,660 | $ | 7,501 | $ | 7,324 | |||||
Costs and expenses: | |||||||||||
Cost of sales | 5,383 | 5,306 | 4,996 | ||||||||
Research and development | 364 | 390 | 401 | ||||||||
Selling, general and administrative | 1,288 | 1,285 | 1,253 | ||||||||
Amortization of intangible assets | 86 | 97 | 57 | ||||||||
Restructuring charges | 113 | 152 | 128 | ||||||||
Transformation costs(a) | 328 | 31 | — | ||||||||
Disaster charges(b) | 93 | — | — | ||||||||
Acquisition and other related charges | 53 | 56 | 46 | ||||||||
Separation costs | 202 | 5 | 118 | ||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(c) | (26 | ) | (22 | ) | — | ||||||
Gain on H3C and MphasiS divestitures | — | — | (251 | ) | |||||||
Total costs and expenses | 7,884 | 7,300 | 6,748 | ||||||||
(Loss) earnings from continuing operations | (224 | ) | 201 | 576 | |||||||
Interest and other, net | (76 | ) | (87 | ) | (91 | ) | |||||
Tax indemnification adjustments | (2 | ) | 10 | 311 | |||||||
Earnings (loss) from equity interests(d) | 1 | 1 | (4 | ) | |||||||
(Loss) earnings from continuing operations before taxes | (301 | ) | 125 | 792 | |||||||
Tax valuation allowances and separation taxes(e) | 619 | 189 | — | ||||||||
Tax settlements | — | — | (647 | ) | |||||||
Benefit (provision) for taxes | 60 | (29 | ) | 181 | |||||||
Net earnings from continuing operations | 378 | 285 | 326 | ||||||||
Net earnings (loss) from discontinued operations | 146 | (120 | ) | (24 | ) | ||||||
Net earnings | $ | 524 | $ | 165 | $ | 302 | |||||
Net earnings (loss) per share: | |||||||||||
Basic | |||||||||||
Continuing operations | $ | 0.23 | $ | 0.17 | $ | 0.19 | |||||
Discontinued operations | 0.09 | (0.07 | ) | (0.01 | ) | ||||||
Total basic net earnings per share | $ | 0.32 | $ | 0.10 | $ | 0.18 | |||||
Diluted | |||||||||||
Continuing operations | $ | 0.23 | $ | 0.17 | $ | 0.19 | |||||
Discontinued operations | 0.09 | (0.07 | ) | (0.01 | ) | ||||||
Total diluted net earnings per share | $ | 0.32 | $ | 0.10 | $ | 0.18 | |||||
Cash dividends declared per share | $ | — | $ | 0.065 | $ | — | |||||
Weighted-average shares used to compute net earnings per share: | |||||||||||
Basic | 1,618 | 1,641 | 1,672 | ||||||||
Diluted | 1,647 | 1,667 | 1,709 | ||||||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) | |||||||
Twelve months ended October 31, | |||||||
2017 | 2016 | ||||||
Net revenue | $ | 28,871 | $ | 30,280 | |||
Costs and expenses: | |||||||
Cost of sales | 20,177 | 20,507 | |||||
Research and development | 1,486 | 1,714 | |||||
Selling, general and administrative | 5,006 | 5,380 | |||||
Amortization of intangible assets | 321 | 272 | |||||
Restructuring charges | 417 | 417 | |||||
Transformation costs(a) | 359 | — | |||||
Disaster charges(b) | 93 | — | |||||
Acquisition and other related charges | 203 | 145 | |||||
Separation costs | 248 | 362 | |||||
Defined benefit plan settlement charges and remeasurement (benefit)(c) | (64 | ) | — | ||||
Gain on H3C and MphasiS divestitures | — | (2,420 | ) | ||||
Total costs and expenses | 28,246 | 26,377 | |||||
Earnings from continuing operations | 625 | 3,903 | |||||
Interest and other, net | (327 | ) | (284 | ) | |||
Tax indemnification adjustments | (3 | ) | 317 | ||||
Loss from equity interests(d) | (23 | ) | (76 | ) | |||
Earnings from continuing operations before taxes | 272 | 3,860 | |||||
Tax valuation allowances and separation taxes(e) | 215 | — | |||||
Tax settlements | — | (647 | ) | ||||
(Provision) benefit for taxes | (51 | ) | 24 | ||||
Net earnings from continuing operations | 436 | 3,237 | |||||
Net loss from discontinued operations | (92 | ) | (76 | ) | |||
Net earnings | $ | 344 | $ | 3,161 | |||
Net earnings (loss) per share: | |||||||
Basic | |||||||
Continuing operations | $ | 0.26 | $ | 1.89 | |||
Discontinued operations | (0.05 | ) | (0.05 | ) | |||
Total basic net earnings per share | $ | 0.21 | $ | 1.84 | |||
Diluted | |||||||
Continuing operations | $ | 0.26 | $ | 1.86 | |||
Discontinued operations | (0.05 | ) | (0.04 | ) | |||
Total diluted net earnings per share | $ | 0.21 | $ | 1.82 | |||
Cash dividends declared per share | $ | 0.26 | $ | 0.22 | |||
Weighted-average shares used to compute net earnings per share: | |||||||
Basic | 1,646 | 1,715 | |||||
Diluted | 1,674 | 1,739 | |||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except percentages and per share amounts) | |||||||||||||||||||||||
Three months ended October 31, 2017 | Diluted net earnings per share | Three months ended July 31, 2017 | Diluted net earnings per share | Three months ended October 31, 2016 | Diluted net earnings per share | ||||||||||||||||||
GAAP net earnings from continuing operations | $ | 378 | $ | 0.23 | $ | 285 | $ | 0.17 | $ | 326 | $ | 0.19 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Amortization of intangible assets | 86 | 0.05 | 97 | 0.06 | 57 | 0.03 | |||||||||||||||||
Restructuring charges | 113 | 0.07 | 152 | 0.09 | 128 | 0.07 | |||||||||||||||||
Transformation costs(a) | 328 | 0.20 | 31 | 0.02 | — | — | |||||||||||||||||
Disaster charges(b) | 93 | 0.06 | — | — | — | — | |||||||||||||||||
Acquisition and other related charges | 53 | 0.03 | 56 | 0.03 | 46 | 0.03 | |||||||||||||||||
Separation costs | 202 | 0.12 | 5 | — | 118 | 0.07 | |||||||||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(c) | (26 | ) | (0.02 | ) | (22 | ) | (0.01 | ) | — | — | |||||||||||||
Gain on H3C and MphasiS divestitures | — | — | — | — | (251 | ) | (0.15 | ) | |||||||||||||||
Tax indemnification adjustments | 2 | — | (10 | ) | (0.01 | ) | (311 | ) | (0.18 | ) | |||||||||||||
Loss from equity interests(d) | 43 | 0.03 | 39 | 0.02 | 35 | 0.02 | |||||||||||||||||
Adjustments for taxes | (180 | ) | (0.10 | ) | (69 | ) | (0.04 | ) | (406 | ) | (0.23 | ) | |||||||||||
Tax valuation allowances and separation taxes(e) | (619 | ) | (0.38 | ) | (189 | ) | (0.11 | ) | — | — | |||||||||||||
Tax settlements | — | — | — | — | 647 | 0.38 | |||||||||||||||||
Non-GAAP net earnings from continuing operations | $ | 473 | $ | 0.29 | $ | 375 | $ | 0.22 | $ | 389 | $ | 0.23 | |||||||||||
GAAP (loss) earnings from continuing operations | $ | (224 | ) | $ | 201 | $ | 576 | ||||||||||||||||
Non-GAAP adjustments related to continuing operations: | |||||||||||||||||||||||
Amortization of intangible assets | 86 | 97 | 57 | ||||||||||||||||||||
Restructuring charges | 113 | 152 | 128 | ||||||||||||||||||||
Transformation costs(a) | 328 | 31 | — | ||||||||||||||||||||
Disaster charges(b) | 93 | — | — | ||||||||||||||||||||
Acquisition and other related charges | 53 | 56 | 46 | ||||||||||||||||||||
Separation costs | 202 | 5 | 118 | ||||||||||||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(c) | (26 | ) | (22 | ) | — | ||||||||||||||||||
Gain on H3C and MphasiS divestitures | — | — | (251 | ) | |||||||||||||||||||
Non-GAAP earnings from continuing operations | $ | 625 | $ | 520 | $ | 674 | |||||||||||||||||
GAAP operating margin from continuing operations | (3 | )% | 3 | % | 8 | % | |||||||||||||||||
Non-GAAP adjustments from continuing operations | 11 | % | 4 | % | 1 | % | |||||||||||||||||
Non-GAAP operating margin from continuing operations | 8 | % | 7 | % | 9 | % | |||||||||||||||||
GAAP net earnings (loss) from discontinued operations | $ | 146 | $ | 0.09 | $ | (120 | ) | $ | (0.07 | ) | $ | (24 | ) | $ | (0.01 | ) | |||||||
Non-GAAP adjustments related to discontinued operations: | |||||||||||||||||||||||
Amortization of intangible assets | 10 | 0.01 | 35 | 0.02 | 69 | 0.04 | |||||||||||||||||
Restructuring charges | (2 | ) | — | 13 | 0.01 | 267 | 0.16 | ||||||||||||||||
Acquisition and other related charges | — | — | — | — | 5 | — | |||||||||||||||||
Separation costs | 70 | 0.04 | 254 | 0.15 | 175 | 0.10 | |||||||||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(c) | (1 | ) | — | (2 | ) | — | — | — | |||||||||||||||
Interest expense on Seattle debt | 8 | — | 11 | 0.01 | — | — | |||||||||||||||||
Tax indemnification adjustments | 15 | 0.01 | — | — | — | — | |||||||||||||||||
Adjustments for taxes | (50 | ) | (0.03 | ) | (81 | ) | (0.05 | ) | 154 | 0.09 | |||||||||||||
Tax valuation allowances and separation taxes(e) | (166 | ) | (0.10 | ) | 12 | 0.01 | — | — | |||||||||||||||
Non-GAAP net earnings from discontinued operations | $ | 30 | $ | 0.02 | $ | 122 | $ | 0.08 | $ | 646 | $ | 0.38 | |||||||||||
Total GAAP net earnings | $ | 524 | $ | 0.32 | $ | 165 | $ | 0.10 | $ | 302 | $ | 0.18 | |||||||||||
Total Non-GAAP net earnings | $ | 503 | $ | 0.31 | $ | 497 | $ | 0.30 | $ | 1,035 | $ | 0.61 | |||||||||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except percentages and per share amounts) | |||||||||||||||
Twelve months ended October 31, 2017 | Diluted net earnings per share | Twelve months ended October 31, 2016 | Diluted net earnings per share | ||||||||||||
GAAP net earnings from continuing operations | $ | 436 | $ | 0.26 | $ | 3,237 | $ | 1.86 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Amortization of intangible assets | 321 | 0.19 | 272 | 0.16 | |||||||||||
Restructuring charges | 417 | 0.25 | 417 | 0.24 | |||||||||||
Transformation costs(a) | 359 | 0.21 | — | — | |||||||||||
Disaster charges(b) | 93 | 0.06 | — | — | |||||||||||
Acquisition and other related charges | 203 | 0.12 | 145 | 0.08 | |||||||||||
Separation costs | 248 | 0.15 | 362 | 0.21 | |||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(c) | (64 | ) | (0.04 | ) | — | — | |||||||||
Gain on H3C and MphasiS divestitures | — | — | (2,420 | ) | (1.39 | ) | |||||||||
Tax indemnification adjustments | 3 | — | (317 | ) | (0.18 | ) | |||||||||
Loss from equity interests(d) | 155 | 0.09 | 93 | 0.05 | |||||||||||
Adjustments for taxes | (348 | ) | (0.20 | ) | (537 | ) | (0.31 | ) | |||||||
Tax valuation allowances and separation taxes(e) | (215 | ) | (0.13 | ) | — | — | |||||||||
Tax settlements | — | — | 647 | 0.37 | |||||||||||
Non-GAAP net earnings from continuing operations | $ | 1,608 | $ | 0.96 | $ | 1,899 | $ | 1.09 | |||||||
GAAP earnings from continuing operations | $ | 625 | $ | 3,903 | |||||||||||
Non-GAAP adjustments related to continuing operations: | |||||||||||||||
Amortization of intangible assets | 321 | 272 | |||||||||||||
Restructuring charges | 417 | 417 | |||||||||||||
Transformation costs(a) | 359 | — | |||||||||||||
Disaster charges(b) | 93 | — | |||||||||||||
Acquisition and other related charges | 203 | 145 | |||||||||||||
Separation costs | 248 | 362 | |||||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(c) | (64 | ) | — | ||||||||||||
Gain on H3C and MphasiS divestitures | — | (2,420 | ) | ||||||||||||
Non-GAAP earnings from continuing operations | $ | 2,202 | $ | 2,679 | |||||||||||
GAAP operating margin from continuing operations | 2 | % | 13 | % | |||||||||||
Non-GAAP adjustments from continuing operations | 6 | % | (4 | )% | |||||||||||
Non-GAAP operating margin from continuing operations | 8 | % | 9 | % | |||||||||||
GAAP net loss from discontinued operations | $ | (92 | ) | $ | (0.05 | ) | $ | (76 | ) | $ | (0.04 | ) | |||
Non-GAAP adjustments related to discontinued operations: | |||||||||||||||
Amortization of intangible assets | 116 | 0.07 | 483 | 0.28 | |||||||||||
Restructuring charges | 251 | 0.15 | 819 | 0.47 | |||||||||||
Acquisition and other related charges | 1 | — | 33 | 0.02 | |||||||||||
Separation costs | 1,037 | 0.62 | 236 | 0.13 | |||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(c) | (9 | ) | (0.01 | ) | — | — | |||||||||
Interest expense on Seattle debt | 19 | 0.01 | — | — | |||||||||||
Tax indemnification adjustments | 15 | 0.01 | — | — | |||||||||||
Adjustments for taxes | (415 | ) | (0.25 | ) | (57 | ) | (0.03 | ) | |||||||
Tax valuation allowances and separation taxes(e) | (172 | ) | (0.10 | ) | — | — | |||||||||
Non-GAAP net earnings from discontinued operations | $ | 751 | $ | 0.45 | $ | 1,438 | $ | 0.83 | |||||||
Total GAAP net earnings | $ | 344 | $ | 0.21 | $ | 3,161 | $ | 1.82 | |||||||
Total Non-GAAP net earnings | $ | 2,359 | $ | 1.41 | $ | 3,337 | $ | 1.92 | |||||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions, except par value) | |||||||
As of | |||||||
October 31, 2017 | October 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 9,579 | $ | 12,987 | |||
Accounts receivable | 3,073 | 3,151 | |||||
Financing receivables | 3,378 | 3,360 | |||||
Inventory | 2,315 | 1,720 | |||||
Assets held for sale(a) | 14 | — | |||||
Other current assets | 3,085 | 2,694 | |||||
Current assets of discontinued operations | — | 5,005 | |||||
Total current assets | 21,444 | 28,917 | |||||
Property, plant and equipment | 6,269 | 6,375 | |||||
Long-term financing receivables and other assets(b) | 12,600 | 10,476 | |||||
Investments in equity interests | 2,535 | 2,648 | |||||
Goodwill and intangible assets | 18,558 | 16,765 | |||||
Non-current assets of discontinued operations | — | 14,448 | |||||
Total assets | $ | 61,406 | $ | 79,629 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Notes payable and short-term borrowings(b) | $ | 3,850 | $ | 3,525 | |||
Accounts payable | 6,072 | 4,945 | |||||
Employee compensation and benefits | 1,156 | 1,253 | |||||
Taxes on earnings | 429 | 161 | |||||
Deferred revenue | 3,128 | 2,996 | |||||
Accrued restructuring | 445 | 256 | |||||
Other accrued liabilities | 3,844 | 3,717 | |||||
Current liabilities of discontinued operations | — | 5,676 | |||||
Total current liabilities | 18,924 | 22,529 | |||||
Long-term debt(b) | 10,182 | 12,168 | |||||
Other non-current liabilities | 8,795 | 8,874 | |||||
Non-current liabilities of discontinued operations | — | 4,540 | |||||
Stockholders’ equity | |||||||
HPE stockholders’ equity: | |||||||
Preferred stock, $0.01 par value (300 shares authorized; none issued and outstanding at October 31, 2017) | — | — | |||||
Common stock, $0.01 par value (9,600 shares authorized; 1,595 and 1,666 shares issued and outstanding at October 31, 2017 and October 31, 2016, respectively) | 16 | 17 | |||||
Additional paid-in capital | 33,583 | 35,248 | |||||
Retained earnings | (7,238 | ) | 2,782 | ||||
Accumulated other comprehensive loss | (2,895 | ) | (6,599 | ) | |||
Total HPE stockholders’ equity | 23,466 | 31,448 | |||||
Non-controlling interests of continuing operations | 39 | 40 | |||||
Non-controlling interests of discontinued operations | — | 30 | |||||
Total stockholders’ equity | 23,505 | 31,518 | |||||
Total liabilities and stockholders’ equity | $ | 61,406 | $ | 79,629 | |||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) | |||||||
Three months ended October 31, 2017 | Twelve months ended October 31, 2017 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 524 | $ | 344 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 682 | 3,051 | |||||
Stock-based compensation expense | 79 | 428 | |||||
Provision for doubtful accounts and inventory | 47 | 129 | |||||
Restructuring charges(a) | 406 | 964 | |||||
Deferred taxes on earnings | (1,267 | ) | (1,122 | ) | |||
Excess tax benefit from stock-based compensation | (27 | ) | (143 | ) | |||
(Earnings) loss from equity interests | (1 | ) | 23 | ||||
Dividends received from equity investees(b) | 98 | 98 | |||||
Other, net | 151 | 543 | |||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | 207 | 457 | |||||
Financing receivables | (335 | ) | (462 | ) | |||
Inventory | (201 | ) | (542 | ) | |||
Accounts payable | 340 | 992 | |||||
Taxes on earnings | 337 | (265 | ) | ||||
Restructuring | (112 | ) | (800 | ) | |||
Other assets and liabilities(c) | (102 | ) | (2,806 | ) | |||
Net cash provided by operating activities | 826 | 889 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment | (732 | ) | (3,137 | ) | |||
Proceeds from sale of property, plant and equipment | 276 | 679 | |||||
Purchases of available-for-sale securities and other investments | (14 | ) | (45 | ) | |||
Maturities and sales of available-for-sale securities and other investments | 24 | 38 | |||||
Financial collateral posted | (302 | ) | (686 | ) | |||
Financial collateral returned | 417 | 466 | |||||
Payments made in connection with business acquisitions, net of cash acquired | (152 | ) | (2,202 | ) | |||
Payments from business divestitures, net(d) | — | (20 | ) | ||||
Net cash used in investing activities | (483 | ) | (4,907 | ) | |||
Cash flows from financing activities: | |||||||
Short-term borrowings with original maturities less than 90 days, net | (12 | ) | 18 | ||||
Proceeds from debt, net of issuance costs | 1,510 | 2,259 | |||||
Payment of debt | (1,487 | ) | (3,783 | ) | |||
Settlement of cash flow hedge | — | 5 | |||||
Issuance of common stock under employee stock plans | 45 | 411 | |||||
Repurchase of common stock | (620 | ) | (2,556 | ) | |||
Net transfer of cash and cash equivalents to Everett | (152 | ) | (711 | ) | |||
Net transfer of cash and cash equivalents to Seattle | (227 | ) | (227 | ) | |||
Cash dividend from Everett(e) | — | 3,008 | |||||
Cash dividend from Seattle(f) | 2,500 | 2,500 | |||||
Restricted cash transfer(g) | — | (29 | ) | ||||
Excess tax benefit from stock-based compensation | 27 | 143 | |||||
Cash dividends paid | (105 | ) | (428 | ) | |||
Net cash provided by financing activities | 1,479 | 610 | |||||
Increase (decrease) in cash and cash equivalents | 1,822 | (3,408 | ) | ||||
Cash and cash equivalents at beginning of period | 7,757 | 12,987 | |||||
Cash and cash equivalents at end of period | $ | 9,579 | $ | 9,579 | |||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) | ||||||||||||
Three months ended | ||||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | ||||||||||
Net revenue:(a) | ||||||||||||
Enterprise Group | $ | 6,852 | $ | 6,791 | $ | 6,823 | ||||||
Financial Services | 1,010 | 897 | 814 | |||||||||
Corporate Investments | 3 | — | 58 | |||||||||
Total segment net revenue | 7,865 | 7,688 | 7,695 | |||||||||
Elimination of intersegment net revenue and other(b) | (205 | ) | (187 | ) | (371 | ) | ||||||
Total Hewlett Packard Enterprise consolidated net revenue | $ | 7,660 | $ | 7,501 | $ | 7,324 | ||||||
Earnings from continuing operations before taxes:(a) | ||||||||||||
Enterprise Group | $ | 723 | $ | 634 | $ | 909 | ||||||
Financial Services | 78 | 70 | 83 | |||||||||
Corporate Investments | (27 | ) | (34 | ) | (64 | ) | ||||||
Total segment earnings from operations | 774 | 670 | 928 | |||||||||
Corporate and unallocated costs and eliminations | (74 | ) | (64 | ) | (167 | ) | ||||||
Stock-based compensation expense | (75 | ) | (86 | ) | (87 | ) | ||||||
Amortization of intangible assets | (86 | ) | (97 | ) | (57 | ) | ||||||
Restructuring charges | (113 | ) | (152 | ) | (128 | ) | ||||||
Transformation costs(c) | (328 | ) | (31 | ) | — | |||||||
Disaster charges(d) | (93 | ) | — | — | ||||||||
Acquisition and other related charges | (53 | ) | (56 | ) | (46 | ) | ||||||
Separation costs | (202 | ) | (5 | ) | (118 | ) | ||||||
Defined benefit plan settlement charges and remeasurement (benefit)(e) | 26 | 22 | — | |||||||||
Gain on H3C and MphasiS divestiture | — | — | 251 | |||||||||
Interest and other, net | (76 | ) | (87 | ) | (91 | ) | ||||||
Tax indemnification adjustments | (2 | ) | 10 | 311 | ||||||||
Earnings (loss) from equity interests(f) | 1 | 1 | (4 | ) | ||||||||
Total Hewlett Packard Enterprise consolidated (loss) earnings from continuing operations before taxes | $ | (301 | ) | $ | 125 | $ | 792 | |||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) | ||||||||
Twelve months ended October 31, | ||||||||
2017 | 2016 | |||||||
Net revenue:(a) | ||||||||
Enterprise Group | $ | 26,211 | $ | 27,779 | ||||
Financial Services | 3,602 | 3,190 | ||||||
Corporate Investments | 3 | 591 | ||||||
Total segment net revenue | 29,816 | 31,560 | ||||||
Elimination of intersegment net revenue and other(b) | (945 | ) | (1,280 | ) | ||||
Total Hewlett Packard Enterprise consolidated net revenue | $ | 28,871 | $ | 30,280 | ||||
Earnings from continuing operations before taxes:(a) | ||||||||
Enterprise Group | $ | 2,707 | $ | 3,569 | ||||
Financial Services | 304 | 336 | ||||||
Corporate Investments | (142 | ) | (240 | ) | ||||
Total segment earnings from operations | 2,869 | 3,665 | ||||||
Corporate and unallocated costs and eliminations | (310 | ) | (619 | ) | ||||
Stock-based compensation expense | (357 | ) | (367 | ) | ||||
Amortization of intangible assets | (321 | ) | (272 | ) | ||||
Restructuring charges | (417 | ) | (417 | ) | ||||
Transformation costs(c) | (359 | ) | — | |||||
Disaster charges(d) | (93 | ) | — | |||||
Acquisition and other related charges | (203 | ) | (145 | ) | ||||
Separation costs | (248 | ) | (362 | ) | ||||
Defined benefit plan settlement charges and remeasurement (benefit)(e) | 64 | — | ||||||
Gain on H3C and MphasiS divestiture | — | 2,420 | ||||||
Interest and other, net | (327 | ) | (284 | ) | ||||
Tax indemnification adjustments | (3 | ) | 317 | |||||
Loss from equity interests(f) | (23 | ) | (76 | ) | ||||
Total Hewlett Packard Enterprise consolidated earnings from continuing operations before taxes | $ | 272 | $ | 3,860 | ||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions, except percentages) | |||||||||||||||||
Three months ended | Change (%) | ||||||||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | Q/Q | Y/Y | |||||||||||||
Net revenue:(a) | |||||||||||||||||
Enterprise Group | |||||||||||||||||
Servers | $ | 3,282 | $ | 3,298 | $ | 3,463 | — | % | (5 | %) | |||||||
Technology Services | 2,021 | 1,947 | 1,974 | 4 | % | 2 | % | ||||||||||
Storage | 871 | 844 | 827 | 3 | % | 5 | % | ||||||||||
Networking | 678 | 702 | 559 | (3 | %) | 21 | % | ||||||||||
Total Enterprise Group | 6,852 | 6,791 | 6,823 | 1 | % | — | % | ||||||||||
Financial Services | 1,010 | 897 | 814 | 13 | % | 24 | % | ||||||||||
Corporate Investments | 3 | — | 58 | — | (95 | %) | |||||||||||
Total segment net revenue | 7,865 | 7,688 | 7,695 | 2 | % | 2 | % | ||||||||||
Elimination of intersegment net revenue and other(b) | (205 | ) | (187 | ) | (371 | ) | 10 | % | (45 | %) | |||||||
Total Hewlett Packard Enterprise consolidated net revenue | $ | 7,660 | $ | 7,501 | $ | 7,324 | 2 | % | 5 | % | |||||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions, except percentages) | |||||||||||
Twelve months ended October 31, | Change (%) | ||||||||||
2017 | 2016 | Y/Y | |||||||||
Net revenue:(a) | |||||||||||
Enterprise Group | |||||||||||
Servers | $ | 12,674 | $ | 13,813 | (8 | %) | |||||
Technology Services | 7,882 | 7,911 | — | % | |||||||
Storage | 3,144 | 3,235 | (3 | %) | |||||||
Networking | 2,511 | 2,820 | (11 | %) | |||||||
Total Enterprise Group | 26,211 | 27,779 | (6 | %) | |||||||
Financial Services | 3,602 | 3,190 | 13 | % | |||||||
Corporate Investments | 3 | 591 | (99 | %) | |||||||
Total segment net revenue | 29,816 | 31,560 | (6 | %) | |||||||
Elimination of intersegment net revenue and other(b) | (945 | ) | (1,280 | ) | (26 | %) | |||||
Total Hewlett Packard Enterprise consolidated net revenue | $ | 28,871 | $ | 30,280 | (5 | %) | |||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY DATA (Unaudited) | |||||||
Three months ended | Change in Operating Margin (pts) | ||||||
October 31, 2017 | Q/Q | Y/Y | |||||
Segment operating margin:(a) | |||||||
Enterprise Group | 10.6 | % | 1.3 pts | (2.7) pts | |||
Financial Services | 7.7 | % | (0.1) pts | (2.5) pts | |||
Corporate Investments(b) | NM | NM | NM | ||||
Total segment operating margin | 9.8 | % | 1.1 pts | (2.3) pts | |||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE (Unaudited) (In millions, except per share amounts) | |||||||||||
Three months ended | |||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | |||||||||
Numerator: | |||||||||||
GAAP net earnings from continuing operations | $ | 378 | $ | 285 | $ | 326 | |||||
GAAP net earnings (loss) from discontinued operations | $ | 146 | $ | (120 | ) | $ | (24 | ) | |||
Non-GAAP net earnings from continuing operations | $ | 473 | $ | 375 | $ | 389 | |||||
Non-GAAP net earnings from discontinued operations | $ | 30 | $ | 122 | $ | 646 | |||||
Denominator: | |||||||||||
Weighted-average shares used to compute basic net earnings per share and diluted net earnings (loss) per share | 1,618 | 1,641 | 1,672 | ||||||||
Dilutive effect of employee stock plans(a) | 29 | 26 | 37 | ||||||||
Weighted-average shares used to compute diluted net earnings per share | 1,647 | 1,667 | 1,709 | ||||||||
GAAP net earnings per share from continuing operations | |||||||||||
Basic | $ | 0.23 | $ | 0.17 | $ | 0.19 | |||||
Diluted(a) | $ | 0.23 | $ | 0.17 | $ | 0.19 | |||||
GAAP net earnings (loss) per share from discontinued operations | |||||||||||
Basic | $ | 0.09 | $ | (0.07 | ) | $ | (0.01 | ) | |||
Diluted(a) | $ | 0.09 | $ | (0.07 | ) | $ | (0.01 | ) | |||
Non-GAAP net earnings per share from continuing operations | |||||||||||
Basic | $ | 0.29 | $ | 0.23 | $ | 0.23 | |||||
Diluted(b) | $ | 0.29 | $ | 0.22 | $ | 0.23 | |||||
Non-GAAP net earnings per share from discontinued operations | |||||||||||
Basic | $ | 0.02 | $ | 0.07 | $ | 0.39 | |||||
Diluted(b) | $ | 0.02 | $ | 0.08 | $ | 0.38 | |||||
Total Hewlett Packard Enterprise GAAP basic net earnings per share | $ | 0.32 | $ | 0.10 | $ | 0.18 | |||||
Total Hewlett Packard Enterprise GAAP diluted net earnings per share | $ | 0.32 | $ | 0.10 | $ | 0.18 | |||||
Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share | $ | 0.31 | $ | 0.30 | $ | 0.62 | |||||
Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share | $ | 0.31 | $ | 0.30 | $ | 0.61 | |||||
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE (Unaudited) (In millions, except per share amounts) | |||||||
Twelve months ended October 31, | |||||||
2017 | 2016 | ||||||
Numerator: | |||||||
GAAP net earnings from continuing operations | $ | 436 | $ | 3,237 | |||
GAAP net loss from discontinued operations | $ | (92 | ) | $ | (76 | ) | |
Non-GAAP net earnings from continuing operations | $ | 1,608 | $ | 1,899 | |||
Non-GAAP net earnings from discontinued operations | $ | 751 | $ | 1,438 | |||
Denominator: | |||||||
Weighted-average shares used to compute basic net earnings (loss) per share and diluted net earnings (loss) per share | 1,646 | 1,715 | |||||
Dilutive effect of employee stock plans(a) | 28 | 24 | |||||
Weighted-average shares used to compute diluted net earnings per share | 1,674 | 1,739 | |||||
GAAP net earnings per share from continuing operations | |||||||
Basic | $ | 0.26 | $ | 1.89 | |||
Diluted(a) | $ | 0.26 | $ | 1.86 | |||
GAAP net loss per share from discontinued operations | |||||||
Basic | $ | (0.05 | ) | $ | (0.05 | ) | |
Diluted(a) | $ | (0.05 | ) | $ | (0.04 | ) | |
Non-GAAP net earnings per share from continuing operations | |||||||
Basic | $ | 0.98 | $ | 1.11 | |||
Diluted(b) | $ | 0.96 | $ | 1.09 | |||
Non-GAAP net earnings per share from discontinued operations | |||||||
Basic | $ | 0.45 | $ | 0.84 | |||
Diluted(b) | $ | 0.45 | $ | 0.83 | |||
Total Hewlett Packard Enterprise GAAP basic net earnings per share | $ | 0.21 | $ | 1.84 | |||
Total Hewlett Packard Enterprise GAAP diluted net earnings per share | $ | 0.21 | $ | 1.82 | |||
Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share | $ | 1.43 | $ | 1.95 | |||
Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share | $ | 1.41 | $ | 1.92 | |||
Use of non-GAAP financial measures
To supplement Hewlett Packard Enterprise’s condensed and consolidated financial statement information presented on a GAAP basis, Hewlett Packard Enterprise provides revenue on a constant currency basis, revenue adjusted for tier-1, divestitures and currency, non-GAAP operating expenses, non-GAAP operating profit, non-GAAP operating margin, non-GAAP income tax rate, non-GAAP net earnings from continuing operations, non-GAAP net (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations, adjusted non-GAAP diluted net earnings per share from continuing operations, non-GAAP diluted net (loss) earnings per share from discontinued operations, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash financial measures. Hewlett Packard Enterprise also provides forecasts of non-GAAP diluted net earnings per share and free cash flow.
These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to revenue on a constant currency basis is revenue. The GAAP measure most directly comparable to revenue adjusted for tier-1, divestitures and currency is revenue. The GAAP measure most directly comparable to non-GAAP operating expense is total costs and expenses. The GAAP measure most directly comparable to non-GAAP operating profit is earnings from operations. The GAAP measure most directly comparable to non-GAAP operating margin is operating 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 from continuing operations is net (loss) earnings from continuing operations. The GAAP measure most directly comparable to non-GAAP net (loss) earnings from discontinued operations is net (loss) earnings from discontinued operations. The GAAP measure most directly comparable to non-GAAP diluted net earnings per share from continuing operations is diluted net (loss) earnings per share from continuing operations. The GAAP measure most directly comparable to adjusted non-GAAP diluted net earnings per share from continuing operations is diluted net (loss) earnings per share from continuing operations. The GAAP measure most directly comparable to non-GAAP diluted net (loss) earnings per share from discontinued operations is diluted net (loss) earnings per share from discontinued operations. 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 capital expenditures is investment in property, plant and equipment. The GAAP measure most directly comparable to net debt and operating company net debt is total company debt. The GAAP measure most directly comparable to each of net cash and operating company net cash is cash and cash equivalents. Reconciliations of each of these non-GAAP financial measures to GAAP information are included in the tables above or elsewhere in the materials accompanying this news release.
Use and economic substance of non-GAAP financial measures used by Hewlett Packard Enterprise
Revenue on a constant currency basis assumes no change in the foreign exchange rate from the prior-year period. Revenue from continuing operations adjusted for tier-1, divestitures and currency excludes revenue related to Tier-1 server sales, revenue resulting from businesses divestitures in fiscal 2017, 2016 and 2015 and also assumes no change in the foreign exchange rate from the prior-year period. Non-GAAP operating expenses, non-GAAP operating profit, and non-GAAP operating margin are defined to exclude the effects of a gain on the MphasiS and H3C divestitures and any charges relating to the amortization of intangible assets, restructuring charges, charges relating to the separation transactions, transformation costs, disaster charges, acquisition and other related charges and defined benefit plan settlement and remeasurement charges. Non-GAAP net earnings from continuing operations and non-GAAP diluted net earnings per share from continuing operations consist of net (loss) earnings or diluted net (loss) earnings per share excluding those same charges and tax valuation allowances and separation taxes, adjustments to loss from equity interest and tax indemnification adjustments and tax settlements. Non-GAAP net (loss) earnings from discontinued operations and non-GAAP diluted net (loss) earnings per share from discontinued operations consist of net (loss) earnings from discontinued operations or diluted net (loss) earnings per share from discontinued operations excluding those same charges, as applicable to discontinued operations. In addition, non-GAAP net earnings from continuing operations, non-GAAP net (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations, adjusted non-GAAP diluted net earnings per share from continuing operations and non-GAAP diluted net (loss) earnings per share from discontinued operations 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:
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:
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 supplement. Hewlett Packard Enterprise also provides a reconciliation of each non-GAAP financial measure to its most directly comparable GAAP measure within this news release and in other written materials that include these non-GAAP financial measures, and Hewlett Packard Enterprise encourages investors to review carefully those reconciliations.
Usefulness of non-GAAP financial measures to investors
Hewlett Packard Enterprise believes that providing revenue on a constant currency basis, revenue adjusted for tier-1, divestitures and currency, non-GAAP operating expenses, non-GAAP operating profit, non-GAAP operating margin, non-GAAP income tax rate, non-GAAP net earnings from continuing operations, non-GAAP net (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations, adjusted non-GAAP diluted net earnings per share from continuing operations and non-GAAP diluted net (loss) earnings per share from discontinued operations, gross cash, free cash flow, net capital expenditures, 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.
Editorial contact
Kate Holderness,
Hewlett Packard Enterprise
corpmediarelations@hpe.com
HPE Investor Relations
Investor.relations@hpe.com