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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Hewlett Packard Enterprise Company | NYSE:HPE | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.28 | -1.34% | 20.64 | 21.03 | 20.455 | 20.86 | 19,614,430 | 01:00:00 |
AI systems revenue doubled sequentially, beating Q2 revenue guidance
Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for the second quarter ended April 30, 2024.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240604126605/en/
"HPE delivered very solid results in Q2, exceeding revenue and non-GAAP EPS guidance. AI systems revenue more than doubled from the prior quarter, driven by our strong order book and better conversion from our supply chain,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “Our deep expertise in designing, manufacturing, and running AI systems at scale fueled growth of cumulative AI systems orders to $4.6 billion, with enterprise AI orders representing more than 15%. HPE’s AI advantage, increased HPE GreenLake adoption, and leading infrastructure portfolio, as well as an improved supply chain environment, set us up very well to deliver a strong second half.”
“Stronger AI systems order conversion, prudent cost discipline, and higher-than-expected free cash flow drove a very solid performance in Q2. Because of our robust AI systems order momentum and disciplined execution across our entire portfolio, we are raising our revenue and non-GAAP EPS guidance for the full year,” said Marie Myers, executive vice president and CFO of Hewlett Packard Enterprise. “We are driving profitable growth as we convert customer demand to revenue, particularly for HPE’s AI systems. The long-term trends across hybrid cloud and networking also position us well for the future.”
Second Quarter Fiscal 2024 Financial Results
Second Quarter Fiscal 2024 Segment Results
Dividend
The HPE Board of Directors declared a regular cash dividend of $0.13 per share on the company’s common stock, payable on July 18, 2024, to stockholders of record as of the close of business on June 19, 2024.
Fiscal 2024 Third Quarter Outlook
HPE estimates revenue to be in the range of $7.4 billion to $7.8 billion. HPE estimates GAAP diluted net EPS to be in the range of $0.29 to $0.34 and non-GAAP diluted net EPS(1) to be in the range of $0.43 to $0.48. Fiscal 2024 third quarter non-GAAP diluted net EPS excludes net after-tax costs of approximately $0.14 per diluted share primarily related to stock-based compensation expense, amortization of intangible assets and acquisition, disposition and other related charges.
Fiscal 2024 Outlook
HPE estimates fiscal 2024 revenue growth to grow 1 to 3%, in constant currency(1)(5), and fiscal 2024 GAAP operating profit growth to be in the range of 2% to 6% and non-GAAP operating profit(1)(4) growth to be flat to 2%. HPE estimates GAAP diluted net EPS to be in the range of $1.61 and $1.71 and non-GAAP diluted net EPS(1) to be in the range of $1.85 and $1.95. Fiscal 2024 non-GAAP diluted net EPS estimates exclude net after-tax adjustments of approximately $0.24 per diluted share, primarily related to stock-based compensation expense, acquisition, disposition and other related charges, amortization of intangible assets, structural tax-rate adjustments, adjustments related to the sale of H3C and a portion of the H3C income. HPE estimates free cash flow(1)(3)(5) to be at least $1.9 billion.
1 A description of HPE’s use of non-GAAP financial information is provided below under “Use of non-GAAP financial information and key performance metrics.”
2 Annualized Revenue Run-Rate (“ARR”) is a financial metric used to assess the growth of the Consumption Services offerings. ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-Service, software consumption revenue, and other as-a-Service offerings, recognized during a quarter and multiplied by four. We use ARR as a performance metric. ARR should be viewed independently of net revenue and is not intended to be combined with it.
3 Free cash flow represents cash flow from operations, less net capital expenditures (investments in property, plant & equipment (“PP&E”) less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.
4 FY24 non-GAAP operating profit excludes costs of approximately $1.0B primarily related to stock-based compensation expense, acquisition, disposition and other related charges, amortization of intangible assets, and transformation costs.
5 Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, Hewlett Packard Enterprise is unable to provide a reconciliation to the most directly comparable GAAP financial measure without unreasonable efforts, as the Company cannot predict some elements that are included in such directly comparable GAAP financial measure. These elements could have a material impact on the Company’s reported GAAP results for the guidance period. Refer to the discussion of non-GAAP financial measures below for more information.
About Hewlett Packard Enterprise
Hewlett Packard Enterprise (NYSE: HPE) is the global edge-to-cloud company that helps organizations accelerate outcomes by unlocking value from all of their data, everywhere. Built on decades of reimagining the future and innovating to advance the way people live and work, HPE delivers unique, open and intelligent technology solutions as a service. With offerings spanning Cloud Services, Server, Intelligent Edge, Software, and Hybrid Cloud, 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 (including at the business segment level), 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 earnings from operations as a percentage of net revenue), non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share and free cash flow (“FCF”). Hewlett Packard Enterprise also provides forecasts of revenue growth on a constant currency basis, non-GAAP diluted net earnings per share, non-GAAP operating profit growth, and FCF. Reconciliations of each of these non-GAAP financial measures to their most directly comparable GAAP measures for this quarter and prior periods are 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 supplemental useful information to investors is included 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 (earnings from operations as a percentage of net revenue), net earnings, diluted net earnings per share, and cash flow from operations 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 offerings. ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income for operating leases and interest income from finance 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, storage 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", "guide", "will", "estimate", "may", "could", “aim”, "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 any anticipated financial or operational benefits associated with the recent segment realignment; any projections, estimations, or expectations of addressable markets and their sizes, revenue (including annualized revenue run rate), margins, expenses (including stock-based compensation expenses), investments, effective tax rates, interest rates, investments, net earnings, net earnings per share, cash flows, liquidity and capital resources, inventory, order backlog, share repurchases, dividends, currency exchange rates, repayments of debts, amortization of intangible assets, or other financial items; any projections or estimations of future orders, including as-a-service orders; any statements of the plans, strategies, and objectives of management for future operations, as well as the execution and consummation of corporate transactions or contemplated acquisitions (including but not limited to our proposed acquisition of Juniper Networks, Inc.) and dispositions (including but not limited to the disposition of our H3C shares and the receipt of proceeds therefrom), 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 concerning technological and market trends, the pace of technological innovation, and adoption of new technologies, including artificial intelligence and products and services offered by Hewlett Packard Enterprise; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and our financial performance, including but not limited to supply chain, demand for our products and services, and access to liquidity, and our actions to mitigate such impacts on our business; any statements concerning the relationship between China and the U.S., and our actions in response thereto; any statements of expectation or belief, including those relating to future guidance and the financial performance of Hewlett Packard Enterprise; 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 use and development of artificial intelligence, the inflationary environment, the ongoing conflicts between Russia and Ukraine and in the Middle East, and the relationship between China and the U.S.; 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 public health crises, such as pandemics or epidemics, and geopolitical events, such as, but not limited to, those mentioned above); 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 (including the desirability of a unified hybrid cloud offering); the execution of Hewlett Packard Enterprise’s transformation and mix shift of its portfolio of offerings; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers, clients, and partners, including any impact thereon resulting from macroeconomic or geopolitical events, such as, but not limited to, those mentioned above; the prospect of a shutdown of the U.S. federal government; the hiring and retention of key employees; the execution, integration, consummation, and other risks associated with business combination, disposition, and investment transactions, including but not limited to the risks associated with the disposition of H3C shares and the receipt of proceeds therefrom and completion of our proposed acquisition of Juniper Networks, Inc. and our ability to integrate and implement our plans, forecasts, and other expectations with respect to the consolidated business; the impact of changes to privacy, cybersecurity, 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 tax law changes 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, 2023, 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 filings made by Hewlett Packard Enterprise from time to time with the Securities and Exchange Commission. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements, except as required by applicable law.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
For the three months ended
April 30, 2024
January 31, 2024
April 30, 2023
In millions, except per share amounts
Net revenue
$
7,204
$
6,755
$
6,973
Costs and Expenses:
Cost of sales
4,828
4,298
4,461
Research and development
590
582
570
Selling, general and administrative
1,215
1,216
1,269
Amortization of intangible assets
67
71
71
Transformation costs
33
20
60
Disaster charges
—
—
3
Acquisition, disposition and other related charges
46
43
19
Total costs and expenses
6,779
6,230
6,453
Earnings from operations
425
525
520
Interest and other, net(1)
(22
)
(88
)
(47
)
Earnings from equity interests
42
46
49
Earnings before provision for taxes
445
483
522
Provision for taxes
(131
)
(96
)
(104
)
Net earnings
$
314
$
387
$
418
Net Earnings Per Share:
Basic
$
0.24
$
0.30
$
0.32
Diluted
$
0.24
$
0.29
$
0.32
Cash dividends declared per share
$
0.13
$
0.13
$
0.12
Weighted-average Shares Used to Compute Net Earnings Per Share:
Basic
1,311
1,301
1,304
Diluted
1,325
1,316
1,318
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
For the six months ended
April 30, 2024
April 30, 2023
In millions, except per share amounts
Net revenue
$
13,959
$
14,782
Costs and Expenses:
Cost of sales
9,126
9,612
Research and development
1,172
1,193
Selling, general and administrative
2,431
2,526
Amortization of intangible assets
138
144
Transformation costs
53
162
Disaster charges
—
4
Acquisition, disposition and other related charges
89
30
Total costs and expenses
13,009
13,671
Earnings from operations
950
1,111
Interest and other, net
(110
)
(73
)
Earnings from equity interests
88
107
Earnings before provision for taxes
928
1,145
Provision for taxes
(227
)
(226
)
Net earnings
$
701
$
919
Net Earnings Per Share:
Basic
$
0.54
$
0.71
Diluted
$
0.53
$
0.70
Cash dividends declared per share
$
0.26
$
0.24
Weighted-average Shares Used to Compute Net Earnings Per Share:
Basic
1,306
1,301
Diluted
1,320
1,317
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP measures
(Unaudited)
For the three months ended
April 30, 2024
January 31, 2024
April 30, 2023
Dollars in millions
GAAP net revenue
$
7,204
$
6,755
$
6,973
GAAP cost of sales
4,828
4,298
4,461
GAAP gross profit
2,376
2,457
2,512
Non-GAAP Adjustments
Stock-based compensation expense
14
16
13
Disaster recovery
(7
)
(25
)
—
Non-GAAP gross profit
$
2,383
$
2,448
$
2,525
GAAP gross profit margin
33.0
%
36.4
%
36.0
%
Non-GAAP adjustments
0.1
%
(0.2
)%
0.2
%
Non-GAAP gross profit margin
33.1
%
36.2
%
36.2
%
For the six months ended
April 30, 2024
April 30, 2023
Dollars in millions
GAAP net revenue
$
13,959
$
14,782
GAAP cost of sales
9,126
9,612
GAAP gross profit
$
4,833
$
5,170
Non-GAAP Adjustments
Stock-based compensation expense
30
29
Disaster recovery
(32
)
—
Non-GAAP gross profit
$
4,831
$
5,199
GAAP gross profit margin
34.6
%
35.0
%
Non-GAAP adjustments
—
%
0.2
%
Non-GAAP gross profit margin
34.6
%
35.2
%
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP measures
(Unaudited)
For the three months ended
April 30, 2024
January 31, 2024
April 30, 2023
Dollars in millions
GAAP earnings from operations
$
425
$
525
$
520
Non-GAAP Adjustments
Amortization of intangible assets
67
71
71
Transformation costs
33
20
60
Disaster (recovery) charges
(7
)
(25
)
3
Stock-based compensation expense
120
141
126
Acquisition, disposition and other related charges
46
43
19
Non-GAAP earnings from operations
$
684
$
775
$
799
GAAP operating profit margin
5.9
%
7.8
%
7.5
%
Non-GAAP adjustments
3.6
%
3.7
%
4.0
%
Non-GAAP operating profit margin
9.5
%
11.5
%
11.5
%
For the six months ended
April 30, 2024
April 30, 2023
Dollars in millions
GAAP earnings from operations
$
950
$
1,111
Non-GAAP Adjustments
Amortization of intangible assets
138
144
Transformation costs
53
162
Disaster (recovery) charges
(32
)
4
Stock-based compensation expense
261
266
Acquisition, disposition and other related charges
89
30
Non-GAAP earnings from operations
$
1,459
$
1,717
GAAP operating profit margin
6.8
%
7.5
%
Non-GAAP adjustments
3.7
%
4.1
%
Non-GAAP operating profit margin
10.5
%
11.6
%
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP measures
(Unaudited)
For the three months ended
April 30,
2024
Diluted net
earnings per
share
January 31,
2024
Diluted net
earnings per
share
April 30,
2023
Diluted net
earnings per
share
Dollars in millions, except per share amounts
GAAP net earnings
$
314
$
0.24
$
387
$
0.29
$
418
$
0.32
Non-GAAP Adjustments:
Amortization of intangible assets
67
0.05
71
0.05
71
0.05
Transformation costs
33
0.03
20
0.02
60
0.05
Disaster (recovery) charges
(7
)
(0.01
)
(25
)
(0.02
)
3
—
Stock-based compensation expense
120
0.09
141
0.11
126
0.10
Acquisition, disposition and other related charges
46
0.04
43
0.03
19
0.01
Earnings from equity interests(2)
(42
)
(0.03
)
(46
)
(0.03
)
2
—
Loss on equity investments, net
—
—
61
0.05
—
—
Adjustments for taxes
31
0.02
(16
)
(0.02
)
(7
)
(0.01
)
Other adjustments(3)
(1
)
(0.01
)
2
—
(7
)
—
Non-GAAP net earnings
$
561
$
0.42
$
638
$
0.48
$
685
$
0.52
For the six months ended
April 30,
2024
Diluted net
earnings per
share
April 30,
2023
Diluted net
earnings per
share
Dollars in millions, except per share amounts
GAAP net earnings
$
701
$
0.53
$
919
$
0.70
Non-GAAP Adjustments:
Amortization of intangible assets
138
0.10
144
0.11
Transformation costs
53
0.04
162
0.12
Disaster (recovery) charges
(32
)
(0.02
)
4
—
Stock-based compensation expense
261
0.20
266
0.21
Acquisition, disposition and other related charges
89
0.07
30
0.02
Earnings from equity interests(2)
(88
)
(0.07
)
14
0.01
Loss on equity investments, net
61
0.05
—
—
Adjustments for taxes
15
0.01
(20
)
(0.02
)
Other adjustments(3)
1
—
(6
)
—
Non-GAAP net earnings
$
1,199
$
0.91
$
1,513
$
1.15
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP measures
(Unaudited)
For the three months ended
April 30, 2024
January 31, 2024
April 30, 2023
In millions
Net cash provided by operating activities
$
1,093
$
64
$
889
Investment in property, plant and equipment
(560
)
(656
)
(688
)
Proceeds from sale of property, plant and equipment
122
96
86
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(45
)
14
1
Free cash flow
$
610
$
(482
)
$
288
For the six months ended
April 30, 2024
April 30, 2023
In millions
Net cash provided by operating activities
$
1,157
$
60
Investment in property, plant and equipment
(1,216
)
(1,482
)
Proceeds from sale of property, plant and equipment
218
245
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(31
)
139
Free cash flow
$
128
$
(1,038
)
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of
April 30, 2024
October 31, 2023
(Unaudited)
(Audited)
In millions, except par value
ASSETS
Current Assets:
Cash and cash equivalents
$
2,676
$
4,270
Accounts receivable, net of allowances
3,840
3,481
Financing receivables, net of allowances
3,646
3,543
Inventory
7,326
4,607
Other current assets
3,939
3,047
Total current assets
21,427
18,948
Property, plant and equipment, net
5,817
5,989
Long-term financing receivables and other assets
11,673
11,377
Investments in equity interests
2,291
2,197
Goodwill and intangible assets
18,503
18,642
Total assets
$
59,711
$
57,153
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable and short-term borrowings
$
3,767
$
4,868
Accounts payable
10,119
7,136
Employee compensation and benefits
1,084
1,724
Taxes on earnings
181
155
Deferred revenue
3,783
3,658
Accrued restructuring
97
180
Other accrued liabilities
4,719
4,161
Total current liabilities
23,750
21,882
Long-term debt
7,490
7,487
Other non-current liabilities
6,737
6,546
Stockholders’ Equity
Common stock, $0.01 par value (9,600 shares authorized; 1,298 and 1,283 shares issued and outstanding as of April 30, 2024 and October 31, 2023, respectively)
13
13
Additional paid-in capital
28,308
28,199
Accumulated deficit
(3,583
)
(3,946
)
Accumulated other comprehensive loss
(3,058
)
(3,084
)
Total HPE stockholders’ equity
21,680
21,182
Non-controlling interests
54
56
Total stockholders’ equity
21,734
21,238
Total liabilities and stockholders’ equity
$
59,711
$
57,153
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the six months ended
April 30, 2024
April 30, 2023
In millions
Cash Flows from Operating Activities:
Net earnings
$
701
$
919
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation and amortization
1,299
1,307
Stock-based compensation expense
261
266
Provision for inventory and credit losses
113
97
Restructuring charges
18
95
Deferred taxes on earnings
—
69
Earnings from equity interests
(88
)
(107
)
Other, net
128
(11
)
Changes in Operating Assets and Liabilities, Net of Acquisitions:
Accounts receivable
(376
)
370
Financing receivables
(327
)
(666
)
Inventory
(2,808
)
782
Accounts payable
3,026
(3,220
)
Taxes on earnings
95
(1
)
Restructuring
(121
)
(147
)
Other assets and liabilities
(764
)
307
Net cash provided by operating activities
1,157
60
Cash Flows from Investing Activities:
Investment in property, plant and equipment
(1,216
)
(1,482
)
Proceeds from sale of property, plant and equipment
218
245
Purchases of investments
(16
)
(5
)
Proceeds from maturities and sales of investments
5
4
Financial collateral posted
(499
)
(1,009
)
Financial collateral received
401
483
Payments made in connection with business acquisitions, net of cash acquired
—
(406
)
Net cash used in investing activities
(1,107
)
(2,170
)
Cash Flows from Financing Activities:
Short-term borrowings with original maturities less than 90 days, net
(45
)
344
Proceeds from debt, net of issuance costs
1,075
2,845
Payment of debt
(2,218
)
(2,428
)
Cash settlement for derivative hedging debt
—
(2
)
Net payments related to stock-based award activities
(94
)
(106
)
Repurchase of common stock
(48
)
(179
)
Cash dividends paid to non-controlling interests, net of contributions
(8
)
—
Cash dividends paid to shareholders
(338
)
(311
)
Net cash (used in) provided by financing activities
(1,676
)
163
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(31
)
139
Decrease in cash, cash equivalents and restricted cash
(1,657
)
(1,808
)
Cash, cash equivalents and restricted cash at beginning of period
4,581
4,763
Cash, cash equivalents and restricted cash at end of period
$
2,924
$
2,955
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the three months ended
April 30, 2024
January 31, 2024
April 30, 2023
In millions
Net Revenue:
Server(4)
$
3,867
$
3,352
$
3,287
Hybrid Cloud(4)
1,256
1,248
1,371
Intelligent Edge(4)
1,086
1,201
1,344
Financial Services
867
873
858
Corporate Investments and other(4)
252
238
242
Total segment net revenue
7,328
6,912
7,102
Elimination of intersegment net revenue
(124
)
(157
)
(129
)
Total consolidated net revenue
$
7,204
$
6,755
$
6,973
Earnings Before Taxes(4):
Server
$
426
$
383
$
473
Hybrid Cloud
10
47
26
Intelligent Edge
237
353
332
Financial Services
81
74
76
Corporate Investments and other
(9
)
(10
)
(19
)
Total segment earnings from operations
745
847
888
Unallocated corporate costs and eliminations
(61
)
(72
)
(89
)
Stock-based compensation expense
(120
)
(141
)
(126
)
Amortization of intangible assets
(67
)
(71
)
(71
)
Transformation costs
(33
)
(20
)
(60
)
Disaster recovery (charges)
7
25
(3
)
Acquisition, disposition and other related charges
(46
)
(43
)
(19
)
Interest and other, net(1)
(22
)
(88
)
(47
)
Earnings from equity interests
42
46
49
Total pretax earnings
$
445
$
483
$
522
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the six months ended
April 30, 2024
April 30, 2023
In millions
Net Revenue:
Server(4)
$
7,219
$
7,619
Hybrid Cloud(4)
2,504
2,755
Intelligent Edge(4)
2,287
2,513
Financial Services
1,740
1,731
Corporate Investments and other(4)
490
476
Total segment net revenue
14,240
15,094
Elimination of intersegment net revenue
(281
)
(312
)
Total consolidated net revenue
$
13,959
$
14,782
Earnings Before Taxes(4):
Server
$
809
$
1,151
Hybrid Cloud
57
106
Intelligent Edge
590
559
Financial Services
155
139
Corporate Investments and other
(19
)
(41
)
Total segment earnings from operations
1,592
1,914
Unallocated corporate costs and eliminations
(133
)
(197
)
Stock-based compensation expense
(261
)
(266
)
Amortization of intangible assets
(138
)
(144
)
Transformation costs
(53
)
(162
)
Disaster recovery (charges)
32
(4
)
Acquisition, disposition and other related charges
(89
)
(30
)
Interest and other, net(1)
(110
)
(73
)
Earnings from equity interests
88
107
Total consolidated earnings before taxes
$
928
$
1,145
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the three months ended
Change (%)
April 30, 2024
January 31, 2024
April 30, 2023
Q/Q
Y/Y
Dollars in millions
Net Revenue:
Server(4)
$
3,867
$
3,352
$
3,287
15
%
18
%
Hybrid Cloud(4)
1,256
1,248
1,371
1
(8
)
Intelligent Edge(4)
1,086
1,201
1,344
(10
)
(19
)
Financial Services
867
873
858
(1
)
1
Corporate Investments and other(4)
252
238
242
6
4
Total segment net revenue
7,328
6,912
7,102
6
3
Elimination of intersegment net revenue
(124
)
(157
)
(129
)
(21
)
(4
)
Total consolidated net revenue
$
7,204
$
6,755
$
6,973
7
%
3
%
For the six months ended
April 30, 2024
April 30, 2023
Y/Y
Dollars in millions
Net Revenue:
Server(4)
$
7,219
$
7,619
(5
%)
Hybrid Cloud(4)
2,504
2,755
(9
)
Intelligent Edge(4)
2,287
2,513
(9
)
Financial Services
1,740
1,731
1
Corporate Investments and other(4)
490
476
3
Total segment net revenue
14,240
15,094
(6
)
Elimination of intersegment net revenue
(281
)
(312
)
(10
)
Total consolidated net revenue
$
13,959
$
14,782
(6
%)
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Segment Operating Margin Summary Data
(Unaudited)
For the three months ended
Change in operating
profit margin (pts)
April 30, 2024
January 31, 2024
April 30, 2023
Q/Q
Y/Y
Segment Operating Profit Margin(4):
Server
11.0
%
11.4
%
14.4
%
(0.4
)
(3.4
)
Hybrid Cloud
0.8
%
3.8
%
1.9
%
(3.0
)
(1.1
)
Intelligent Edge
21.8
%
29.4
%
24.7
%
(7.6
)
(2.9
)
Financial Services
9.3
%
8.5
%
8.9
%
0.8
0.4
Corporate Investments and other
(3.6
%)
(4.2
%)
(7.9
%)
0.6
4.3
Total segment operating profit margin
10.2
%
12.3
%
12.5
%
(2.1
)
(2.3
)
For the six months ended
Change in operating
profit margin (pts)
April 30, 2024
April 30, 2023
Y/Y
Segment Operating Profit Margin(4):
Server
11.2
%
15.1
%
(3.9
)
Hybrid Cloud
2.3
%
3.8
%
(1.5
)
Intelligent Edge
25.8
%
22.2
%
3.6
Financial Services
8.9
%
8.0
%
0.9
Corporate Investments and other
(3.9
%)
(8.6
%)
4.7
Total segment operating profit margin
11.2
%
12.7
%
(1.5
)
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Calculation of Diluted Net Earnings Per Share
(Unaudited)
For the three months ended
April 30, 2024
January 31, 2024
April 30, 2023
In millions, except per share amounts
Numerator:
GAAP net earnings
$
314
$
387
$
418
Non-GAAP net earnings
$
561
$
638
$
685
Denominator:
Weighted-average shares used to compute basic net earnings per share
1,311
1,301
1,304
Dilutive effect of employee stock plans
14
15
14
Weighted-average shares used to compute diluted net earnings per share
1,325
1,316
1,318
GAAP Net Earnings Per Share
Basic
$
0.24
$
0.30
$
0.32
Diluted
$
0.24
$
0.29
$
0.32
Non-GAAP Net Earnings Per Share
Basic
$
0.43
$
0.49
$
0.53
Diluted
$
0.42
$
0.48
$
0.52
For the six months ended
April 30, 2024
April 30, 2023
In millions, except per share amounts
Numerator:
GAAP net earnings
$
701
$
919
Non-GAAP net earnings
$
1,199
$
1,513
Denominator:
Weighted-average shares used to compute basic net earnings per share
1,306
1,301
Dilutive effect of employee stock plans
14
16
Weighted-average shares used to compute diluted net earnings per share
1,320
1,317
GAAP Net Earnings Per Share
Basic
$
0.54
$
0.71
Diluted
$
0.53
$
0.70
Non-GAAP Net Earnings Per Share
Basic
$
0.92
$
1.16
Diluted
$
0.91
$
1.15
(1)
Interest and other, net includes tax indemnification and other adjustments, non-service net periodic benefit cost, and interest and other, net.
(2)
For the three and six months ended April 30, 2024, includes the equity in earnings from H3C equity method investment and all periods include the amortization of the basis difference in the Company’s investment.
(3)
Other adjustments includes non-service net periodic benefit cost and tax indemnification and other adjustments.
(4)
As previously disclosed, effective as of the beginning of the first quarter of fiscal 2024, in order to align the segment financial reporting more closely with its business structure, the Company established two new reportable segments, Hybrid Cloud and Server. Hybrid Cloud includes the historical Storage segment, HPE GreenLake Flex Solutions (which provides flexible as-a-service IT infrastructure through the HPE GreenLake edge-to-cloud platform and was previously reported under the Compute and the High Performance Computing & Artificial Intelligence ("HPC & AI") segments), Private Cloud, and Software (previously reported under the Corporate Investments and Other segment). The Server segment combines the previously separately reported Compute and HPC & AI segments, with adjustments for certain product lines that are now reported in Hybrid Cloud. Additionally, certain products and services previously reported in the financial results for the HPC & AI segment were moved to be reported in the Hybrid Cloud segment, and the Athonet business and certain components of the Communications and Media Solutions business, both previously reported in the financial results for Corporate Investments and Other, moved to be reported in the Intelligent Edge segment.
As a result, the Company’s new organizational structure consists of the following segments: (i) Server; (ii) Hybrid Cloud; (iii) Intelligent Edge; (iv) Financial Services; and (v) Corporate Investments and Other. The Company began reporting under this re-aligned segment structure beginning with the results of the first quarter of fiscal 2024.
The Company has reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the realignment of net revenue and operating profit for each of the segments as described above. These changes had no impact on Hewlett Packard Enterprise’s previously reported consolidated net revenue, net earnings, net earnings per share or total assets.
Use of non-GAAP financial measures
To supplement Hewlett Packard Enterprise’s condensed consolidated financial statement information presented on a GAAP basis, Hewlett Packard Enterprise provides non-GAAP financial measures including revenue on a constant currency basis (including at the business segment level), 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 earnings from operations as a percentage of net revenue), non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, and FCF. Hewlett Packard Enterprise also provides forecasts of revenue growth on a constant currency basis, non-GAAP diluted net earnings per share, non-GAAP operating profit growth, and FCF.
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 net revenue on a constant currency basis is net 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 earnings from operations. The GAAP measure most directly comparable to non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue) is operating profit margin (earnings from operations 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 FCF is cash flow from operations. Reconciliations of each of these non-GAAP financial measures to their most directly comparable GAAP measures for this quarter and prior periods are included in the tables above or elsewhere in the materials accompanying this news release.
Usefulness of non-GAAP financial measures to investors
Hewlett Packard Enterprise believes that providing the non-GAAP financial measures stated above, 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 provides Hewlett Packard Enterprise’s investors with a supplemental view to understand the Company’s historical and prospective 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 the comparisons of Hewlett Packard Enterprise’s operating performance with the performance of other companies in the same industry that supplement their GAAP results with non-GAAP financial measures that may be calculated in a similar manner.
Economic substance of and material limitations associated with non-GAAP financial measures used by Hewlett Packard Enterprise
Net revenue on a constant currency basis assumes no change to the foreign exchange rate utilized in the comparable prior-year period. This measure assists investors with evaluating the Company’s past and future performance, without the impact of foreign exchange rates, as more than half of our revenue is generated outside of the U.S. Non-GAAP gross profit and non-GAAP gross profit margin are defined to exclude charges related to the stock-based compensation expense, and disaster (recovery) charges. Non-GAAP operating profit (non-GAAP earnings from operations) and non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue) consist of earnings from operations or earnings from operations as a percentage of net revenue excluding the items mentioned above and charges relating to the amortization of intangible assets, transformation costs, 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 the charges previously stated, as well as earnings from equity interests, gain or loss on equity investments, other adjustments, and adjustments for taxes. The Adjustments for taxes line item includes certain income tax valuation allowances and separation taxes, the impact of tax reform, structural rate adjustment, excess tax benefit from stock-based compensation, and adjustments for additional taxes or tax benefits associated with each non-GAAP item.
Hewlett Packard Enterprise believes that excluding the items mentioned above from the non-GAAP financial measures provides a supplemental view to management and investors of its consolidated financial performance and presents the financial results of the business without costs that Hewlett Packard Enterprise’s management does not believe to be reflective of ongoing operating results. Exclusion of these items can have a material impact on the equivalent GAAP measure and cash flows thus limiting their use as analytical tools. These limitations are discussed below or elsewhere in the materials accompanying this news release. More specifically, Hewlett Packard Enterprise’s management excludes each of those items mentioned above for the following reasons:
Compensation for material limitations with use of non-GAAP financial measures
These non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of Hewlett Packard Enterprise’s results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are that they can have a material impact on the equivalent GAAP earnings measures and cash flows, they may be calculated differently by other companies (limiting the usefulness of those measures for comparative purposes) and may not reflect the full economic effect of the loss in value of certain assets. Hewlett Packard Enterprise compensates for these limitations on the 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 financial measure for this quarter and prior periods 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240604126605/en/
Media Contact: Laura Keller Laura.Keller@hpe.com
Investor Contact: Jeff Kvaal investor.relations@hpe.com
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