HPE reports fiscal 2021 second quarter results

JUNE 1, 2021 • PRESS RELEASE

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Q2 2021 Financial Highlights:

  • Revenue: $6.7 billion, up 11% from the prior-year period or 9% when adjusted for currency with better than normal sequential seasonality driven by strong demand

    • Annualized revenue run-rate (ARR): $678 million, up 30% from the prior-year period

    • Intelligent Edge revenue: $799 million, up 20% from the prior year period or 17% when adjusted for currency

    • HPC & MCS revenue: $685 million, up 13% from the prior-year period or 11% when adjusted for currency

    • Core businesses delivered revenue growth and strong profitability with Compute revenue of $3.0 billion, up 12% from the prior-year period or 10% when adjusted for currency and Storage revenue of $1.1 billion, up 5% from the prior-year period or 3% when adjusted for currency
       
  • Diluted net earnings per share (“EPS”):

    • GAAP of $0.19, above the previously provided outlook of $0.02 to $0.08 per share

    • Non-GAAP of $0.46, up 70% from the prior-year period and above the previously provided outlook of $0.38 to $0.44 per share
       
  • Cash flow from operations of $822 million, up $722 million from the prior-year period

  • Generated free cash flow of $368 million, up $770 million from the prior-year period


Dividend: declared a regular cash dividend of $0.12 per share, payable on July 7, 2021

Outlook:

  • Fiscal 2021 Third quarter: Estimates GAAP diluted net EPS to be in the range of $0.04 to $0.10 and non-GAAP diluted net EPS to be in the range of $0.38 to $0.44

  • Fiscal 2021: Raises GAAP diluted net EPS outlook to $0.60 to $0.72 and non-GAAP diluted net EPS outlook to $1.82 to $1.94

  • Fiscal 2021 free cash flow1: Raises free cash flow guidance to $1.2 to $1.5 billion

Q2 marked by revenue growth, strong profitability and cash flow; raising FY21 EPS and FCF outlook

HOUSTON, Texas June 1, 2021 – Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for the second quarter, ended April 30, 2021.

“Our disciplined execution on our strategic priorities is positively impacting both top and bottom line performance,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “We are strengthening our core compute and storage businesses, doubling down in our growth Intelligent Edge and HPC businesses and accelerating our pivot to as-a-service, while also advancing our cloud-first innovation agenda to become the edge-to-cloud platform as-a-service choice for our customers and partners.”

“As businesses emerge from the pandemic and move beyond the immediate needs of COVID, digital transformation is at the forefront of their strategic initiatives,” said Neri. “Our focus has been to accelerate our strategy in order to help our customers transform their businesses, optimize their applications and data across an increasingly distributed world, and be future ready, today.”

“I am very pleased with our results that are marked by revenue growth, strong profitability and free cash flow,” said Tarek Robbiati, EVP and CFO of Hewlett Packard Enterprise. “The overall demand environment is improving, and we are seeing traction across our portfolio.”

 “We are once again raising our full-year guidance to reflect the continued momentum in the demand environment and our strong operational performance to date,” continued Robbiati. “This marks the third increase in our outlook since our Securities Analyst Meeting last October.” 

Second Quarter Fiscal Year 2021 Results

Net revenue
of $6.7 billion, up 11% from the prior-year period or 9% when adjusted for currency, with better than normal sequential seasonality driven by strong demand.

Annualized revenue run-rate (ARR)
of $678 million, up 30% from the prior-year period and total as-a-Service orders were up 41% from the prior-year period. HPE Aruba Central SaaS platform continued to grow, up triple-digits from the prior-year period. Based on strong customer demand and recent wins, we reiterate our 2020 Securities Analyst Meeting ARR guidance of 30-40% Compounded Annual Growth Rate from fiscal year 2020 to fiscal year 2023.

GAAP gross margins
of 34.1%, up 220 basis points from the prior-year period and Non-GAAP gross margins of 34.3%, up 210 basis points from the prior-year period.

GAAP diluted net earnings per share (“EPS”)
was $0.19, compared to ($0.64) in the prior-year period and above the previously provided outlook of $0.02 to $0.08 per share.

Non-GAAP diluted net EPS
was $0.46, compared to $0.27 in the prior-year period and above the previously provided outlook of $0.38 to $0.44 per share. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $353 million or $0.27 per diluted share, respectively, primarily related to transformation costs, stock-based compensation expense and the amortization of intangible assets.

Cash flow from operations
of approximately $822 million, up $722 million from the prior-year period.

Free cash flow
of $368 million, up $770 million from the prior-year period.

Segment Results

  • Intelligent Edge revenue was $799 million, up 20% from the prior-year period or 17% when adjusted for currency, with 15.5% operating profit margin, compared to 12.3% from the prior-year period. Switching was up 17% from the prior-year period when adjusted for currency, WLAN was up 16% from the prior-year period when adjusted for currency, and Aruba SaaS offering was up triple-digits from the prior-year period and is now a meaningful contributor to HPE’s overall ARR.

  • High Performance Compute & Mission Critical Systems (HPC & MCS) revenue was $685 million, up 13% from the prior-year period or 11% when adjusted for currency, with 2.8% operating profit margin, compared to 7.6% from the prior-year period. We remain on track to achieve our full year and 3-year revenue growth CAGR target of 8% to 12%.

  • Compute revenue was $3.0 billion, up 12% from the prior-year period or up 10% when adjusted for currency, with 11.3% operating profit margin, compared to 5.8% from the prior-year period.  

  • Storage revenue was $1.1 billion, up 5% from the prior-year period or up 3% when adjusted for currency, with 16.8% operating profit margin, compared to 15.7% from the prior-year period. Notable strength in software-defined solutions, including Nimble, up 17% from the prior-year period when adjusted for currency with strong momentum in dHCI growing triple-digits. All flash Arrays grew 20% from the prior-year period led by Primera, up triple-digits from the prior-year period.

  • Financial Services revenue was $839 million, up 1% from the prior-year period or down 3% when adjusted for currency, with 10.8% operating profit margin, compared to 9.2% from the prior-year period. Net portfolio assets were up 3% from the prior-year period or down 2% when adjusted for currency. The business delivered return on equity of 18.3%, up 2.5 points from the prior-year period.

    Dividend

    Board of Directors have declared a regular cash dividend of $0.12 per share on the company's common stock. This dividend, the third in Hewlett Packard Enterprise's fiscal year 2021, is payable on July 7, 2021, to stockholders of record as of the close of business on June 16, 2021.

    Fiscal 2021 third quarter outlook:

    Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.04 to $0.10 and non-GAAP diluted net EPS to be in the range of $0.38 to $0.44. Fiscal 2021 third quarter non-GAAP diluted net EPS estimates exclude after-tax adjustments of approximately $0.34 per diluted share, primarily related to transformation costs, stock-based compensation expense and the amortization of intangible assets.

    Fiscal 2021 outlook:

    Hewlett Packard Enterprise raises GAAP diluted net EPS outlook to $0.60 to $0.72 from $0.48 to $0.66 and non-GAAP diluted net EPS outlook to $1.82 to $1.94 from $1.70 to $1.88. Fiscal 2021 non-GAAP diluted net EPS estimates exclude after-tax adjustments of approximately $1.22 per diluted share, primarily related to transformation costs, stock-based compensation expense and the amortization of intangible assets.

    Raises free cash flow1 guidance range to $1.2 to $1.5 billion from $1.1 to $1.4 billion.

    Download the Q2 FY21 earnings infographic here.


1 Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis, as the company cannot predict some elements that are included in reported GAAP results. Refer to the discussion of non-GAAP financial measures below for more information.

About Hewlett Packard Enterprise

Hewlett Packard Enterprise is the global edge-to-cloud platform as-a-service 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, with a consistent experience across all clouds and edges, to help customers develop new business models, engage in new ways, and increase operational performance. For more information, visit: www.hpe.com.


Editorial contact:

Stefanie Notaney, HPE

stefanie.notaney@hpe.com


Investor contact:

Andrew Simanek

investor.relations@hpe.com

Use of non-GAAP financial information and key performance metrics

To supplement Hewlett Packard Enterprise’s condensed consolidated financial statement information presented on a generally accepted accounting principles (GAAP) basis, Hewlett Packard Enterprise provides revenue on a constant currency basis, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating profit (non-GAAP earnings from operations), non-GAAP operating profit margin, non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, free cash flow, net debt, net cash, operating company net debt and operating company net cash financial measures. Hewlett Packard Enterprise also provides forecasts of non-GAAP diluted net earnings per share and free cash flow. A reconciliation of adjustments to GAAP financial measures for this quarter and prior periods is included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which Hewlett Packard Enterprise’s management uses these non-GAAP measures to evaluate its business, the substance behind Hewlett Packard Enterprise’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Hewlett Packard Enterprise’s management compensates for those limitations, and the substantive reasons why Hewlett Packard Enterprise’s management believes that these non-GAAP measures provide useful information to investors is included under “Use of non-GAAP financial measures” further below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for revenue, gross profit, gross profit margin, operating profit (earnings from operations), operating profit margin, net earnings, diluted net earnings per share, cash, cash equivalents and restricted cash, cash flow from operations, investments in property, plant and equipment, or total company debt prepared in accordance with GAAP.

In addition to the supplemental non-GAAP financial information, Hewlett Packard Enterprise also presents annualized revenue run-rate ("ARR") and as-a-Service ("AAS") orders as performance metrics. ARR is a financial metric used to assess the growth of the Consumption Services ("CS") offerings. ARR represents the annualized value of all recurring net GreenLake services revenue, related financial services revenue (which includes rental income for operating leases and interest income for capital leases), and Software-as-a-Service ("SaaS"), subscription, and other as-a-Service offerings recognized during a quarter and multiplied by four. AAS orders are an overlay across all business segments contributing to HPE's consumption based services (both recurring and non-recurring revenues), and includes hardware, as well as GreenLake as-a-Service, Aruba SaaS, CMS SaaS, and other Software assets. ARR & AAS orders should be viewed independently of net revenue and deferred revenue and are not intended to be combined with any of these items.

Forward-looking statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise Company and its consolidated subsidiaries ("Hewlett Packard Enterprise") may differ materially from those expressed or implied by such forward-looking statements and assumptions. The words "believe", "expect", "anticipate", "optimistic", "intend", "aim", "will", "should" and similar expressions are intended to identify such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to the scope and duration of the novel coronavirus pandemic ("COVID-19") and its impact on our business, operations, liquidity and capital resources, employees, customers, partners, supply chain, financial results and the world economy; any projections of revenue, margins, expenses, investments, effective tax rates, interest rates, the impact of the U.S. Tax Cuts and Jobs Act of 2017 and related guidance or regulations, net earnings, net earnings per share, cash flows, liquidity and capital resources, inventory, goodwill, impairment charges, hedges and derivatives and related offsets, order backlog, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates, repayments of debts including our asset-backed debt securities, or other financial items; any projections of the amount, execution, timing and results of any transformation or impact of cost savings, restructuring plans, including estimates and assumptions related to the anticipated benefits, cost savings, or charges of implementing transformation and restructuring plans; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of corporate transactions or contemplated acquisitions, research and development expenditures, and any resulting benefit, cost savings, charges, or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise's businesses; the competitive pressures faced by Hewlett Packard Enterprise's businesses; risks associated with executing Hewlett Packard Enterprise's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers, the distribution of Hewlett Packard Enterprise's products and the delivery of Hewlett Packard Enterprise's services effectively; the protection of Hewlett Packard Enterprise's intellectual property assets, including intellectual property licensed from third parties and intellectual property shared with its former parent; risks associated with Hewlett Packard Enterprise's international operations (including pandemics and public health problems, such as the outbreak of COVID-19); the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers, clients and partners, including any impact thereon resulting from events such as the COVID-19 pandemic; the hiring and retention of key employees; the execution, integration, and other risks associated with business combination and investment transactions; the impact of changes to environmental, global trade, and other governmental regulations; changes in our product, lease, intellectual property or real estate portfolio; the payment or non-payment of a dividend for any period; the efficacy of using non-GAAP, rather than GAAP, financial measures in business projections and planning; the judgments required in connection with determining revenue recognition; impact of company policies and related compliance; utility of segment realignments; allowances for recovery of receivables and warranty obligations; provisions for, and resolution of, pending investigations, claims and disputes; and other risks that are described herein, including but not limited to the risks described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2020, Current Reports on Form 8-K, and in other filings made by Hewlett Packard Enterprise from time to time with the Securities and Exchange Commission.

As in prior periods, the financial information set forth in this press release, including tax-related items, reflects estimates based on information available at this time. While Hewlett Packard Enterprise believes these estimates to be reasonable, these amounts could differ materially from reported amounts in the Hewlett Packard Enterprise Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2021.  Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements, except as required by applicable law.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In millions, except per share amounts)

 

 

 

Three months ended

 

April 30,
2021

 

January 31, 2021

 

April 30,
2020

Net revenue

$

6,700 

 

 

$

6,833 

 

 

$

6,009 

 

Costs and expenses:

 

 

 

 

 

Cost of sales

4,413 

 

 

4,545 

 

 

4,095 

 

Research and development

503 

 

 

468 

 

 

450 

 

Selling, general and administrative

1,199 

 

 

1,159 

 

 

1,109 

 

Amortization of intangible assets

84 

 

 

110 

 

 

84 

 

Impairment of goodwill

 

— 

 

 

— 

 

 

865 

 

Transformation costs

209 

 

 

311 

 

 

200 

 

Disaster charges

 

 

— 

 

 

22 

 

Acquisition, disposition and other related charges

13 

 

 

18 

 

 

18 

 

Total costs and expenses

6,422 

 

 

6,611 

 

 

6,843 

 

Earnings (loss) from operations

278 

 

 

222 

 

 

(834)

 

Interest and other, net

(11)

 

 

(44)

 

 

(68)

 

Tax indemnification adjustments

— 

 

 

(16)

 

 

(35)

 

Non-service net periodic benefit credit

17 

 

 

17 

 

 

36 

 

Earnings (loss) from equity interests

 

 

26 

 

 

(10)

 

Earnings (loss) before taxes

288 

 

 

205 

 

 

(911)

 

(Provision) benefit from taxes

(29)

 

 

18 

 

 

90 

 

Net earnings (loss)

$

259 

 

 

$

223 

 

 

$

(821)

 

Net earnings (loss) per share:

 

 

 

 

 

Basic

$

0.20 

 

 

$

0.17 

 

 

$

(0.64)

 

Diluted

$

0.19 

 

 

$

0.17 

 

 

$

(0.64)

 

Cash dividends declared per share

$

0.12 

 

 

$

0.12 

 

 

$

0.12 

 

Weighted-average shares used to compute net earnings (loss) per share:

 

 

 

 

 

Basic

1,309 

 

 

1,300 

 

 

1,291 

 

Diluted

1,331 

 

 

1,315 

 

 

1,291 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In millions, except per share amounts)

 

 

 

Six months ended April 30,

 

2021

 

2020

Net revenue

$

13,533 

 

 

$

12,958 

 

Costs and expenses:

 

 

 

Cost of sales

8,958 

 

 

8,762 

 

Research and development

971 

 

 

935 

 

Selling, general and administrative

2,358 

 

 

2,327 

 

Amortization of intangible assets

194 

 

 

204 

 

Impairment of goodwill

— 

 

 

865 

 

Transformation costs

520 

 

 

289 

 

Disaster charges

 

 

22 

 

Acquisition, disposition and other related charges

31 

 

 

40 

 

Total costs and expenses

13,033 

 

 

13,444 

 

Earnings (loss) from operations

500 

 

 

(486)

 

Interest and other, net

(55)

 

 

(87)

 

Tax indemnification adjustments

(16)

 

 

(56)

 

Non-service net periodic benefit credit

34 

 

 

73 

 

Earnings from equity interests

30 

 

 

23 

 

Earnings (loss) before taxes

493 

 

 

(533)

 

(Provision) benefit from taxes

(11)

 

 

45 

 

Net earnings (loss)

$

482 

 

 

$

(488)

 

Net earnings (loss) per share:

 

 

 

Basic

$

0.37 

 

 

$

(0.38)

 

Diluted

$

0.36 

 

 

$

(0.38)

 

Cash dividends declared per share

$

0.24 

 

 

$

0.24 

 

Weighted-average shares used to compute net earnings (loss) per share:

 

 

 

Basic

1,304

 

1,295

Diluted

1,323

 

1,295

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended April 30, 2021

 

Diluted net  earnings per share

 

Three months ended January  31, 2021

 

Diluted net earnings per share

 

Three months ended April 30, 2020

 

Diluted net earnings per share

GAAP net earnings (loss)

$

259 

 

 

$

0.19 

 

 

$

223 

 

 

$

0.17 

 

 

$

(821)

 

 

$

(0.64)

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Amortization of initial direct costs

 

 

— 

 

 

 

 

— 

 

 

 

 

— 

 

Amortization of intangible assets

84 

 

 

0.06 

 

 

110 

 

 

0.08 

 

 

84 

 

 

0.07 

 

Impairment of goodwill

— 

 

 

— 

 

 

— 

 

 

— 

 

 

865 

 

 

0.67 

 

Transformation costs

209 

 

 

0.15 

 

 

311 

 

 

0.23 

 

 

200 

 

 

0.15 

 

Disaster charges

 

 

— 

 

 

— 

 

 

— 

 

 

22 

 

 

0.02 

 

Stock-based compensation expense(a)

98 

 

 

0.08 

 

 

110 

 

 

0.08 

 

 

67 

 

 

0.05 

 

Acquisition, disposition and other related charges

13 

 

 

0.01 

 

 

18 

 

 

0.01 

 

 

25 

 

 

0.02 

 

Tax indemnification adjustments

— 

 

 

— 

 

 

16 

 

 

0.02 

 

 

35 

 

 

0.03 

 

Non-service net periodic benefit credit

(17)

 

 

(0.01)

 

 

(17)

 

 

(0.01)

 

 

(36)

 

 

(0.03)

 

Earnings from equity interests(b)

34 

 

 

0.03 

 

 

34 

 

 

0.03 

 

 

37 

 

 

0.03 

 

Adjustments for taxes

(71)

 

 

(0.05)

 

 

(128)

 

 

(0.09)

 

 

(137)

 

 

(0.10)

 

Non-GAAP net earnings

$

612 

 

 

$

0.46 

 

 

$

679 

 

 

$

0.52 

 

 

$

344 

 

 

$

0.27 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP earnings (loss) from operations

$

278 

 

 

 

 

$

222 

 

 

 

 

$

(834)

 

 

 

Non-GAAP adjustments

 

 

 

 

 

 

 

 

 

 

 

Amortization of initial direct costs

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

84 

 

 

 

 

110 

 

 

 

 

84 

 

 

 

Impairment of goodwill

— 

 

 

 

 

— 

 

 

 

 

865 

 

 

 

Transformation costs

209 

 

 

 

 

311 

 

 

 

 

200 

 

 

 

Disaster charges

 

 

 

 

— 

 

 

 

 

22 

 

 

 

Stock-based compensation expense(a)

98 

 

 

 

 

110 

 

 

 

 

67 

 

 

 

Acquisition, disposition and other related charges

13 

 

 

 

 

18 

 

 

 

 

25 

 

 

 

Non-GAAP earnings from operations

$

685 

 

 

 

 

$

773 

 

 

 

 

$

432 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating profit margin

4.1 

%

 

 

 

3.2 

%

 

 

 

(13.9)

%

 

 

Non-GAAP adjustments

6.1 

%

 

 

 

8.1 

%

 

 

 

21.1 

%

 

 

Non-GAAP operating profit margin

10.2 

%

 

 

 

11.3 

%

 

 

 

7.2 

%

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

 

 

Three months ended April 30, 2021

 

Three months ended January  31, 2021

 

Three months ended April 30, 2020

GAAP net revenue

$

6,700 

 

 

$

6,833 

 

 

$

6,009 

 

GAAP cost of sales

4,413 

 

 

4,545 

 

 

4,095 

 

GAAP gross profit

$

2,287 

 

 

$

2,288 

 

 

$

1,914 

 

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

 

Amortization of initial direct costs

$

 

 

$

 

 

$

 

Acquisition, disposition and other related charges(c)

— 

 

 

— 

 

 

 

Stock-based compensation expense(a)

11 

 

 

13 

 

 

 

Non-GAAP gross profit

$

2,300 

 

 

$

2,303 

 

 

$

1,933 

 

 

 

 

 

 

 

GAAP gross profit margin

34.1 

%

 

33.5 

%

 

31.9 

%

Non-GAAP adjustments

0.2 

%

 

0.2 

%

 

0.3 

%

Non-GAAP gross profit margin

34.3 

%

 

33.7 

%

 

32.2 

%

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

822 

 

 

$

963 

 

 

$

100 

 

Investment in property, plant and equipment

(535)

 

 

(513)

 

 

(591)

 

Proceeds from sale of property, plant and equipment

81 

 

 

113 

 

 

89 

 

Free cash flow

$

368 

 

 

$

563 

 

 

$

(402)

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

 

 

 

 

Six months ended April 30, 2021

 

Diluted net earnings per share

 

Six months ended April 30, 2020

 

Diluted net earnings per share

GAAP net earnings (loss)

$

482 

 

 

$

0.36 

 

 

$

(488)

 

 

$

(0.38)

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Amortization of initial direct costs

 

 

— 

 

 

 

 

— 

 

Amortization of intangible assets

194 

 

 

0.15 

 

 

204 

 

 

0.16 

 

Impairment of goodwill

— 

 

 

— 

 

 

865 

 

 

0.67 

 

Transformation costs

520 

 

 

0.40 

 

 

289 

 

 

0.22 

 

Disaster charges

 

 

— 

 

 

22 

 

 

0.02 

 

Stock-based compensation expense(a)

208 

 

 

0.16 

 

 

160 

 

 

0.12 

 

Acquisition, disposition and other related charges

31 

 

 

0.02 

 

 

67 

 

 

0.05 

 

Tax indemnification adjustments

16 

 

 

0.01 

 

 

56 

 

 

0.04 

 

Non-service net periodic benefit credit

(34)

 

 

(0.03)

 

 

(73)

 

 

(0.06)

 

Earnings from equity interests(b)

68 

 

 

0.05 

 

 

74 

 

 

0.06 

 

Adjustments for taxes

(199)

 

 

(0.14)

 

 

(181)

 

 

(0.13)

 

Non-GAAP net earnings

$

1,291 

 

 

$

0.98 

 

 

$

1,001 

 

 

$

0.77 

 

 

 

 

 

 

 

 

 

GAAP (loss) earnings from operations

$

500 

 

 

 

 

$

(486)

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

 

 

 

Amortization of initial direct costs

 

 

 

 

 

 

 

Amortization of intangible assets

194 

 

 

 

 

204 

 

 

 

Impairment of goodwill

— 

 

 

 

 

865 

 

 

 

Transformation costs

520 

 

 

 

 

289 

 

 

 

Disaster charges

 

 

 

 

22 

 

 

 

Stock-based compensation expense(a)

208 

 

 

 

 

160 

 

 

 

Acquisition, disposition and other related charges

31 

 

 

 

 

67 

 

 

 

Non-GAAP earnings from operations

$

1,458 

 

 

 

 

$

1,127 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating profit  margin

3.7 

%

 

 

 

(3.8)

%

 

 

Non-GAAP adjustments

7.1 

%

 

 

 

12.5 

%

 

 

Non-GAAP operating profit margin

10.8 

%

 

 

 

8.7 

%

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

Six months ended April 30, 2021

 

Six months ended April 30, 2020

GAAP net revenue

$

13,533 

 

 

$

12,958 

 

GAAP cost of sales

8,958 

 

 

8,762 

 

GAAP gross profit

$

4,575 

 

 

$

4,196 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

Amortization of initial direct costs

$

 

 

$

 

Acquisition, disposition and other related charges(c)

— 

 

 

27 

 

Stock-based compensation expense(a)

24 

 

 

22 

 

Non-GAAP gross profit

$

4,603 

 

 

$

4,251 

 

 

 

 

 

GAAP gross profit margin

33.8 

%

 

32.4 

%

Non-GAAP adjustments

0.2 

%

 

0.4 

%

Non-GAAP gross profit margin

34.0 

%

 

32.8 

%

 

 

 

 

Net cash provided by operating activities

$

1,785 

 

 

$

21 

 

Investment in property, plant and equipment

(1,048)

 

 

(1,159)

 

Proceeds from sale of property, plant and equipment

194 

 

 

551 

 

Free cash flow

$

931 

 

 

$

(587)

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except par value)

 

 

 

As of

 

April 30, 2021

 

October 31, 2020

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

4,625 

 

 

$

4,233 

 

Accounts receivable, net of allowances

2,936 

 

 

3,386 

 

Financing receivables, net of allowances

3,845 

 

 

3,794 

 

Inventory

3,117 

 

 

2,674 

 

Assets held for sale

— 

 

 

77 

 

Other current assets

2,180 

 

 

2,392 

 

Total current assets

16,703 

 

 

16,556 

 

Property, plant and equipment

5,480 

 

 

5,625 

 

Long-term financing receivables and other assets

10,770 

 

 

10,544 

 

Investments in equity interests

2,212 

 

 

2,170 

 

Goodwill and intangible assets

18,967 

 

 

19,120 

 

Total assets

$

54,132 

 

 

$

54,015 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Notes payable and short-term borrowings

$

3,531 

 

 

$

3,755 

 

Accounts payable

5,533 

 

 

5,383 

 

Employee compensation and benefits

1,397 

 

 

1,391 

 

Taxes on earnings

133 

 

 

148 

 

Deferred revenue

3,415 

 

 

3,430 

 

Accrued restructuring

233 

 

 

366 

 

Other accrued liabilities

3,738 

 

 

4,265 

 

Total current liabilities

17,980 

 

 

18,738 

 

Long-term debt

12,296 

 

 

12,186 

 

Other non-current liabilities

7,245 

 

 

6,995 

 

Stockholders’ equity

 

 

 

HPE stockholders’ equity:

 

 

 

Preferred stock, $0.01 par value (300 shares authorized; none issued)

— 

 

 

— 

 

Common stock, $0.01 par value (9,600 shares authorized; 1,304 and 1,287 shares issued and outstanding at April 30, 2021 and October 31, 2020, respectively)

13 

 

 

13 

 

Additional paid-in capital

28,538 

 

 

28,350 

 

Accumulated deficit

(8,229)

 

 

(8,375)

 

Accumulated other comprehensive loss

(3,762)

 

 

(3,939)

 

Total HPE stockholders’ equity

16,560 

 

 

16,049 

 

Non-controlling interests

51 

 

 

47 

 

Total stockholders’ equity

16,611 

 

 

16,096 

 

Total liabilities and stockholders’ equity

$

54,132 

 

 

$

54,015 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

 

Three months ended April 30, 2021

 

Six months ended April 30, 2021

Cash flows from operating activities:

 

 

 

Net earnings

$

259 

 

 

$

482 

 

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

639 

 

 

1,313 

 

Stock-based compensation expense

105 

 

 

218 

 

Provision for doubtful accounts and inventory

46 

 

 

98 

 

Restructuring charges

134 

 

 

366 

 

Deferred taxes on earnings

(24)

 

 

(95)

 

Earnings from equity interests

(4)

 

 

(30)

 

Other, net

(3)

 

 

62 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

(14)

 

 

432 

 

Financing receivables

16 

 

 

(104)

 

Inventory

(349)

 

 

(497)

 

Accounts payable

325 

 

 

164 

 

Taxes on earnings

 

 

(30)

 

Restructuring

(104)

 

 

(324)

 

Other assets and liabilities

(208)

 

 

(270)

 

Net cash provided by operating activities

822 

 

 

1,785 

 

Cash flows from investing activities:

 

 

 

Investment in property, plant and equipment

(535)

 

 

(1,048)

 

Proceeds from sale of property, plant and equipment

81 

 

 

194 

 

Purchases of available-for-sale securities and other investments

(12)

 

 

(19)

 

Maturities and sales of available-for-sale securities and other investments

 

 

10 

 

Financial collateral posted

(365)

 

 

(631)

 

Financial collateral received

277 

 

 

297 

 

Payments made in connection with business acquisitions, net of cash acquired

(34)

 

 

(34)

 

Net cash used in investing activities

(579)

 

 

(1,231)

 

Cash flows from financing activities:

 

 

 

Short-term borrowings with original maturities less than 90 days, net

13 

 

 

39 

 

Proceeds from debt, net of issuance costs

1,309 

 

 

1,632 

 

Payment of debt

(1,133)

 

 

(1,744)

 

Net proceeds (payments) related to stock-based award activities

 

 

(27)

 

Contributions from non-controlling interests

— 

 

 

(8)

 

Cash dividends paid

(156)

 

 

(311)

 

Net cash provided by (used in) financing activities

40 

 

 

(419)

 

Increase in cash, cash equivalents and restricted cash

283 

 

 

135 

 

Cash, cash equivalents and restricted cash at beginning of period

4,473 

 

 

4,621 

 

Cash, cash equivalents and restricted cash at end of period

$

4,756 

 

 

$

4,756 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions)

 

 

 

 

 

Three months ended

 

 

April 30,
2021

 

January 31, 2021

 

April 30,
2020

Net revenue:(d)

 

 

 

 

 

 

Compute

 

$

2,976 

 

 

$

2,986 

 

 

$

2,655 

 

HPC & MCS

 

685 

 

 

762 

 

 

607 

 

Storage

 

1,137 

 

 

1,193 

 

 

1,086 

 

Intelligent Edge

 

799 

 

 

806 

 

 

665 

 

Financial Services

 

839 

 

 

860 

 

 

833 

 

Corporate Investments and Other

 

350 

 

 

321 

 

 

328 

 

Total segment net revenue

 

6,786 

 

 

6,928 

 

 

6,174 

 

Elimination of intersegment net revenue

 

(86)

 

 

(95)

 

 

(165)

 

Total Hewlett Packard Enterprise consolidated net revenue

 

$

6,700 

 

 

$

6,833 

 

 

$

6,009 

 

 

 

 

 

 

 

 

Earnings before taxes:(a)(d)

 

 

 

 

 

 

Compute

 

$

335 

 

 

$

342 

 

 

$

155 

 

HPC & MCS

 

19 

 

 

43 

 

 

46 

 

Storage

 

191 

 

 

235 

 

 

171 

 

Intelligent Edge

 

124 

 

 

152 

 

 

82 

 

Financial Services

 

91 

 

 

84 

 

 

77 

 

Corporate Investments and Other

 

(25)

 

 

(31)

 

 

(51)

 

Total segment earnings from operations

 

735 

 

 

825 

 

 

480 

 

 

 

 

 

 

 

 

Unallocated corporate costs and eliminations

 

(50)

 

 

(52)

 

 

(48)

 

Stock-based compensation expense(a)

 

(98)

 

 

(110)

 

 

(67)

 

Amortization of initial direct costs

 

(2)

 

 

(2)

 

 

(3)

 

Amortization of intangible assets

 

(84)

 

 

(110)

 

 

(84)

 

Impairment of goodwill

 

— 

 

 

— 

 

 

(865)

 

Transformation costs

 

(209)

 

 

(311)

 

 

(200)

 

Disaster charges

 

(1)

 

 

— 

 

 

(22)

 

Acquisition, disposition and other related charges

 

(13)

 

 

(18)

 

 

(25)

 

Interest and other, net

 

(11)

 

 

(44)

 

 

(68)

 

Tax indemnification adjustments

 

— 

 

 

(16)

 

 

(35)

 

Non-service net periodic benefit credit

 

17 

 

 

17 

 

 

36 

 

Earnings (loss) from equity interests

 

 

 

26 

 

 

(10)

 

Total Hewlett Packard Enterprise consolidated earnings (loss) before taxes

 

$

288 

 

 

$

205 

 

 

$

(911)

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions)

 

 

 

 

 

Six months ended April 30,

 

 

2021

 

2020

Net revenue:(d)

 

 

 

 

Compute

 

$

5,962 

 

 

$

5,685 

 

HPC & MCS

 

1,447 

 

 

1,446 

 

Storage

 

2,330 

 

 

2,338 

 

Intelligent Edge

 

1,605 

 

 

1,385 

 

Financial Services

 

1,699 

 

 

1,692 

 

Corporate Investments and Other

 

671 

 

 

655 

 

Total segment net revenue

 

13,714 

 

 

13,201 

 

Elimination of intersegment net revenue

 

(181)

 

 

(243)

 

Total Hewlett Packard Enterprise consolidated net revenue

 

$

13,533 

 

 

$

12,958 

 

 

 

 

 

 

Earnings before taxes:(a)(d)

 

 

 

 

Compute

 

$

677 

 

 

$

479 

 

HPC & MCS

 

62 

 

 

109 

 

Storage

 

426 

 

 

422 

 

Intelligent Edge

 

276 

 

 

169 

 

Financial Services

 

175 

 

 

152 

 

Corporate Investments and Other

 

(56)

 

 

(104)

 

Total segment earnings from operations

 

1,560 

 

 

1,227 

 

 

 

 

 

 

Unallocated corporate costs and eliminations

 

(102)

 

 

(100)

 

Stock-based compensation expense(a)

 

(208)

 

 

(160)

 

Amortization of initial direct costs

 

(4)

 

 

(6)

 

Amortization of intangible assets

 

(194)

 

 

(204)

 

Impairment of goodwill

 

— 

 

 

(865)

 

Transformation costs

 

(520)

 

 

(289)

 

Disaster (charges) recovery

 

(1)

 

 

(22)

 

Acquisition, disposition and other related charges

 

(31)

 

 

(67)

 

Interest and other, net

 

(55)

 

 

(87)

 

Tax indemnification adjustments

 

(16)

 

 

(56)

 

Non-service net periodic benefit credit

 

34 

 

 

73 

 

Earnings from equity interests

 

30 

 

 

23 

 

Total Hewlett Packard Enterprise consolidated earnings (loss) before taxes

 

$

493 

 

 

$

(533)

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions, except percentages)

 

 

 

 

 

Three months ended

 

Change (%)

 

April 30, 2021

 

January 31, 2021

 

April 30, 2020

 

Q/Q

 

Y/Y

Net revenue:(d)

 

 

 

 

 

 

 

 

 

Compute

$

2,976 

 

 

$

2,986 

 

 

$

2,655 

 

 

— 

%

 

12 

%

HPC & MCS

685 

 

 

762 

 

 

607 

 

 

(10) 

%

 

13 

%

Storage

1,137 

 

 

1,193 

 

 

1,086 

 

 

(5) 

%

 

%

Intelligent Edge

799 

 

 

806 

 

 

665 

 

 

(1) 

%

 

20 

%

Financial Services

839 

 

 

860 

 

 

833 

 

 

(2) 

%

 

%

Corporate Investments and Other

350 

 

 

321 

 

 

328 

 

 

%

 

%

Total segment net revenue

6,786 

 

 

6,928 

 

 

6,174 

 

 

(2) 

%

 

10 

%

Elimination of intersegment net revenue

(86)

 

 

(95)

 

 

(165)

 

 

(9) 

%

 

(48) 

%

Total Hewlett Packard Enterprise consolidated net revenue

$

6,700 

 

 

$

6,833 

 

 

$

6,009 

 

 

(2) 

%

 

11 

%

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions, except percentages)

 

 

 

Six months ended April 30,

 

2021

 

2020

 

Y/Y

Net revenue:(d)

 

 

 

 

 

Compute

$

5,962 

 

 

$

5,685 

 

 

%

HPC & MCS

1,447 

 

 

1,446 

 

 

— 

%

Storage

2,330 

 

 

2,338 

 

 

— 

%

Intelligent Edge

1,605 

 

 

1,385 

 

 

16 

%

Financial Services

1,699 

 

 

1,692 

 

 

— 

%

Corporate Investments

671 

 

 

655 

 

 

%

Total segment net revenue

13,714 

 

 

13,201 

 

 

%

Elimination of intersegment net revenue

(181)

 

 

(243)

 

 

(26) 

%

Total Hewlett Packard Enterprise consolidated net revenue

$

13,533 

 

 

$

12,958 

 

 

%

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

SEGMENT OPERATING MARGIN SUMMARY DATA

(Unaudited)

 

 

 

 

 

 

 

Three months ended

 

Change in Operating Profit

Margin (pts)

 

 

April 30, 2021

 

Q/Q

 

Y/Y

Segment operating profit margin:(a)(d)

 

 

 

 

 

 

Compute

 

11.3 

%

 

-0.2

 

5.5

HPC & MCS

 

2.8 

%

 

-2.8

 

-4.8

Storage

 

16.8 

%

 

-2.9

 

1.1

Intelligent Edge

 

15.5 

%

 

-3.4

 

3.2

Financial Services

 

10.8 

%

 

1.0

 

1.6

Corporate Investments and Other

 

(7.1) 

%

 

2.6

 

8.4

Total segment operating profit margin

 

10.8 

%

 

-1.1

 

3.0

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE

(Unaudited)

(In millions, except per share amounts)

 

 

 

Three months ended

 

April 30,
2021

 

January 31, 2021

 

April 30,
2020

Numerator:

 

 

 

 

 

GAAP net earnings (loss)

$

259 

 

 

$

223 

 

 

$

(821)

 

Non-GAAP net earnings

$

612 

 

 

$

679 

 

 

$

344 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted-average shares used to compute basic net earnings (loss) per share and diluted net loss per share

1,309 

 

 

1,300 

 

 

1,291 

 

Dilutive effect of employee stock plans

22 

 

 

15 

 

 

 

Weighted-average shares used to compute diluted net earnings per share

1,331 

 

 

1,315 

 

 

1,298 

 

 

 

 

 

 

 

GAAP net earnings (loss) per share

 

 

 

 

 

Basic

$

0.20 

 

 

$

0.17 

 

 

$

(0.64)

 

Diluted

$

0.19 

 

 

$

0.17 

 

 

$

(0.64)

 

 

 

 

 

 

 

Non-GAAP net earnings per share

 

 

 

 

 

Basic

$

0.47 

 

 

$

0.52 

 

 

$

0.27 

 

Diluted

$

0.46 

 

 

$

0.52 

 

 

$

0.27 

 

 

 

 

 

Six  months ended April 30,

 

2021

 

2020

Numerator:

 

 

 

GAAP net earnings (loss)

$

482 

 

 

$

(488)

 

Non-GAAP net earnings

$

1,291 

 

 

$

1,001 

 

 

 

 

 

Denominator:

 

 

 

Weighted-average shares used to compute basic net earnings (loss) per share and diluted net loss per share

1,304 

 

 

1,295 

 

Dilutive effect of employee stock plans

19 

 

 

11 

 

Weighted-average shares used to compute diluted net earnings per share

1,323 

 

 

1,306 

 

 

 

 

 

GAAP net earnings (loss) per share

 

 

 

Basic

$

0.37 

 

 

$

(0.38)

 

Diluted

$

0.36 

 

 

$

(0.38)

 

 

 

 

 

Non-GAAP net earnings per share

 

 

 

Basic

$

0.99 

 

 

$

0.77 

 

Diluted

$

0.98 

 

 

$

0.77 

 

(a)    Effective at the beginning of the first quarter of fiscal 2021, Hewlett Packard Enterprise Company ("the Company") excluded stock-based compensation expense ("Non-GAAP Stock-Based Compensation Adjustment") from its segment earnings from operations and excluded stock-based compensation expense from consolidated non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin, non-GAAP net earnings and non-GAAP net earnings per share. The Company reflected the Non-GAAP Stock-Based Compensation Adjustment to the earliest period presented. This change had no impact on the Company's previously reported consolidated GAAP results.

(b)    Represents the amortization of basis difference adjustments related to the H3C divestiture.

(c)    Acquisition, disposition and other related charges for the three and six months ended April 30, 2020 related to a non-cash inventory fair value adjustment in connection with the acquisition of Cray, Inc., which was included in Cost of sales.

(d)    Effective at the beginning of the first quarter of fiscal 2021, the Company implemented certain organizational changes to align its segment financial reporting more closely with its current business  structure. These organizational changes are: (i) the transfer of the lifecycle event services business, previously reported within the Advisory and Professional Services ("A & PS") reportable segment to Compute, Storage and HPC & MCS reportable segments; (ii) the transfer of certain software and related services business, previously reported within the Compute, Storage and A & PS reportable segments, to the Corporate Investments and Other reportable segment, to form a new Software operating segment; and (iii) the transfer of the remaining A & PS operating segment, previously reported as a separate reportable segment, to the Corporate Investments and Other reportable segment. As a result of these changes, the Corporate Investments and Other Segment now includes the A & PS operating segment, the Communications and Media Solutions operating segment, the Software operating segment, and Hewlett Packard Enterprise Labs which is responsible for research and development.

The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the transfer of net revenue and operating profit for each of the businesses as described above. These changes had no impact on the Company's previously reported consolidated results.

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