- Driven by strong revenue performance due to momentum in
addressing market trends in Edge, Hybrid Cloud, and AI
- Delivered strong full-year cash flow from operations,
record-breaking gross margin and free cash flow
Fiscal 2023 Full-Year Financial Results
- Revenue: $29.1 billion, up 2% and 5.5% in constant
currency(1) from the prior-year period
- Gross margins:
- GAAP of 35.1%, up 170 basis points from the prior-year
period
- Non-GAAP(1) of 35.3%, up 140 basis points from the prior-year
period
- Diluted net earnings per share (“EPS”):
- GAAP of $1.54, up 133% from the prior-year period, which
included a non-cash goodwill impairment charge of $905 million
- Non-GAAP(1) of $2.15, up 6% from the prior-year period, and at
the high-end of the guidance provided at our 2023 Securities
Analyst Meeting
- Cash flow from operations: $4.4 billion, down $165
million from the prior-year period
- Free cash flow(1)(3): $2.2 billion, up $444 million from
the prior-year period
- Capital returns to shareholders: $1.0 billion in the
form of dividends and share repurchases
Fourth Quarter Fiscal 2023 Financial Results
- Revenue: $7.4 billion, down 7% from the prior-year
period and 6% in constant currency(1)
- Annualized revenue run-rate (“ARR”)(2): $1.3 billion, up
39% from the prior-year period and 37% in constant currency(1)
- Gross margins:
- GAAP of 34.8%, up 190 basis points from the prior-year period
and down 100 basis points sequentially
- Non-GAAP(1) of 34.8%, up 170 basis points from the prior-year
period and down 110 basis points sequentially
- Diluted net EPS:
- GAAP of $0.49, up 313% from the prior-year period, which
included a non-cash goodwill impairment charge of $905 million, and
up 40% sequentially, exceeding the high-end of our guidance range
of $0.30 to $0.34
- Non-GAAP(1) of $0.52, down 9% from the prior-year period and up
6% sequentially, at the high-end of our guidance range of $0.48 to
$0.52
- Cash flow from operations: $2.8 billion, a decrease of
$193 million from the prior-year period
- Free cash flow(1)(3): $2.3 billion, up $326 million from
the prior-year period
- Capital returns to shareholders: $209 million in the
form of dividends and share repurchases
Hewlett Packard Enterprise (NYSE: HPE) today announced financial
results for the fourth quarter and full year ended October 31,
2023.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20231128841766/en/
"In fiscal year 2023, HPE clearly demonstrated that our
strategic investments and extraordinary innovation across the
growth areas of Edge, Hybrid Cloud, and AI are resonating with
customers,” said Antonio Neri, president and CEO of Hewlett Packard
Enterprise. “We delivered record performance against key financial
metrics this year. Our steady execution resulted in higher revenue,
further margin expansion, larger operating profit, and
record-breaking non-GAAP diluted net earnings per share and free
cash flow. As we continue to capitalize on growing market
opportunities – particularly as customer interest in AI continues
to explode – I am confident in our ability to deliver substantial
returns to our shareholders, hence why we are raising the dividend
in FY 2024.”
“The progress we’re making aligned to our edge-to-cloud strategy
is evident in our top and bottom-line results,” said Jeremy Cox,
senior vice president and interim CFO of Hewlett Packard
Enterprise. “Given our disciplined execution and focus, we closed
Q4 and fiscal year 2023 strong within an uneven IT market. We see
promising indicators of continued demand in the areas of the market
we are prioritizing, especially in AI.”
Fourth Quarter Fiscal 2023 Segment Results
- Intelligent Edge revenue was $1.4 billion, up 41% from the
prior-year period in actual dollars and 40% in constant
currency(1), with 29.5% operating profit margin, compared to 13.3%
in the prior-year period.
- High Performance Computing & Artificial Intelligence (“HPC
& AI”) revenue was $1.2 billion, up 37% from the prior-year
period in actual dollars and 38% in constant currency(1), with 4.7%
operating profit margin, compared to 3.5% from the prior-year
period.
- Compute revenue was $2.6 billion, down 31% from the prior-year
period in actual dollars and 30% in constant currency(1), with 9.8%
operating profit margin, compared to 14.9% from the prior-year
period.
- Storage revenue was $1.1 billion, down 13% from the prior-year
period in actual dollars and 12% in constant currency(1), with 8.1%
operating profit margin, compared to 15.4% from the prior-year
period.
- Financial Services revenue was $876 million, up 2% from the
prior-year period in actual dollars and flat in constant
currency(1), with 8.9% operating profit margin, compared to 11.1%
from the prior-year period. Net portfolio assets of $13.1 billion,
up 4.3% from the prior-year period in actual dollars and up 2.2% in
constant currency(1). The business delivered return on equity of
15.3%, down 2.7 points from the prior-year period.
Dividend
The HPE Board of Directors declared a regular cash dividend of
$0.13 per share on the company’s common stock, payable on January
11, 2024, to stockholders of record as of the close of business on
December 13, 2023.
Outlook
- Revenue: Estimates first quarter fiscal 2024 revenue to
be in the range of $6.9 billion to $7.3 billion, and reiterates
fiscal 2024 revenue growth to be in the range of 2% to 4% in
constant currency(1)
- ARR(2): Reiterates our 2023 HPE Securities Analyst
Meeting ARR guidance of 35% to 45% Compounded Annual Growth Rate
from fiscal 2022 to fiscal 2026
- Diluted net EPS:
- Estimates first quarter fiscal 2024 GAAP diluted net EPS to be
in the range of $0.24 to $0.32 and non-GAAP diluted net EPS to be
in the range of $0.42 to $0.50. First quarter fiscal 2024 non-GAAP
diluted net EPS estimates exclude after-tax adjustments of $0.18
per share, primarily related to stock-based compensation expense,
amortization of intangible assets, H3C income, transformation costs
and acquisition, disposition and other related charges.
- Estimates fiscal 2024 GAAP diluted net EPS to be in the range
of $1.81 to $2.01 and reiterates non-GAAP diluted net EPS to be in
the range of $1.82 to $2.02. Fiscal 2024 non-GAAP diluted net EPS
estimates exclude after-tax adjustments of $0.01 per share,
primarily related to stock-based compensation expense, amortization
of intangible assets, transformation costs, acquisition,
disposition and other related charges, structural tax rate
adjustments, H3C income, and adjustments related to the sale of
H3C.
- GAAP operating profit growth: Estimates fiscal 2024 GAAP
operating profit growth to be in the range of 15% to 21%
- Non-GAAP operating profit(4) growth:
Estimates fiscal 2024 non-GAAP operating profit growth to be in the
range of 3% to 5%
- Fiscal 2024 free cash flow (1)(3)(5): Reiterates
guidance to be in the range of $1.9 billion to $2.1 billion
- Fiscal 2024 capital returns to shareholders: Returning
approximately 65% - 75% of free cash flow to shareholders in
dividends and share repurchases
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
Non-GAAP operating profit
excludes costs of approximately $0.9 billion primarily related to
stock-based compensation expense, amortization of intangible
assets, transformation costs, and acquisition, disposition and
other related charges.
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, Compute, High Performance Computing & AI, Intelligent
Edge, Software, and Storage, HPE provides a consistent experience
across all clouds and edges, helping customers develop new business
models, engage in new ways, and increase operational performance.
For more information, visit: www.hpe.com.
Use of non-GAAP financial information and key performance
metrics
To supplement Hewlett Packard Enterprise’s condensed
consolidated financial statement information presented on a
generally accepted accounting principles (“GAAP”) basis, Hewlett
Packard Enterprise provides financial measures, including revenue
on a constant currency basis (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. 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 free cash flow.
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", "guides", "will", "estimates", "may",
"could", "should", and similar expressions are intended to identify
such forward-looking statements. All statements other than
statements of historical fact are statements that could be deemed
forward-looking statements, including but not limited to any
anticipated financial or operational benefits associated with the
recent segment realignment; any projections or expectations of
revenue, margins, expenses (including stock-based compensation
expenses), investments, net earnings, net earnings per share, cash
flows, liquidity and capital resources, inventory, order book,
share repurchases, dividends, currency exchange rates, amortization
of intangible assets, or other financial items; any projections or
estimations of orders, including as-a-service orders; any
projections of the amount, execution, timing, and results of any
transformation or impact of cost savings or restructuring plans,
including estimates and assumptions related to the anticipated
benefits, cost savings, or charges of implementing such
transformation and restructuring plans; any statements of the
plans, strategies, and objectives of management for future
operations, as well as the execution and consummation of corporate
transactions or contemplated acquisitions and dispositions
(including but not limited to the disposition of 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 other 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 demand for our
products and services; 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 financial sector
volatility, supply chain constraints, the inflationary environment,
the ongoing conflicts between Russia and Ukraine and between Israel
and Hamas, 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 ongoing 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; 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 the Inflation
Reduction Act of 2022 and related guidance or regulations; and
other risks that are described herein, including but not limited to
the risks described in Hewlett Packard Enterprise’s Annual Report
on Form 10-K for the fiscal year ended October 31, 2022, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and in other
filings made by Hewlett Packard Enterprise from time to time with
the Securities and Exchange Commission.
As in prior periods, the financial information set forth in this
press release, including tax-related items, reflects estimates
based on information available at this time. While Hewlett Packard
Enterprise believes these estimates to be reasonable, these amounts
could differ materially from reported amounts in the Hewlett
Packard Enterprise Annual Report on Form 10-K for the fiscal year
ended October 31, 2023. 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
October 31, 2023
July 31, 2023
October 31, 2022
In millions, except per share
amounts
Net revenue
$
7,351
$
7,002
$
7,871
Costs and Expenses:
Cost of sales
4,792
4,492
5,278
Research and development
578
578
515
Selling, general and administrative
1,332
1,302
1,262
Amortization of intangible assets
72
72
73
Impairment of goodwill(1)
—
—
905
Transformation costs
56
65
184
Disaster (recovery) charges
(4
)
1
(1
)
Acquisition, disposition and other related
charges
18
21
(6
)
Total costs and expenses
6,844
6,531
8,210
Earnings (loss) from operations
507
471
(339
)
Interest and other, net
(27
)
(50
)
(109
)
Tax indemnification and other
adjustments
5
45
(20
)
Non-service net periodic benefit (cost)
credit
(1
)
(3
)
28
Earnings from equity interests
65
73
83
Earnings (loss) before provision for
taxes
549
536
(357
)
(Provision) benefit for taxes
93
(72
)
53
Net earnings (loss)
$
642
$
464
$
(304
)
Net Earnings (Loss) Per Share:
Basic
$
0.50
$
0.36
$
(0.23
)
Diluted
$
0.49
$
0.35
$
(0.23
)
Cash dividends declared per share
$
0.12
$
0.12
$
0.12
Weighted-average Shares Used to Compute
Net Earnings (Loss) Per Share:
Basic
1,295
1,299
1,296
Diluted
1,315
1,316
1,296
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated
Statements of Earnings
(Unaudited)
Year Ended
October 31, 2023
October 31, 2022
In millions, except per share
amounts
Net revenue
$
29,135
$
28,496
Costs and Expenses:
Cost of sales
18,896
18,990
Research and development
2,349
2,045
Selling, general and administrative
5,160
4,941
Amortization of intangible assets
288
293
Impairment of goodwill(1)
—
905
Transformation costs
283
473
Disaster charges
1
48
Acquisition, disposition and other related
charges
69
19
Total costs and expenses
27,046
27,714
Earnings from operations
2,089
782
Interest and other, net
(156
)
(188
)
Tax indemnification and other
adjustments
55
(67
)
Non-service net periodic benefit (cost)
credit
(3
)
134
Earnings from equity interests
245
215
Earnings before provision for taxes
2,230
876
Provision for taxes
(205
)
(8
)
Net earnings
$
2,025
$
868
Net Earnings Per Share:
Basic
$
1.56
$
0.67
Diluted
$
1.54
$
0.66
Cash dividends declared per share
$
0.48
$
0.48
Weighted-average Shares Used to Compute
Net Earnings Per Share:
Basic
1,299
1,303
Diluted
1,316
1,322
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
October 31, 2023
July 31, 2023
October 31, 2022
Dollars in millions
GAAP net revenue
$
7,351
$
7,002
$
7,871
GAAP cost of sales
4,792
4,492
5,278
GAAP gross profit
2,559
2,510
2,593
Non-GAAP Adjustments
Amortization of initial direct costs
—
—
1
Stock-based compensation expense
9
9
8
Disaster recovery
(10
)
(3
)
—
Non-GAAP gross profit
$
2,558
$
2,516
$
2,602
GAAP gross profit margin
34.8
%
35.8
%
32.9
%
Non-GAAP adjustments
—
%
0.1
%
0.2
%
Non-GAAP gross profit margin
34.8
%
35.9
%
33.1
%
Year Ended
October 31, 2023
October 31, 2022
Dollars in millions
GAAP net revenue
$
29,135
$
28,496
GAAP cost of sales
18,896
18,990
GAAP gross profit
$
10,239
$
9,506
Non-GAAP Adjustments
Amortization of initial direct costs
$
—
$
4
Stock-based compensation expense
47
46
Disaster (recovery) charges
(13
)
111
Non-GAAP gross profit
$
10,273
$
9,667
GAAP gross profit margin
35.1
%
33.4
%
Non-GAAP adjustments
0.2
%
0.5
%
Non-GAAP gross profit margin
35.3
%
33.9
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
October 31, 2023
July 31, 2023
October 31, 2022
Dollars in millions
GAAP earnings (loss) from
operations
$
507
$
471
$
(339
)
Non-GAAP Adjustments
Amortization of initial direct costs
—
—
1
Amortization of intangible assets
72
72
73
Impairment of goodwill(1)
—
—
905
Transformation costs
56
65
184
Disaster recovery
(14
)
(2
)
(1
)
Stock-based compensation expense
71
91
85
Acquisition, disposition and other related
charges
18
21
(6
)
Non-GAAP earnings from
operations
$
710
$
718
$
902
GAAP operating profit margin
6.9
%
6.7
%
(4.3
)%
Non-GAAP adjustments
2.8
%
3.6
%
15.8
%
Non-GAAP operating profit
margin
9.7
%
10.3
%
11.5
%
Year Ended
October 31, 2023
October 31, 2022
Dollars in millions
GAAP earnings from operations
$
2,089
$
782
Non-GAAP Adjustments
Amortization of initial direct costs
—
4
Amortization of intangible assets
288
293
Impairment of goodwill(1)
—
905
Transformation costs
283
473
Disaster (recovery) charges
(12
)
159
Stock-based compensation expense
428
391
Acquisition, disposition and other related
charges
69
19
Non-GAAP earnings from
operations
$
3,145
$
3,026
GAAP operating profit margin
7.2
%
2.7
%
Non-GAAP adjustments
3.6
%
7.9
%
Non-GAAP operating profit
margin
10.8
%
10.6
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
October 31, 2023
Diluted net earnings per
share
July 31, 2023
Diluted net earnings per
share
October 31, 2022
Diluted net earnings per
share
Dollars in millions, except
per share amounts
GAAP net earnings (loss)
$
642
$
0.49
$
464
$
0.35
$
(304
)
$
(0.23
)
Non-GAAP Adjustments:
Amortization of initial direct costs
—
—
—
—
1
—
Amortization of intangible assets
72
0.05
72
0.05
73
0.06
Impairment of goodwill(1)
—
—
—
—
905
0.68
Transformation costs
56
0.05
65
0.05
184
0.14
Disaster recovery
(14
)
(0.01
)
(2
)
—
(1
)
—
Stock-based compensation expense
71
0.05
91
0.07
85
0.07
Acquisition, disposition and other related
charges
18
0.01
21
0.02
(6
)
—
Tax indemnification and other
adjustments
(5
)
—
(45
)
(0.03
)
20
0.02
Non-service net periodic benefit cost
(credit)
1
—
3
—
(28
)
(0.02
)
Earnings from equity interests
2
—
2
—
3
—
Impairment of investment
40
0.03
—
—
—
—
Adjustments for taxes
(203
)
(0.15
)
(32
)
(0.02
)
(177
)
(0.15
)
Non-GAAP net earnings
$
680
$
0.52
$
639
$
0.49
$
755
$
0.57
Year Ended
October 31, 2023
Diluted net earnings per
share
October 31, 2022
Diluted net earnings per
share
Dollars in millions, except
per share amounts
GAAP net earnings
$
2,025
$
1.54
$
868
$
0.66
Non-GAAP Adjustments:
Amortization of initial direct costs
—
—
4
—
Amortization of intangible assets
288
0.22
293
0.22
Impairment of goodwill(1)
—
—
905
0.69
Transformation costs
283
0.22
473
0.36
Disaster (recovery) charges
(12
)
(0.01
)
159
0.12
Stock-based compensation expense
428
0.33
391
0.30
Acquisition, disposition and other related
charges
69
0.05
19
0.01
Tax indemnification and other
adjustments
(55
)
(0.04
)
67
0.05
Non-service net periodic benefit cost
(credit)
3
—
(134
)
(0.10
)
Earnings from equity interests(2)
18
0.01
45
0.03
Impairment of investment
40
0.03
—
—
Adjustments for taxes
(255
)
(0.20
)
(426
)
(0.32
)
Non-GAAP net earnings
$
2,832
$
2.15
$
2,664
$
2.02
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP measures
(Unaudited)
For the three months
ended
October 31, 2023
July 31, 2023
October 31, 2022
In millions
Net cash provided by operating
activities
$
2,843
$
1,525
$
3,036
Investment in property, plant and
equipment
(675
)
(671
)
(1,000
)
Proceeds from sale of property, plant and
equipment
255
102
238
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(102
)
(1
)
(279
)
Free cash flow
$
2,321
$
955
$
1,995
Year Ended
October 31, 2023
October 31, 2022
In millions
Net cash provided by operating
activities
$
4,428
$
4,593
Investment in property, plant and
equipment
(2,828
)
(3,122
)
Proceeds from sale of property, plant and
equipment
602
602
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
36
(279
)
Free cash flow
$
2,238
$
1,794
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
As of
October 31, 2023
October 31, 2022
(Unaudited)
(Audited)
In millions, except par
value
ASSETS
Current Assets:
Cash and cash equivalents
$
4,270
$
4,163
Accounts receivable, net of allowances
3,481
4,101
Financing receivables, net of
allowances
3,543
3,522
Inventory
4,607
5,161
Other current assets
3,047
3,559
Total current assets
18,948
20,506
Property, plant and equipment
5,989
5,784
Long-term financing receivables and other
assets
11,377
10,537
Investments in equity interests
2,197
2,160
Goodwill and intangible assets
18,642
18,136
Total assets
$
57,153
$
57,123
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Notes payable and short-term
borrowings
$
4,868
$
4,612
Accounts payable
7,136
8,717
Employee compensation and benefits
1,724
1,401
Taxes on earnings
155
176
Deferred revenue
3,658
3,451
Accrued restructuring
180
192
Other accrued liabilities
4,161
4,625
Total current liabilities
21,882
23,174
Long-term debt
7,487
7,853
Other non-current liabilities
6,546
6,187
Stockholders’ Equity
Common stock, $0.01 par value (9,600
shares authorized; 1,283 and 1,281 shares issued and outstanding as
of October 31, 2023 and October 31, 2022, respectively)
13
13
Additional paid-in capital
28,199
28,299
Accumulated deficit
(3,946
)
(5,350
)
Accumulated other comprehensive loss
(3,084
)
(3,098
)
Total HPE stockholders’ equity
21,182
19,864
Non-controlling interests
56
45
Total stockholders’ equity
21,238
19,909
Total liabilities and stockholders’
equity
$
57,153
$
57,123
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Year Ended
October 31, 2023
October 31, 2022
In millions
Cash Flows from Operating Activities:
Net earnings
$
2,025
$
868
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation and amortization
2,616
2,480
Impairment of goodwill
—
905
Stock-based compensation expense
428
391
Provision for inventory and credit
losses
230
262
Restructuring charges
242
214
Deferred taxes on earnings
(67
)
(249
)
Earnings from equity interests(2)
(245
)
(215
)
Dividends received from equity
investees
200
197
Other, net
31
310
Changes in Operating Assets and
Liabilities, Net of Acquisitions:
Accounts receivable
577
(186
)
Financing receivables
(607
)
694
Inventory
400
(713
)
Accounts payable
(1,655
)
1,707
Taxes on earnings
(34
)
150
Restructuring
(275
)
(334
)
Other assets and liabilities
562
(1,888
)
Net cash provided by operating
activities
4,428
4,593
Cash Flows from Investing Activities:
Investment in property, plant and
equipment
(2,828
)
(3,122
)
Proceeds from sale of property, plant and
equipment
602
602
Purchases of investments
(15
)
(55
)
Proceeds from maturities and sales of
investments
9
262
Financial collateral posted
(1,443
)
(148
)
Financial collateral received
1,152
374
Payments made in connection with business
acquisitions, net of cash acquired
(761
)
—
Net cash used in investing activities
(3,284
)
(2,087
)
Cash Flows from Financing Activities:
Short-term borrowings with original
maturities less than 90 days, net
(47
)
100
Proceeds from debt, net of issuance
costs
4,725
3,296
Payment of debt
(4,887
)
(3,992
)
Cash settlement for derivative hedging
debt
(7
)
(8
)
Net payments related to stock-based award
activities
(106
)
(53
)
Repurchase of common stock
(421
)
(512
)
Cash dividends paid to non-controlling
interests, net of contributions
—
(6
)
Cash dividends paid to shareholders
(619
)
(621
)
Net cash used in financing activities
(1,362
)
(1,796
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
36
(279
)
(Decrease) increase in cash, cash
equivalents and restricted cash
(182
)
431
Cash, cash equivalents and restricted cash
at beginning of period
4,763
4,332
Cash, cash equivalents and restricted cash
at end of period
$
4,581
$
4,763
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the three months
ended
October 31, 2023
July 31, 2023
October 31, 2022
In millions
Net Revenue:
Compute(3)
$
2,595
$
2,624
$
3,768
High Performance Computing &
Artificial Intelligence
1,181
836
862
Storage(3)
1,111
1,074
1,274
Intelligent Edge
1,358
1,415
965
Financial Services
876
873
857
Corporate Investments and other
343
318
303
Total segment net revenue
7,464
7,140
8,029
Elimination of intersegment net
revenue
(113
)
(138
)
(158
)
Total consolidated net revenue
$
7,351
$
7,002
$
7,871
Earnings Before Taxes:
Compute(3)
$
255
$
285
$
560
High Performance Computing &
Artificial Intelligence
55
(7
)
30
Storage(3)
90
115
196
Intelligent Edge
401
420
128
Financial Services
78
73
95
Corporate Investments and other
(32
)
(38
)
(26
)
Total segment earnings from operations
847
848
983
Unallocated corporate costs and
eliminations
(137
)
(130
)
(81
)
Stock-based compensation expense
(71
)
(91
)
(85
)
Amortization of initial direct costs
—
—
(1
)
Amortization of intangible assets
(72
)
(72
)
(73
)
Impairment of goodwill
—
—
(905
)
Transformation costs
(56
)
(65
)
(184
)
Disaster recovery
14
2
1
Acquisition, disposition and other related
charges
(18
)
(21
)
6
Interest and other, net
(27
)
(50
)
(109
)
Tax indemnification and other
adjustments
5
45
(20
)
Non-service net periodic benefit (cost)
credit
(1
)
(3
)
28
Earnings from equity interests
65
73
83
Total pretax earnings (loss)
$
549
$
536
$
(357
)
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
Year Ended
October 31, 2023
October 31, 2022
In millions
Net Revenue:
Compute(3)
$
11,436
$
12,850
High Performance Computing &
Artificial Intelligence
3,913
3,192
Storage(3)
4,415
4,603
Intelligent Edge
5,204
3,674
Financial Services
3,480
3,339
Corporate Investments and other
1,250
1,255
Total segment net revenue
29,698
28,913
Elimination of intersegment net
revenue
(563
)
(417
)
Total consolidated net revenue
$
29,135
$
28,496
Earnings Before Taxes:
Compute(3)
$
1,569
$
1,821
High Performance Computing &
Artificial Intelligence
47
11
Storage(3)
429
641
Intelligent Edge
1,419
549
Financial Services
317
399
Corporate Investments and other
(172
)
(92
)
Total segment earnings from operations
3,609
3,329
Unallocated corporate costs and
eliminations
(464
)
(303
)
Stock-based compensation expense
(428
)
(391
)
Amortization of initial direct costs
—
(4
)
Amortization of intangible assets
(288
)
(293
)
Impairment of goodwill(1)
—
(905
)
Transformation costs
(283
)
(473
)
Disaster recovery (charges)
12
(159
)
Acquisition, disposition and other related
charges
(69
)
(19
)
Interest and other, net
(156
)
(188
)
Tax indemnification and other
adjustments
55
(67
)
Non-service net periodic benefit (cost)
credit
(3
)
134
Earnings from equity interests(2)
245
215
Total consolidated earnings before
taxes
$
2,230
$
876
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Information
(Unaudited)
For the three months
ended
Change (%)
October 31, 2023
July 31, 2023
October 31, 2022
Q/Q
Y/Y
Dollars in millions
Net Revenue:
Compute(3)
$
2,595
$
2,624
$
3,768
(1
%)
(31
%)
High Performance Computing &
Artificial Intelligence
1,181
836
862
41
37
Storage(3)
1,111
1,074
1,274
3
(13
)
Intelligent Edge
1,358
1,415
965
(4
)
41
Financial Services
876
873
857
—
2
Corporate Investments and other
343
318
303
8
13
Total segment net revenue
7,464
7,140
8,029
5
(7
)
Elimination of intersegment net
revenue
(113
)
(138
)
(158
)
(18
)
(29
)
Total consolidated net revenue
$
7,351
$
7,002
$
7,871
5
%
(7
%)
Year Ended
October 31, 2023
October 31, 2022
Y/Y
Dollars in millions
Net Revenue:
Compute(3)
$
11,436
$
12,850
(11
%)
High Performance Computing &
Artificial Intelligence
3,913
3,192
23
Storage(3)
4,415
4,603
(4
)
Intelligent Edge
5,204
3,674
42
Financial Services
3,480
3,339
4
Corporate Investments and other
1,250
1,255
—
Total segment net revenue
29,698
28,913
3
Elimination of intersegment net
revenue
(563
)
(417
)
35
Total consolidated net revenue
$
29,135
$
28,496
2
%
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Segment Operating Margin
Summary Data
(Unaudited)
For the three months
ended
Change in operating profit
margin (pts)
October 31, 2023
July 31, 2023
October 31, 2022
Q/Q
Y/Y
Segment Operating Profit Margin:
Compute(3)
9.8
%
10.9
%
14.9
%
(1.1
)
(5.1
)
High Performance Computing &
Artificial Intelligence
4.7
%
(0.8
)%
3.5
%
5.5
1.2
Storage(3)
8.1
%
10.7
%
15.4
%
(2.6
)
(7.3
)
Intelligent Edge
29.5
%
29.7
%
13.3
%
(0.2
)
16.2
Financial Services
8.9
%
8.4
%
11.1
%
0.5
(2.2
)
Corporate Investments and other
(9.3
%)
(11.9
%)
(8.6
%)
2.6
(0.7
)
Total segment operating profit margin
11.3
%
11.9
%
12.2
%
(0.6
)
(0.9
)
Year Ended
Change in operating profit
margin (pts)
October 31, 2023
October 31, 2022
Y/Y
Segment Operating Profit Margin:
Compute(3)
13.7
%
14.2
%
(0.5
)
High Performance Computing &
Artificial Intelligence
1.2
%
0.3
%
0.9
Storage(3)
9.7
%
13.9
%
(4.2
)
Intelligent Edge
27.3
%
14.9
%
12.4
Financial Services
9.1
%
11.9
%
(2.8
)
Corporate Investments and other
(13.8
%)
(7.3
%)
(6.5
)
Total segment operating profit margin
12.2
%
11.5
%
0.7
HEWLETT PACKARD ENTERPRISE
COMPANY AND SUBSIDIARIES
Calculation of Diluted Net
Earnings Per Share
(Unaudited)
For the three months
ended
October 31, 2023
July 31, 2023
October 31, 2022
In millions, except per share
amounts
Numerator:
GAAP net earnings (loss)
$
642
$
464
$
(304
)
Non-GAAP net earnings
$
680
$
639
$
755
Denominator:
Weighted-average shares used to compute
basic net earnings per share
1,295
1,299
1,296
Dilutive effect of employee stock
plans(4)
20
17
18
Weighted-average shares used to compute
diluted net earnings per share
1,315
1,316
1,314
GAAP Net Earnings (loss) Per Share
Basic
$
0.50
$
0.36
$
(0.23
)
Diluted(4)
$
0.49
$
0.35
$
(0.23
)
Non-GAAP Net Earnings Per Share
Basic
$
0.53
$
0.49
$
0.58
Diluted
$
0.52
$
0.49
$
0.57
Year Ended
October 31, 2023
October 31, 2022
In millions, except per share
amounts
Numerator:
GAAP net earnings
$
2,025
$
868
Non-GAAP net earnings
$
2,832
$
2,664
Denominator:
Weighted-average shares used to compute
basic net earnings per share
1,299
1,303
Dilutive effect of employee stock
plans
17
19
Weighted-average shares used to compute
diluted net earnings per share
1,316
1,322
GAAP Net Earnings Per Share
Basic
$
1.56
$
0.67
Diluted
$
1.54
$
0.66
Non-GAAP Net Earnings Per Share
Basic
$
2.18
$
2.04
Diluted
$
2.15
$
2.02
____________________
(1)
The Company recorded a goodwill
impairment charge of $905 million in the fourth quarter of fiscal
2022 as it was determined that the fair value of the HPC & AI
and Software reporting units was below the carrying value of their
net assets. Software is under the Corporate Investments and Other
reportable segment.
(2)
Represents the amortization of
basis difference adjustments related to H3C. The twelve months
ended October 31, 2023 also included the Company's portion of
intangible asset impairment charges from H3C of $8 million.
(3)
Effective at the beginning of the
first quarter of fiscal 2023, the Company implemented certain
organizational changes to align its segment financial reporting
more closely with its current business structure. This resulted in
the transfer of certain storage networking products, previously
reported within the Storage reportable segment, to the Compute
reportable segment. 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.
(4)
Diluted net earnings per share
reflects any dilutive effect of restricted stock awards, stock
options and performance based awards, but the effect is excluded
when calculating GAAP diluted net loss per share because it would
be anti-dilutive.
Use of non-GAAP financial measures
To supplement Hewlett Packard Enterprise’s condensed
consolidated financial statement information presented on a GAAP
basis, Hewlett Packard Enterprise provides financial measures
including revenue on a constant currency basis (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. 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 free cash flow.
These non-GAAP financial measures are not computed in accordance
with, or as an alternative to, GAAP in the United States. The GAAP
measure most directly comparable to revenue on a constant currency
basis is revenue. The GAAP measure most directly comparable to
non-GAAP gross profit is gross profit. The GAAP measure most
directly comparable to non-GAAP gross profit margin is gross profit
margin. The GAAP measure most directly comparable to non-GAAP
operating profit (non-GAAP earnings from operations) is 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. 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 free cash flow 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 Hewlett Packard
Enterprise’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
Hewlett Packard Enterprise’s 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 past and
future performance of the Company, without the impact of foreign
exchange rates. Non-GAAP gross profit and non-GAAP gross profit
margin are defined to exclude charges relating to the amortization
of initial direct costs, stock-based compensation expense and
disaster charges. Non-GAAP operating profit (non-GAAP earnings from
operations) and non-GAAP operating profit margin (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 those same charges 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 tax indemnification and other
adjustments, non-service net periodic benefit cost (credit),
earnings from equity interests, impairment of investment, 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 these non-GAAP financial measures provides a
supplemental view to management and investors of the consolidated
financial performance of the Company without costs that Hewlett
Packard Enterprise’s management does not believe are 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:
- Amortization of initial direct costs represents the portion of
lease origination costs incurred in prior fiscal years that do not
qualify for capitalization under the new leasing standard. Hewlett
Packard Enterprise excludes these costs as the Company elected the
practical expedient under the new leasing standard. As a result,
the Company did not adjust these historical costs to accumulated
deficit. Hewlett Packard Enterprise believes that most financing
companies did not elect this practical expedient and therefore the
Company excludes these costs. Exclusion of these costs can have an
impact on the equivalent GAAP earnings measure and HPE Financial
Services segment results.
- Hewlett Packard Enterprise incurs charges relating to the
amortization of intangible assets and excludes these charges for
purposes of calculating these non-GAAP measures. Such charges are
significantly impacted by the timing and magnitude of Hewlett
Packard Enterprise’s acquisitions. Consequently, Hewlett Packard
Enterprise excludes these charges for purposes of calculating these
non-GAAP measures, primarily because they are non-cash expenses and
the Company’s internal benchmarking analyses evidence that many
industry participants and peers present non-GAAP financial measures
excluding intangible asset amortization. Amortization of intangible
assets, though not directly affecting Hewlett Packard Enterprise’s
cash position, represents the loss in value of intangible assets
over time and can have a material impact on the equivalent GAAP
earnings measure.
- Transformation costs represent net costs related to the (i) HPE
Next Plan and (ii) Cost Optimization and Prioritization Plan and
include restructuring charges, program design and execution costs,
costs incurred to transform the Company’s IT infrastructure, net
gains from the sale of real estate and any impairment charges on
real-estate identified as part of the initiatives. Hewlett Packard
Enterprise excludes these costs as they are discrete costs related
to two specific transformation programs that were announced in 2017
and 2020, respectively, as multi-year programs necessary to
transform the business and IT infrastructure following material
divestiture transactions in 2017 and in response to COVID-19 and an
evolving product portfolio in fiscal 2020. The primary elements of
the HPE Next and the Cost Optimization and Prioritization Plan have
been substantially completed by October 31, 2023. The exclusion of
the transformation program costs from the non-GAAP measures, as
stated above, is to provide a supplemental measure of the Company’s
operating results that do not include material HPE Next Plan and
Cost Optimization and Prioritization Plan costs as the Company’s
management does not believe such costs to be reflective of the
ongoing operating cost structure. Further, the transformation costs
for these plans have materially fluctuated since 2017, have been
materially declining since 2021 and are not expected to be material
beyond fiscal 2023. Hewlett Packard Enterprises management believes
that non-GAAP measures excluding these costs are useful to
management and investors for comparing operating performance across
multiple periods.
- Disaster charges are primarily related to the exit of the
Company’s businesses in Russia and Belarus and include credit
losses of financing receivables and trade receivables, employee
severance and abandoned assets. Disaster charges also include
direct costs or recovery of these costs related to COVID-19 as a
result of Hewlett Packard Enterprise-hosted, co-hosted, or
sponsored event cancellations and subsequent shift to a virtual
format. Hewlett Packard Enterprise excludes Disaster charges from
these non-GAAP measures as the specific charges are non-recurring
charges and not indicative of the operational performance of the
Company’s business.
- Stock-based compensation expense consists of equity awards
granted based on the estimated fair value of those awards at grant
date. Although stock-based compensation is a key incentive offered
to employees, Hewlett Packard Enterprise excludes these charges for
the purpose of calculating these non-GAAP measures, primarily
because they are non-cash expenses, and internal benchmarking
analyses evidence that many industry participants and competitors
present non-GAAP financial measures excluding stock-based
compensation expense.
- Hewlett Packard Enterprise incurs costs related to its
acquisition, disposition and other related charges. The charges are
direct expenses, such as professional fees and retention costs,
most of which are treated as non-cash or non-capitalized expenses.
Charges may also include expenses associated with disposal
activities including legal and arbitration settlements in
connection with certain dispositions. Hewlett Packard Enterprise
excludes these costs as these expenses are inconsistent in amount
and frequency and are significantly impacted by the timing and
nature of acquisitions and divestitures, and internal benchmarking
analyses evidence that many industry participants and peers present
non-GAAP financial measures excluding stock-based compensation
expense.
- Tax indemnification and other adjustments are primarily related
to changes to certain pre-separation and pre-divestiture tax
liabilities and tax receivables for which Hewlett Packard
Enterprise remains liable on behalf of the separated or divested
business, but which may not be subject to indemnification. Hewlett
Packard Enterprise excludes these income or charges and the
associated tax impact for the purpose of calculating non-GAAP
measures to facilitate an evaluation of Hewlett Packard
Enterprise’s current operating performance and comparisons to
operating performance in prior periods.
- Non-service net periodic benefit cost/credit includes certain
market-related factors such as (i) interest cost, (ii) expected
return on plan assets, (iii) amortization of prior plan amendments,
(iv) amortized actuarial gains or losses, (v) the impacts of any
plan settlements/curtailments and (vi) impacts from other
market-related factors associated with Hewlett Packard Enterprise's
defined benefit pension and post-retirement benefit plans. These
market-driven retirement-related adjustments are primarily due to
the change in pension plan assets and liabilities which are tied to
financial market performance. Hewlett Packard Enterprise excludes
these adjustments for purposes of calculating non-GAAP measures and
considers them to be outside the operational performance of the
business.
- Adjustment to earnings from equity interests includes the
amortization of the basis difference in relation to the H3C
divestiture and the resulting equity method investment in H3C. In
the first fiscal quarter of 2023, this adjustment also included the
Company's portion of intangible asset impairment charges from H3C.
Hewlett Packard Enterprise believes that eliminating this amount
for purposes of calculating non-GAAP measures facilitates the
evaluation of Hewlett Packard Enterprise’s current operating
performance and comparisons to operating performance in prior
periods.
- In the fourth quarter of fiscal 2023, HPE recorded an
impairment charge for an equity investment resulting from a
permanent reduction of the investee’s assets. This adjustment was
reflected in Interest and other, net in the Consolidated Statements
of Earnings. HPE believes eliminating the impairment of investment
for the purposes of calculating non-GAAP measures facilitates the
evaluation of our current operating performance and comparisons to
operating performance in prior periods.
- Hewlett Packard Enterprise utilizes a structural long-term
projected non-GAAP income tax rate in order to provide consistency
across the interim reporting periods and to eliminate the effects
of items not directly related to the Company’s operating structure
that can vary in size and frequency. When projecting this long-term
rate, Hewlett Packard Enterprise evaluated a three-year financial
projection. The projected rate assumes no incremental acquisitions
in the three-year projection period and considers other factors
including Hewlett Packard Enterprise’s expected tax structure, its
tax positions in various jurisdictions and current impacts from key
legislation implemented in major jurisdictions where Hewlett
Packard Enterprise operates. For fiscal 2023 and 2022, the Company
used a non-GAAP income tax rate of 14%. The non-GAAP income tax
rate could be subject to change for a variety of reasons, including
the rapidly evolving global tax environment, significant changes in
Hewlett Packard Enterprise’s geographic earnings mix including due
to acquisition activity, or other changes to the Company’s strategy
or business operations. The Company will re-evaluate its long-term
rate as appropriate. Hewlett Packard Enterprise believes that
making these adjustments for purposes of calculating non-GAAP
measures, facilitates a supplemental evaluation of the Company’s
current operating performance and comparisons to past operating
results.
- Free cash flow (“FCF”) is a non-GAAP measure that is defined as
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. FCF does not represent the total increase or
decrease in cash for the period. Hewlett Packard Enterprise’s
management and investors can use FCF for the purpose of determining
the amount of cash available for investment in the Company’s
businesses, repurchasing stock and other purposes as well as
evaluating historical and prospective liquidity.
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 the
limitations on its use of non-GAAP financial measures by relying
primarily on its GAAP results and using non-GAAP financial measures
only as a supplement. Hewlett Packard Enterprise also provides a
reconciliation of each non-GAAP financial measure to its most
directly comparable GAAP 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/20231128841766/en/
Media Contact: Laura Keller Laura.Keller@hpe.com
Investor Contact: Jeff Kvaal investor.relations@hpe.com
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