Outlook
For the fiscal 2018 first quarter, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.01 to $0.05 and non-GAAP diluted net EPS to be in the range of $0.20 to $0.24. Fiscal 2018 first quarter non-GAAP diluted net EPS from continuing operations estimates exclude after-tax costs of approximately $0.19 per diluted share, related primarily to transformation costs, separation costs, and the amortization of intangible assets.
Fiscal 2017 fourth quarter segment results
- Enterprise Group revenue was $6.9 billion, flat year over year, up 1% when adjusted for currency, with a 10.6% operating margin. Servers revenue was down 5%, down 5% when adjusted for currency, Storage revenue was up 5%, up 5% when adjusted for currency, Networking revenue was up 21%, up 21% when adjusted for currency, and Technology Services revenue was up 2%, up 3% when adjusted for currency.
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Financial Services revenue was $1.0 billion, up 24% year over year, net portfolio assets were up 1%, and financing volume was flat year over year. The business delivered an operating margin of 7.7%.
Revenue from continuing operations adjusted for divestitures and currency excludes revenue resulting from businesses divestitures in fiscal 2017 and 2016 and also assumes no change in the foreign exchange rate from the prior-year period. A reconciliation of GAAP revenue to revenue adjusted for divestitures and currency is provided in the earnings presentation at investors.hpe.com.
About Hewlett Packard Enterprise
Hewlett Packard Enterprise (HPE) is an industry leading technology company that enables customers to go further, faster. With the industry’s most comprehensive portfolio, spanning the cloud to the data center to workplace applications, our technology and services help customers around the world make IT more efficient, more productive and more secure.
Use of non-GAAP financial information
To supplement Hewlett Packard Enterprise’s condensed and consolidated financial statement information presented on a generally accepted accounting principles (GAAP) basis, Hewlett Packard Enterprise provides revenue on a constant currency basis and revenue adjusted for tier-1, divestitures and currency, as well as non-GAAP operating expense, non-GAAP operating profit, non-GAAP operating margin, non-GAAP income tax rate, non-GAAP net earnings from continuing operations, non-GAAP net (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations, adjusted non-GAAP diluted net earnings per share from continuing operations, non-GAAP diluted net (loss) earnings per share from discontinued operations, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash financial measures. Hewlett Packard Enterprise also provides forecasts of non-GAAP diluted net earnings per share and free cash flow. A reconciliation of adjustments to GAAP financial measures for this quarter and prior periods is included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which Hewlett Packard Enterprise’s management uses these non-GAAP measures to evaluate its business, the substance behind Hewlett Packard Enterprise’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Hewlett Packard Enterprise’s management compensates for those limitations, and the substantive reasons why Hewlett Packard Enterprise’s management believes that these non-GAAP measures provide useful information to investors is included under “Use of non-GAAP financial measures” further below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for revenue, operating profit, operating margin, net earnings from continuing operations, net (loss) earnings from discontinued operations, diluted net earnings per share from continuing operations, diluted net (loss) earnings per share from discontinued operations, cash and cash equivalents, cash flow from operations, investments in property, plant and equipment, or total company debt prepared in accordance with GAAP.
Forward-looking statements
This press release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, including the completed separation transactions, the execution of restructuring plans and any resulting cost savings or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements or assumptions underlying any of the foregoing.
Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise’s businesses; the competitive pressures faced by Hewlett Packard Enterprise’s businesses; risks associated with executing Hewlett Packard Enterprise’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Hewlett Packard Enterprise’s products and the delivery of Hewlett Packard Enterprise’s services effectively; the protection of Hewlett Packard Enterprise’s intellectual property assets, including intellectual property licensed from third parties; risks associated with Hewlett Packard Enterprise’s international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the separation transactions or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of Hewlett Packard Enterprise’s business) and the anticipated benefits of the transactions or of implementing the restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016 and subsequent Quarterly Reports on Form 10-Q.
As in prior periods, the financial information set forth in this press release, including tax-related items, reflects estimates based on information available at this time. While Hewlett Packard Enterprise believes these estimates to be reasonable, these amounts could differ materially from reported amounts in the Hewlett Packard Enterprise Annual Report on Form 10-K for the fiscal year ended October 31, 2017. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements.
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) | |||||||||||
| Three months ended | |||||||||||
|
October 31,
2017 |
July 31,
2017 |
October 31,
2016 | |||||||||
| Net revenue | $ | 7,660 | $ | 7,501 | $ | 7,324 | |||||
| Costs and expenses: | |||||||||||
| Cost of sales | 5,383 | 5,306 | 4,996 | ||||||||
| Research and development | 364 | 390 | 401 | ||||||||
| Selling, general and administrative | 1,288 | 1,285 | 1,253 | ||||||||
| Amortization of intangible assets | 86 | 97 | 57 | ||||||||
| Restructuring charges | 113 | 152 | 128 | ||||||||
| Transformation costs (a) | 328 | 31 | — | ||||||||
| Disaster charges (b) | 93 | — | — | ||||||||
| Acquisition and other related charges | 53 | 56 | 46 | ||||||||
| Separation costs | 202 | 5 | 118 | ||||||||
| Defined benefit plan settlement charges and remeasurement (benefit) (c) | (26 | ) | (22 | ) | — | ||||||
| Gain on H3C and MphasiS divestitures | — | — | (251 | ) | |||||||
| Total costs and expenses | 7,884 | 7,300 | 6,748 | ||||||||
| (Loss) earnings from continuing operations | (224 | ) | 201 | 576 | |||||||
| Interest and other, net | (76 | ) | (87 | ) | (91 | ) | |||||
| Tax indemnification adjustments | (2 | ) | 10 | 311 | |||||||
| Earnings (loss) from equity interests (d) | 1 | 1 | (4 | ) | |||||||
| (Loss) earnings from continuing operations before taxes | (301 | ) | 125 | 792 | |||||||
| Tax valuation allowances and separation taxes (e) | 619 | 189 | — | ||||||||
| Tax settlements | — | — | (647 | ) | |||||||
| Benefit (provision) for taxes | 60 | (29 | ) | 181 | |||||||
| Net earnings from continuing operations | 378 | 285 | 326 | ||||||||
| Net earnings (loss) from discontinued operations | 146 | (120 | ) | (24 | ) | ||||||
| Net earnings | $ | 524 | $ | 165 | $ | 302 | |||||
| Net earnings (loss) per share: | |||||||||||
| Basic | |||||||||||
| Continuing operations | $ | 0.23 | $ | 0.17 | $ | 0.19 | |||||
| Discontinued operations | 0.09 | (0.07 | ) | (0.01 | ) | ||||||
| Total basic net earnings per share | $ | 0.32 | $ | 0.10 | $ | 0.18 | |||||
| Diluted | |||||||||||
| Continuing operations | $ | 0.23 | $ | 0.17 | $ | 0.19 | |||||
| Discontinued operations | 0.09 | (0.07 | ) | (0.01 | ) | ||||||
| Total diluted net earnings per share | $ | 0.32 | $ | 0.10 | $ | 0.18 | |||||
| Cash dividends declared per share | $ | — | $ | 0.065 | $ | — | |||||
| Weighted-average shares used to compute net earnings per share: | |||||||||||
| Basic | 1,618 | 1,641 | 1,672 | ||||||||
| Diluted | 1,647 | 1,667 | 1,709 | ||||||||
- Represents amounts in connection with the HPE Next initiative and includes costs related to labor and non-labor restructuring, program management and IT charges, partially offset by a gain on sale of real estate.
- Represents amounts in connection with damages sustained by the Company as a result of Hurricane Harvey.
- Represents adjustment to net periodic pension cost resulting from remeasurements of the Hewlett Packard Enterprise pension plans in connection with the spin-off of the software business, Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro Focus International plc and the spin-off of the enterprise services business, Everett SpinCo, Inc., and the merger of Everett SpinCo, Inc. with Computer Sciences Corporation.
- Primarily represents the Company’s ownership interest in the net earnings of H3C, which the Company records as an equity method investment.
- Represents tax amounts in connection with the spin-off of the enterprise services business, Everett SpinCo, Inc. and the software business, Seattle SpinCo, Inc. For the three months ended October 31, 2017, this amount primarily includes the income tax benefit related to U.S. foreign tax credits generated.
