01—Abstract
Summary
Summary of the 10-K filed December 17, 2015. Cited figures are marked; the original filing is the authoritative source.
Hewlett Packard Enterprise (HPE) completed its separation from Hewlett-Packard Company (HP Inc.) on November 1, 2015, emerging as an independent, publicly traded entity.
The company's fiscal year 2015 results reflect the significant impact of this separation, including substantial separation costs. HPE operates across five segments: Enterprise Group (EG), Enterprise Services (ES), Software, Financial Services (FS), and Corporate Investments. While EG saw a slight revenue increase driven by ISS and the Aruba acquisition, overall HPE revenue declined due to challenges in ES (contract runoff, soft demand) and Software (shift to SaaS).
Gross margins improved slightly year-over-year, driven by ES efficiencies, but operating margins contracted due to increased separation costs, R&D investments, and asset impairments. The company ended fiscal year 2015 with a strong cash position, significantly bolstered by debt financing activities undertaken in preparation for the separation.
02—Key points
Key Highlights
- HPE became an independent publicly traded company on November 1, 2015, following its separation from HP Inc.
- Total net revenue for fiscal year 2015 decreased by 5.5% (flat on a constant currency basis) compared to fiscal year 2014.
- The Enterprise Group (EG) segment experienced a 0.6% increase in net revenue, primarily driven by Industry Standard Servers (ISS) and the acquisition of Aruba Networks.
- Enterprise Services (ES) revenue declined by 11.6% due to contract runoff, soft demand, and unfavorable currency impacts.
- Software segment revenue decreased by 7.9%, attributed to the market shift towards SaaS and go-to-market execution challenges.
- HPE ended fiscal year 2015 with a robust cash and cash equivalents balance of $9.8 billion, a significant increase from the prior year, largely due to capital raised through senior notes.
- The company incurred substantial separation costs totaling $797 million in fiscal year 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Hewlett Packard Enterprise Co kept $0.08.
- Revenue$31.08B100.0%
- Cost of revenue−$13.29B42.8%
- Gross profit$17.78B57.2%
- Operating costs−$15.84B51.0%
- Operating income$1.95B6.3%
- Interest, other & tax$515.0M1.7%
- Net income$2.46B7.9%
Where FY2015 revenue went
$31.08B- Cost of revenue: $13.29B, 43% of revenue
- Other operating costs: $9.02B, 29% of revenue
- SG&A: $5.14B, 17% of revenue
- Operating income: $1.95B, 6.3% of revenue
- R&D: $1.68B, 5.4% of revenue
Kept 6.3% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed December 17, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $31.08B$55.12B | −43.6% |
| Cost of Revenue | $13.29B$12.39B | +7.3% |
| Gross Profit | $17.78B$42.73B | −58.4% |
| R&D Expenses | $1.68B$2.20B | −23.7% |
| SG&A Expenses | $5.14B$8.72B | −41.0% |
| Operating Expenses | $29.13B$52.79B | −44.8% |
| Operating Income | $1.95B$2.33B | −16.7% |
| Interest Expense | $249.00M$322.00M | −22.7% |
| Net Income | $2.46B$1.65B | +49.3% |
| EPS (Basic) | $1.36$0.91 | +49.5% |
| EPS (Diluted) | $1.34$0.90 | +48.9% |
| Shares Outstanding (Basic) | 1.80B— | — |
| Shares Outstanding (Diluted) | 1.83B1.83B | 0.0% |
05—Questions
Frequently Asked Questions
What was the primary event impacting HPE's financial reporting for fiscal year 2015?
The primary event was the separation from HP Inc. (formerly Hewlett-Packard Company) on November 1, 2015, which resulted in HPE becoming an independent, publicly traded company. This event led to significant separation costs and impacts on the financial statements, particularly in the fourth quarter.
How did HPE's revenue perform across its key segments in fiscal year 2015?
The Enterprise Group (EG) segment saw a slight revenue increase, largely due to strong performance in Industry Standard Servers and the acquisition of Aruba Networks. However, Enterprise Services (ES) experienced a significant revenue decline due to contract runoff and weak demand, while the Software segment also saw a decrease driven by the market's shift to SaaS models and go-to-market execution challenges.
What is the company's financial position regarding cash and debt following the separation?
HPE ended fiscal year 2015 with a strong cash position of $9.8 billion. This was significantly bolstered by the issuance of $14.6 billion in senior unsecured notes in October 2015, the proceeds of which were largely used to facilitate the separation. Total debt increased substantially due to this issuance.
What were the major cost impacts during fiscal year 2015?
Key cost impacts included $797 million in separation costs, $2.3 billion in Research and Development expenses, and $8.0 billion in Selling, General, and Administrative (SG&A) expenses. The company also incurred $954 million in restructuring charges and $225 million in defined benefit plan settlement charges.
06—Continue