10-KPeriod: FY2015

Hewlett Packard Enterprise Co Annual Report, Year Ended Oct 31, 2015

Filed December 17, 2015For Securities:HPEHPE-PC

Summary

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.

Financial Highlights

51 data points
Beta

Revenue

$31.08B

57.2% Gross Margin

Net Income

$2.46B

7.9% Net Margin

EPS (Diluted)

$1.34

Total Assets

$79.92B

Cash & Equivalents

$9.84B

Free Cash Flow

$3.66B

Financial Statements
Beta
Revenue$31.08B
Cost of Revenue$13.29B
Gross Profit$17.78B
R&D Expenses$1.68B
SG&A Expenses$5.14B
Operating Expenses$29.13B
Operating Income$1.95B
Interest Expense$249.00M
Net Income$2.46B
EPS (Basic)$1.36
EPS (Diluted)$1.34
Shares Outstanding (Basic)1.80B
Shares Outstanding (Diluted)1.83B

Key Highlights

  • 1HPE became an independent publicly traded company on November 1, 2015, following its separation from HP Inc.
  • 2Total net revenue for fiscal year 2015 decreased by 5.5% (flat on a constant currency basis) compared to fiscal year 2014.
  • 3The 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.
  • 4Enterprise Services (ES) revenue declined by 11.6% due to contract runoff, soft demand, and unfavorable currency impacts.
  • 5Software segment revenue decreased by 7.9%, attributed to the market shift towards SaaS and go-to-market execution challenges.
  • 6HPE 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.
  • 7The company incurred substantial separation costs totaling $797 million in fiscal year 2015.

Frequently Asked Questions

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.

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.

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.

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.