10-QPeriod: Q1 FY2017

Hewlett Packard Enterprise Co Quarterly Report for Q1 Ended Jan 31, 2017

Filed March 9, 2017For Securities:HPEHPE-PC

Summary

Hewlett Packard Enterprise (HPE) reported net earnings of $267 million for the three months ended January 31, 2017, a slight increase from $267 million in the same period of the prior year. Diluted earnings per share remained flat at $0.16. Total net revenue for the quarter decreased by 10.4% to $11.4 billion, primarily driven by a decline in the Enterprise Group (EG) and Enterprise Services (ES) segments, impacted by divestitures and challenging market demand. The company is actively managing its portfolio through strategic transactions, including announced plans for the spin-off and merger of its Software segment with Micro Focus and the Enterprise Services business with CSC. These strategic moves aim to create more focused and agile businesses. Despite revenue headwinds, HPE demonstrated improved gross margins and operating margins due to cost efficiencies and expense management, reflecting ongoing restructuring efforts.

Financial Highlights

52 data points
Beta

Revenue

$6.90B

32.1% Gross Margin

Net Income

$267.00M

3.9% Net Margin

EPS (Diluted)

$0.16

Total Assets

$76.66B

Cash & Equivalents

$9.86B

Free Cash Flow

-$1.19B

Financial Statements
Beta
Revenue$6.90B
Cost of Revenue$4.69B
Gross Profit$2.21B
R&D Expenses$356.00M
SG&A Expenses$1.20B
Operating Expenses$6.45B
Operating Income$453.00M
Interest Expense$158.00M
Net Income$267.00M
EPS (Basic)$0.16
EPS (Diluted)$0.16
Shares Outstanding (Basic)1.67B
Shares Outstanding (Diluted)1.70B

Key Highlights

  • 1Net earnings remained stable at $267 million, with diluted EPS at $0.16 for the three months ended January 31, 2017.
  • 2Total net revenue declined by 10.4% to $11.4 billion compared to the prior year, impacted by segment divestitures and market conditions.
  • 3The Enterprise Group (EG) revenue decreased by 11.9%, affected by the H3C divestiture and challenges in Servers and Storage.
  • 4Enterprise Services (ES) revenue fell by 11.4%, influenced by the MphasiS divestiture and weak demand in EMEA.
  • 5Gross margin improved to 28.9% from 28.4% year-over-year, driven by cost savings and service delivery efficiencies.
  • 6Operating margin increased by 1.1 percentage points, reflecting improved expense management across R&D and SG&A.
  • 7The company is progressing with planned divestitures of its Software and Enterprise Services businesses.

Frequently Asked Questions

The primary driver for the 10.4% decrease in net revenue was the impact of divestitures, including the H3C divestiture within the Enterprise Group and the MphasiS divestiture within Enterprise Services, coupled with challenging market demand for products like Servers and Storage.

Despite lower revenue, profitability saw improvement in margins. Gross margin increased to 28.9% due to service delivery efficiencies and cost savings from restructuring programs. Operating margin also improved by 1.1 percentage points, reflecting better expense management in R&D and SG&A.

HPE is actively pursuing strategic transformations. The company has announced plans to spin off and merge its Software segment with Micro Focus and to spin off and merge its Enterprise Services business with Computer Sciences Corporation (CSC). These moves are designed to create more focused and stronger businesses.

As of January 31, 2017, HPE reported cash and cash equivalents and short-term and long-term investments of $9.9 billion, a decrease of $3.1 billion from the prior quarter. This decrease was primarily due to $1.9 billion in pension funding payments related to the Everett Transaction, investments in property, plant, and equipment, and cash used for share repurchases and dividends.