10-QPeriod: Q2 FY2017

Hewlett Packard Enterprise Co Quarterly Report for Q2 Ended Apr 30, 2017

Filed June 8, 2017For Securities:HPEHPE-PC

Summary

Hewlett Packard Enterprise (HPE) reported a net loss of $612 million ($0.37 per share) for the three months ended April 30, 2017, a significant shift from the net earnings of $320 million ($0.18 per share) in the same period last year. This downturn was primarily driven by a substantial decrease in net revenue, down 12.5% to $7.45 billion, and increased separation and restructuring costs. The company also reported a net loss of $345 million ($0.21 per share) for the six months ended April 30, 2017, compared to net earnings of $587 million ($0.33 per share) in the prior year period. This financial performance reflects ongoing strategic transformations, including the separation of its Enterprise Services business, which was completed on April 1, 2017. The company's balance sheet also showed a decrease in cash and cash equivalents to $8.1 billion from $13.0 billion at the beginning of the fiscal year, largely due to business acquisitions and share repurchases. Despite the net loss, the company continues to navigate complex market trends and competitive pressures, particularly in its Enterprise Group segment, while also preparing for the spin-off and merger of its Software segment. Investors should monitor the execution of these strategic initiatives and their impact on future revenue and profitability.

Financial Highlights

50 data points
Beta

Revenue

$6.81B

29.5% Gross Margin

Net Income

-$612.00M

-9.0% Net Margin

EPS (Diluted)

$-0.37

Total Assets

$67.47B

Cash & Equivalents

$8.10B

Free Cash Flow

$739.00M

Financial Statements
Beta
Revenue$6.81B
Cost of Revenue$4.80B
Gross Profit$2.01B
R&D Expenses$376.00M
SG&A Expenses$1.23B
Operating Expenses$6.61B
Operating Income$195.00M
Interest Expense$142.00M
Net Income-$612.00M
EPS (Basic)$-0.37
EPS (Diluted)$-0.37
Shares Outstanding (Basic)1.66B
Shares Outstanding (Diluted)1.66B

Key Highlights

  • 1HPE reported a net loss of $612 million for the three months ended April 30, 2017, a significant decline from a net profit of $320 million in the prior year period.
  • 2Net revenue for the quarter decreased by 12.5% to $7.45 billion, compared to $8.51 billion in the same quarter of the previous year.
  • 3The company completed the separation of its Enterprise Services business through a merger with Computer Sciences Corporation (CSC) on April 1, 2017.
  • 4Cash and cash equivalents decreased to $8.1 billion as of April 30, 2017, from $13.0 billion as of October 31, 2016.
  • 5Restructuring charges and separation costs increased in the current period, contributing to the net loss.
  • 6The company is progressing with the planned spin-off and merger of its Software segment with Micro Focus International plc, expected to close by September 1, 2017.
  • 7Earnings from continuing operations were negative at $(487) million for the quarter, down from positive $322 million in the prior year.

Frequently Asked Questions

The significant net loss of $612 million is primarily attributed to a substantial decrease in net revenue (down 12.5%), coupled with increased restructuring charges and separation costs related to ongoing strategic transformations.

The separation of the Enterprise Services business, completed on April 1, 2017, has led to its classification as 'discontinued operations'. This transaction involved the spin-off of Everett SpinCo, Inc. (now DXC Technology Company) and resulted in separation costs. While it removes the financial performance of this segment from continuing operations, it also incurred significant costs in the current period.

HPE announced plans to spin-off and merge its Software segment with Micro Focus. This transition is causing business disruption, impacting revenue performance. The transaction is anticipated to close by September 1, 2017, and is expected to create a stronger, more focused enterprise software company.

Cash and cash equivalents decreased by approximately $4.9 billion to $8.1 billion during the first six months of fiscal 2017. Key uses of cash included payments for business acquisitions ($2.1 billion), investments in property, plant, and equipment ($1.5 billion), share repurchases ($1.3 billion), and net cash used in operating activities ($0.8 billion). A significant pension funding payment of $1.9 billion was also made in connection with the Enterprise Services separation.