10-QPeriod: Q2 FY2020

Hewlett Packard Enterprise Co Quarterly Report for Q2 Ended Apr 30, 2020

Filed June 2, 2020For Securities:HPEHPE-PC

Summary

Hewlett Packard Enterprise (HPE) reported a net loss of $821 million, or $0.64 per diluted share, for the second quarter of fiscal year 2020, a significant decline from a net earning of $419 million in the prior year's quarter. This was primarily driven by an $865 million goodwill impairment charge related to the HPC & MCS segment, compounded by the ongoing impacts of the COVID-19 pandemic on demand and supply chains. Total net revenue decreased by 16.0% to $6.0 billion compared to the prior year, with all segments experiencing declines. The company cited supply chain constraints, customer acceptance challenges due to lockdowns, and competitive pricing as key factors impacting revenue. Despite the challenges, HPE is implementing a cost optimization plan expected to deliver significant savings and is leveraging its technology to support customers navigating the pandemic. The company maintained a strong cash position, ending the quarter with $5.1 billion in cash and cash equivalents, though it suspended its share repurchase program due to economic uncertainty.

Financial Highlights

50 data points
Beta

Revenue

$6.01B

31.9% Gross Margin

Net Income

-$821.00M

-13.7% Net Margin

EPS (Diluted)

$-0.64

Total Assets

$54.52B

Cash & Equivalents

$5.13B

Free Cash Flow

$100.00M

Financial Statements
Beta
Revenue$6.01B
Cost of Revenue$4.09B
Gross Profit$1.91B
R&D Expenses$450.00M
SG&A Expenses$1.11B
Operating Expenses$6.84B
Operating Income-$834.00M
Net Income-$821.00M
EPS (Basic)$-0.64
EPS (Diluted)$-0.64
Shares Outstanding (Basic)1.29B
Shares Outstanding (Diluted)1.29B

Key Highlights

  • 1Net loss of $821 million for the quarter, a reversal from a net profit of $419 million in Q2 FY2019.
  • 2Total net revenue declined 16.0% year-over-year to $6.0 billion, impacted by COVID-19 and supply chain issues.
  • 3Significant goodwill impairment charge of $865 million recognized in the HPC & MCS segment.
  • 4Company announced a cost optimization and prioritization plan targeting at least $1.0 billion in gross savings by FY2022.
  • 5Cash and cash equivalents increased to $5.1 billion, providing a solid liquidity position.
  • 6Share repurchase program suspended due to global economic uncertainty from COVID-19.

Frequently Asked Questions

The primary driver of the net loss was an $865 million goodwill impairment charge recognized in the High Performance Compute & Mission-Critical Systems (HPC & MCS) segment. This was further impacted by the broader economic challenges and supply chain disruptions caused by the COVID-19 pandemic.

COVID-19 significantly impacted HPE's performance by reducing demand, disrupting supply chains, causing customer acceptance challenges due to lockdowns, and leading to delays in order fulfillment and on-site installations. These factors contributed to a 16.0% decline in total net revenue.

HPE announced a cost optimization and prioritization plan aimed at achieving at least $1.0 billion in gross savings by fiscal year 2022. They are also focused on leveraging their technology to support customers through the pandemic, such as through HPC solutions for research and by offering flexible as-a-service offerings via HPE GreenLake Central. The company has also suspended its share repurchase program due to economic uncertainty.

All segments experienced revenue declines. Compute revenue decreased by 20.4%, HPC & MCS by 18.3%, Storage by 17.6%, Advisory and Professional Services (A&PS) by 8.8%, Intelligent Edge by 2.9%, and Financial Services (FS) by 7.0% compared to the prior year's quarter.