10-QPeriod: Q2 FY2021

Hewlett Packard Enterprise Co Quarterly Report for Q2 Ended Apr 30, 2021

Filed June 3, 2021For Securities:HPEHPE-PC

Summary

Hewlett Packard Enterprise (HPE) reported solid financial performance for the second quarter and first half of fiscal year 2021, demonstrating a strong recovery from the previous year's challenges. Net revenue saw a significant increase of 11.5% year-over-year for the quarter, reaching $6.7 billion, driven by improved demand and reduced supply chain constraints. For the first half of the year, net revenue grew 4.4% to $13.5 billion. The company also reported improved profitability, with a substantial increase in earnings from operations and net earnings, significantly exceeding the prior year's results, which were impacted by a large goodwill impairment charge. The company generated strong operating cash flow of $1.8 billion for the first half of the year. Profitability metrics, both GAAP and non-GAAP, showed marked improvement. Gross profit margin increased due to pricing discipline, cost savings from transformation programs, and a favorable shift towards higher-margin offerings. While transformation costs remain, they are part of a multi-year plan to optimize operations. The company continues to return capital to shareholders through dividends, though share repurchases remain suspended due to economic uncertainty. Overall, HPE's results indicate a positive trajectory, showcasing resilience and strategic execution in a recovering market.

Financial Highlights

48 data points
Beta

Revenue

$6.70B

Net Income

$259.00M

3.9% Net Margin

EPS (Diluted)

$0.19

Total Assets

$54.13B

Cash & Equivalents

$4.63B

Free Cash Flow

$822.00M

Financial Statements
Beta
Revenue$6.70B
R&D Expenses$503.00M
SG&A Expenses$1.20B
Operating Expenses$6.42B
Operating Income$278.00M
Net Income$259.00M
EPS (Basic)$0.20
EPS (Diluted)$0.19
Shares Outstanding (Basic)1.31B
Shares Outstanding (Diluted)1.33B

Key Highlights

  • 1Total net revenue increased by 11.5% year-over-year to $6.7 billion for the three months ended April 30, 2021, and by 4.4% for the six months ended April 30, 2021, reaching $13.5 billion.
  • 2Earnings from operations turned positive, reporting $278 million for the quarter and $500 million for the six months, a significant improvement from the losses reported in the prior year.
  • 3Net earnings also rebounded significantly, with $259 million for the quarter and $482 million for the six months, compared to net losses in the prior year.
  • 4Gross profit margin improved to 34.1% for the quarter and 33.8% for the six months, driven by cost savings and favorable product mix.
  • 5Operating cash flow for the first six months of fiscal 2021 was $1.8 billion, a substantial increase from $21 million in the prior year period.
  • 6The company continues to manage transformation costs, with $209 million incurred in the quarter and $520 million in the first half of the year, part of ongoing optimization initiatives.
  • 7Financial Services segment showed resilience, with modest revenue growth and improved operating profit margin.

Frequently Asked Questions

For the three months ended April 30, 2021, HPE reported total net revenue of $6.7 billion, an increase of 11.5% compared to $6.0 billion in the prior year period. For the six months ended April 30, 2021, net revenue was $13.5 billion, up 4.4% from $13.0 billion in the prior year period. Growth was driven by improved demand and reduced supply chain constraints.

Profitability saw a significant improvement. Earnings from operations were $278 million for the quarter and $500 million for the six months, a substantial turnaround from losses in the prior year. Net earnings also turned positive, reporting $259 million for the quarter and $482 million for the six months, compared to net losses of $(821) million and $(488) million, respectively, in the prior year. This improvement was due to higher revenues, improved gross margins, and lower operating expenses, partly offset by ongoing transformation costs.

HPE incurred $209 million in transformation costs during the three months ended April 30, 2021, and $520 million for the six months ended April 30, 2021. These costs are related to ongoing initiatives to optimize operations, realign the workforce, and streamline business processes. While these costs impact short-term profitability, they are expected to drive future operational efficiencies and cost savings.

HPE generated strong operating cash flow of $1.8 billion for the first six months of fiscal 2021, a significant increase from $21 million in the prior year. The company reported $4.8 billion in cash, cash equivalents, and restricted cash as of April 30, 2021. Management believes these resources, along with potential access to capital markets, are sufficient to meet its liquidity needs.