HPE Reports Fiscal 2016 First Quarter Results

PALO ALTO, CA–(Marketwired – Mar 3, 2016) – Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for its fiscal 2016 first quarter, ended January 31, 2016. First quarter net revenue of $12.7 billion was down 3% from the prior-year period and up 4% on a constant currency basis.

 

First quarter GAAP diluted net earnings per share (EPS) was $0.15, down from $0.30 in the prior-year period, and above its previously provided outlook of $0.09 to $0.13. First quarter non-GAAP diluted net EPS was $0.41, down from adjusted non-GAAP diluted net EPS of $0.44 in the prior-year period, and at the top end of its previously provided outlook of $0.37 to $0.41.  First quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $464 million and $0.26 per diluted share, respectively, related to restructuring charges, the amortization of intangible assets, separation costs, acquisition and other related charges and tax indemnification adjustments.

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“During our first quarter as an independent company, we saw the progress that comes from being more focused and nimble,” said Meg Whitman, president and chief executive officer, Hewlett Packard Enterprise. “We delivered a third consecutive quarter of year-over-year constant currency revenue growth, and excluding the impact of recent M&A activity, we saw revenue growth in constant currency across every business segment for the first time since 2010.”

HPE fiscal 2016 first quarter financial performance

  Q1 FY16 Q1 FY15 Y/Y
GAAP net revenue ($B) $12.7 $13.1 (3%)
GAAP operating margin 3.0% 5.6% (2.6 pts.)
GAAP net earnings ($B) $0.3 $0.5 (51%)
GAAP diluted net earnings per share $0.15 $0.30 (50%)
Non-GAAP operating margin 8.1% 8.5% (0.4 pts.)
Non-GAAP net earnings ($B) $0.7 $0.9 (15%)
Non-GAAP diluted net earnings per share $0.41 $0.44* (7%)*
Cash flow from operations ($B) ($0.1) $0.3* (130%)*
       

*Q1 FY15 Non-GAAP diluted net earnings per share (EPS) and Cash flow from operations contain adjustments to give effect to the separation of the Company from HP Inc. (formerly known as Hewlett-Packard Company). The adjusted figures provide a more useful representation, as if the Company had been a stand-alone company during fiscal 2015.
Information about HPE’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.

Outlook
For the fiscal 2016 second quarter, Hewlett Packard Enterprise estimates non-GAAP diluted net EPS to be in the range of $0.39 to $0.43 and GAAP diluted net EPS to be in the range of $0.13 to $0.17. Fiscal 2016 second quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.26 per share, related to restructuring charges, the amortization of intangible assets, separation costs and acquisition and other related charges.
For fiscal 2016, Hewlett Packard Enterprise estimates non-GAAP diluted net EPS to be in the range of $1.85 to $1.95 and GAAP diluted net EPS to be in the range of $0.75 to $0.85. Fiscal 2016 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.10 per share, related to restructuring charges, the amortization of intangible assets, separation costs, acquisition and other related charges and tax indemnification adjustments.   
“After returning $1.3 billion in capital to our shareholders, HPE is increasing our commitment to return at least 100% of our free cash flow outlook to shareholders in FY16,” said Tim Stonesifer, chief financial officer, Hewlett Packard Enterprise. “In addition, when the Tsinghua transaction closes, we plan to use the majority of approximately $2 billion received to repurchase shares.”

Fiscal 2016 first quarter segment results
•    Enterprise Group revenue was $7.1 billion, up 1% year over year, up 7% in constant currency, with a 13.4% operating margin. Servers revenue was down 1%, up 5% in constant currency, Storage revenue was down 3%, up 3% in constant currency, Networking revenue was up 54%, up 62% in constant currency, and Technology Services revenue was down 9%, down 3% in constant currency.  
•    Enterprise Services revenue was $4.7 billion, down 6% year over year, flat in constant currency, with a 5.1% operating margin. Infrastructure Technology Outsourcing revenue was down 8%, down 2% in constant currency, and Application and Business Services revenue was down 3%, up 3% in constant currency.
•    Software revenue was $780 million, down 10% year over year, down 6% in constant currency, with a 17.4% operating margin. License revenue was down 6%, down 2% in constant currency, support revenue was down 13%, down 9% in constant currency, professional services revenue was down 7%, down 2% in constant currency, and software-as-a-service (SaaS) revenue was down 9%, down 7% in constant currency.
•    Financial Services revenue was $776 million, down 3% year over year, up 3% in constant currency, net portfolio assets were up 4%, up 9% in constant currency, and financing volume was down 4%, up 3% in constant currency. The business delivered an operating margin of 12.9%.

About Hewlett Packard Enterprise
Hewlett Packard Enterprise (HPE) is an industry leading technology company that enables customers to go further, faster. With the industry’s most comprehensive portfolio, spanning the cloud to the data center to workplace applications, our technology and services help customers around the world make IT more efficient, more productive and more secure.