Financial Summary
Second quarter net revenue of $7.2 billion, down 4% from the prior-year period, and down 2% when adjusted for currency. Second quarter net revenue was up 1% from the prior-year period, excluding Tier 1 server sales, when adjusted for currency.
Second quarter GAAP diluted net earnings per share (“EPS”) from continuing operations was $0.30, down from GAAP diluted net EPS from continuing operations of $0.54 in the prior-year period primarily due to one-time, non-cash adjustments related to U.S. tax reform in the prior-year period.
Second quarter non-GAAP diluted net EPS from continuing operations was $0.42, up from non-GAAP diluted net EPS from continuing operations of $0.32 in the prior-year period. Second quarter non-GAAP net earnings from continuing operations and non-GAAP diluted net EPS from continuing operations exclude after-tax adjustments of $160 million and $0.12 per diluted share, respectively, primarily related to the impact of acquisition, disposition and other related charges, amortization of intangible assets, transformation costs, an adjustment to earnings from equity interests and the impact of U.S. tax reform.
Second quarter cash flow from operations of $987 million and free cash flow of $402 million, was up $740 million and $671 million from the prior-year period, respectively.
Segment Results
- Intelligent Edge revenue was $666 million, down 6% year over year and down 5% when adjusted for currency, with 3.0% operating margin. HPE Aruba Product revenue was down 8% year over year and down 7% when adjusted for currency and HPE Aruba Services revenue was up 16% year over year and up 18% when adjusted for currency.
- Hybrid IT continued to drive profitable growth with revenue of $5.6 billion, down 4% year over year and down 3% when adjusted for currency with 11.4% operating margin that was up 140 bps year over year. Compute revenue was down 5% year over year and down 4% when adjusted for currency. Excluding the impact from the company’s intentional exit of certain Tier 1 customer segments, Compute revenue was up 4% when adjusted for currency and HPE’s higher-margin Value Compute portfolio grew approximately 8% when adjusted for currency, driven by strength in high-performance compute, hyper-converged and composable cloud. Storage revenue was up 3% year over year and up 5% when adjusted for currency, with particular strength in Nimble, XP and Entry Storage. HPE Pointnext revenue was down 7% year over year and down 3% when adjusted for currency. HPE Pointnext operational services orders, including Nimble services was up 1% when adjusted for currency.
- Financial Services revenue was $896 million, down 2% year over year and up 2% when adjusted for currency, net portfolio assets were down 2% year over year and up 1% when adjusted for currency, and financing volume was down 10% year over year and down 6% when adjusted for currency. The business delivered an operating margin of 8.6%.
Raised FY 2019 Outlook
For the fiscal 2019 third quarter, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.29 to $0.33 and non-GAAP diluted net EPS to be in the range of $0.40 to $0.44. Fiscal 2019 third quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.11 per diluted share, primarily related to transformation costs and the amortization of intangible assets.
For fiscal 2019 full-year, Hewlett Packard Enterprise now estimates GAAP diluted net EPS to be in the range of $0.98 to $1.08 and the non-GAAP diluted net EPS to be in the range of $1.62 to $1.72. Fiscal 2019 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.64 per diluted share, primarily related to transformation costs, the amortization of intangible assets, and an adjustment to earnings from equity interests.
For fiscal 2019 full-year, Hewlett Packard Enterprise reiterates free cash flow guidance range of $1.4 to $1.6 billion, up over 35% from the prior year.
About Hewlett Packard Enterprise
Hewlett Packard Enterprise is a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze and act upon data seamlessly from edge to cloud. HPE enables customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future.
Use of non-GAAP financial information
To supplement Hewlett Packard Enterprise’s condensed consolidated
financial statement information presented on a generally accepted
accounting principles (GAAP) basis, Hewlett Packard Enterprise provides
revenue on a constant currency basis as well as non-GAAP operating
expense, non-GAAP operating profit, non-GAAP operating margin, non-GAAP
income tax rate, non-GAAP net earnings from continuing operations,
non-GAAP net earnings from discontinued operations, non-GAAP diluted net
earnings per share from continuing operations, non-GAAP diluted net
earnings per share from discontinued operations, gross cash, free cash
flow, net capital expenditures, net debt, net cash, operating company
net debt and operating company net cash financial measures. Hewlett
Packard Enterprise also provides forecasts of non-GAAP diluted net
earnings per share and free cash flow. A reconciliation of adjustments
to GAAP financial measures for this quarter and prior periods is
included in the tables below or elsewhere in the materials accompanying
this news release. In addition, an explanation of the ways in which
Hewlett Packard Enterprise’s management uses these non-GAAP measures to
evaluate its business, the substance behind Hewlett Packard Enterprise’s
decision to use these non-GAAP measures, the material limitations
associated with the use of these non-GAAP measures, the manner in which
Hewlett Packard Enterprise’s management compensates for those
limitations, and the substantive reasons why Hewlett Packard
Enterprise’s management believes that these non-GAAP measures provide
useful information to investors is included under “Use of non-GAAP
financial measures” further below. This additional non-GAAP financial
information is not meant to be considered in isolation or as a
substitute for revenue, operating profit, operating margin, net earnings
from continuing operations, net earnings from discontinued operations,
diluted net earnings per share from continuing operations, diluted net
earnings per share from discontinued operations, cash, cash equivalents
and restricted cash, cash flow from operations, investments in property,
plant and equipment, or total company debt prepared in accordance with
GAAP.
