HPE Reports Fiscal 2019 Fourth Quarter and Full-Year Results

Fiscal 2020 outlook:

Hewlett Packard Enterprise maintains GAAP diluted net earnings per share outlook of $1.01 to $1.17 and non-GAAP diluted net earnings per share outlook of $1.78 to $1.94. Fiscal 2020 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.77 per diluted share, primarily related to transformation costs and the amortization of intangible assets.

Reiterates free cash flow¹ guidance range of $1.9 to $2.1 billion.

¹Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis, as the company cannot predict some elements that are included in reported GAAP results. Refer to the discussion of non-GAAP financial measures below for more information.

About Hewlett Packard Enterprise

Hewlett Packard Enterprise is the global edge-to-cloud platform-as-a-service company that helps organizations accelerate outcomes by unlocking value from all of their data, everywhere. Built on decades of reimagining the future and innovating to advance the way we live and work, HPE delivers unique, open and intelligent technology solutions, with a consistent experience across all clouds and edges, to help customers develop new business models, engage in new ways, and increase operational performance. For more information, visit: www.hpe.com.

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 and revenue adjusted for Tier 1 server sales and currency, as well as non-GAAP gross margin, 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, non-GAAP net earnings, non-GAAP diluted net earnings per share, 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, gross margin, 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.

Forward-looking statements

This press release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, effective tax rates, the impact of the U.S. Tax Cuts and Jobs Act of 2017, net earnings, net earnings per share, cash flows, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of corporate transactions or contemplated acquisitions, transformation and restructuring plans and any resulting benefit, cost savings, revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements or assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise’s businesses; the competitive pressures faced by Hewlett Packard Enterprise’s businesses; risks associated with executing Hewlett Packard Enterprise’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Hewlett Packard Enterprise’s products and the delivery of Hewlett Packard Enterprise’s services effectively; the protection of Hewlett Packard Enterprise’s intellectual property assets, including intellectual property licensed from third parties and intellectual property shared with its former Parent; risks associated with Hewlett Packard Enterprise’s international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers, clients and partners; the hiring and retention of key employees; execution, integration and other risks associated with business combination and investment transactions; and the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of Hewlett Packard Enterprise's business) and the anticipated benefits of implementing the transformation and restructuring plans; the effects of the U.S. Tax Cuts and Jobs Act and related guidance and regulations; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2018 and subsequent Quarterly Reports on Form 10-Q.

As in prior periods, the financial information set forth in this press release, including tax-related items, reflects estimates based on information available at this time. While Hewlett Packard Enterprise believes these estimates to be reasonable, these amounts could differ materially from reported amounts in the Hewlett Packard Enterprise Annual Report on Form 10-K for the fiscal year ended October 31, 2019. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts)

	Three months ended
	October 31, 2019			July 31, 2019			October 31, 2018
Net revenue^(a)	$	7,215		$	7,217		$	7,946
Costs and expenses:
Cost of sales	4,822			4,768			5,507
Research and development	438			481			440
Selling, general and administrative	1,229			1,253			1,237
Amortization of intangible assets	68			58			72
Impairment of goodwill	—			—			88
Restructuring charges	—			—			5
Transformation costs	151			170			(77		)
Acquisition, disposition and other related charges ^(b)	47			563			12
Separation costs	—			—			9
Total costs and expenses	6,755			7,293			7,293
Earnings (loss) from continuing operations	460			(76		)	653
Interest and other, net	(38		)	(70		)	(111		)
Tax indemnification adjustments ^(c)	288			(134		)	(12		)
Non-service net periodic benefit credit ^(d)	14			12			31
(Loss) earnings from equity interests	(1		)	3			15
Earnings (loss) from continuing operations before taxes	723			(265		)	576
(Provision) benefit for taxes ^(e)	(243		)	238			(1,348		)
Net earnings (loss) from continuing operations	480			(27		)	(772		)
Net earnings from discontinued operations	—			—			15
Net earnings (loss)	$	480		$	(27	)	$	(757	)
Net earnings (loss) per share:
Basic
Continuing operations	$	0.37		$	(0.02	)	$	(0.53	)
Discontinued operations	—			—			0.01
Total basic net earnings (loss) per share	$	0.37		$	(0.02	)	$	(0.52	)
Diluted
Continuing operations	$	0.36		$	(0.02	)	$	(0.53	)
Discontinued operations	—			—			0.01
Total diluted net earnings (loss) per share	$	0.36		$	(0.02	)	$	(0.52	)
Cash dividends declared per share	$	0.1200		$	0.1125		$	0.1125
Weighted-average shares used to compute net earnings (loss) per share:
Basic	1,308			1,334			1,459
Diluted ^(m)	1,323			1,334			1,459

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts)

	Twelve months ended October 31,
	2019			2018
Net revenue ^(a)	$	29,135		$	30,852
Costs and expenses:
Cost of sales	19,642			21,621
Research and development	1,842			1,667
Selling, general and administrative	4,907			4,921
Amortization of intangible assets	267			294
Impairment of goodwill	—			88
Restructuring charges	—			19
Transformation costs	453			414
Disaster charges	(7		)	—
Acquisition, disposition and other related charges ^(b)	757			82
Separation costs	—			9
Total costs and expenses	27,861			29,115
Earnings from continuing operations	1,274			1,737
Interest and other, net	(177		)	(274		)
Tax indemnification adjustments ^(c)	377			(1,354		)
Non-service net periodic benefit credit ^(d)	59			121
Earnings from equity interests	20			38
Earnings from continuing operations before taxes	1,553			268
(Provision) benefit for taxes ^(e)	(504		)	1,744
Net earnings from continuing operations	1,049			2,012
Net loss from discontinued operations	—			(104		)
Net earnings	$	1,049		$	1,908
Net earnings (loss) per share:
Basic
Continuing operations	$	0.78		$	1.32
Discontinued operations	—			(0.07		)
Total basic net earnings per share	$	0.78		$	1.25
Diluted
Continuing operations	$	0.77		$	1.30
Discontinued operations	—			(0.07		)
Total diluted net earnings per share	$	0.77		$	1.23
Cash dividends declared per share	$	0.4575		$	0.4875
Weighted-average shares used to compute net earnings (loss) per share:
Basic	1,353			1,529
Diluted	1,366			1,553

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except percentages and per share amounts)

	Three months ended October 31, 2019			Diluted net earnings per share			Three months ended July 31, 2019			Diluted net earnings per share			Three months ended October 31, 2018			Diluted net earnings per share
GAAP net earnings (loss) from continuing operations	$	480		$	0.36		$	(27	)	$	(0.02	)	$	(772	)	$	(0.53	)

Non-GAAP adjustments:
Amortization of intangible assets	68			0.05			58			0.04			72			0.05
Impairment of goodwill	—			—			—			—			88			0.06
Restructuring charges	—			—			—			—			5			—
Transformation costs ^(f)	151			0.11			170			0.13			(57		)	(0.04		)
Acquisition, disposition and other related charges ^(b)(g)	54			0.04			563			0.42			12			0.01
Separation costs	—			—			—			—			9			0.01
Tax indemnification adjustments ^(c)	(288		)	(0.22		)	134			0.10			12			0.01
Non-service net periodic benefit credit ^(d)	(14		)	(0.01		)	(12		)	(0.01		)	(31		)	(0.02		)
Loss from equity interests ^(h)	38			0.03			38			0.03			38			0.03
Adjustments for taxes ^(e)(i)	155			0.13			(321		)	(0.24		)	1,257			0.85
Non-GAAP net earnings from continuing operations	$	644		$	0.49		$	603		$	0.45		$	633		$	0.43

GAAP earnings (loss) from continuing operations	$	460					$	(76	)				$	653

Non-GAAP adjustments related to continuing operations:
Amortization of intangible assets	68						58						72
Impairment of goodwill	—						—						88
Restructuring charges	—						—						5
Transformation costs	151						170						(77		)
Acquisition, disposition and other related charges ^(b)(g)	54						563						12
Separation costs	—						—						9
Non-GAAP earnings from continuing operations	$	733					$	715					$	762

GAAP operating margin from continuing operations	6		%				(1		)%				8		%
Non-GAAP adjustments from continuing operations	4		%				11		%				2		%
Non-GAAP operating margin from continuing operations	10		%				10		%				10		%

GAAP net earnings from discontinued operations	$	—		$	—		$	—		$	—		$	15		$	0.01

Non-GAAP adjustments related to discontinued operations:

Tax indemnification adjustments	—			—			—			—			(11		)	(0.01		)
Adjustments for taxes	—			—			—			—			(4		)	—
Non-GAAP net earnings from discontinued operations	$	—		$	—		$	—		$	—		$	—		$	—
Total GAAP net earnings (loss)	$	480		$	0.36		$	(27	)	$	(0.02	)	$	(757	)	$	(0.52	)
Total Non-GAAP net earnings	$	644		$	0.49		$	603		$	0.45		$	633		$	0.43

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except percentages and per share amounts)

	Twelve months ended October 31, 2019			Diluted net earnings per share			Twelve months ended October 31, 2018			Diluted net earnings per share
GAAP net earnings from continuing operations	$	1,049		$	0.77		$	2,012		$	1.30

Non-GAAP adjustments:
Amortization of intangible assets	267			0.20			294			0.19
Impairment of goodwill	—			—			88			0.06
Restructuring charges	—			—			19			0.01
Transformation costs ^(f)	453			0.33			434			0.28
Disaster charges	(7		)	(0.01		)	—			—
Acquisition, disposition and other related charges ^(b)(g)	764			0.56			82			0.05
Separation costs	—			—			9			0.01
Tax indemnification adjustments ^(c)	(377		)	(0.28		)	1,354			0.87
Non-service net periodic benefit credit ^(d)	(59		)	(0.04		)	(121		)	(0.08		)
Loss from equity interests ^(h)	152			0.11			151			0.10
Adjustments for taxes ^(e)(i)	174			0.13			(2,024		)	(1.31		)
Non-GAAP net earnings from continuing operations	$	2,416		$	1.77		$	2,298		$	1.48

GAAP earnings from continuing operations	$	1,274					$	1,737

Non-GAAP adjustments related to continuing operations:
Amortization of intangible assets	267						294
Impairment of goodwill	—						88
Restructuring charges	—						19
Transformation costs	453						414
Disaster charges	(7		)				—
Acquisition, disposition and other related charges ^(b)(g)	764						82
Separation costs	—						9
Non-GAAP earnings from continuing operations	$	2,751					$	2,643

GAAP operating margin from continuing operations	4		%				6		%
Non-GAAP adjustments from continuing operations	5		%				3		%
Non-GAAP operating margin from continuing operations	9		%				9		%

GAAP net loss from discontinued operations	$	—		$	—		$	(104	)	$	(0.07	)

Non-GAAP adjustments related to discontinued operations:
Separation costs	—			—			51			0.03
Tax indemnification adjustments	—			—			58			0.04
Adjustments for taxes	—			—			(5		)	—
Non-GAAP net earnings from discontinued operations	$	—		$	—		$	—		$	—

Total GAAP net earnings	$	1,049		$	0.77		$	1,908		$	1.23
Total Non-GAAP net earnings	$	2,416		$	1.77		$	2,298		$	1.48

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions, except par value)

	As of
	October 31, 2019			October 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	3,753		$	4,880
Accounts receivable, net of allowance for doubtful accounts	2,957			3,263
Financing receivables	3,572			3,396
Inventory	2,387			2,447
Assets held for sale	46			6
Other current assets ^(j)	2,428			3,280
Total current assets	15,143			17,272
Property, plant and equipment	6,054			6,138
Long-term financing receivables and other assets	8,918			11,359
Investments in equity interests	2,254			2,398
Goodwill and intangible assets	19,434			18,326
Total assets	$	51,803		$	55,493
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and short-term borrowings	$	4,425		$	2,005
Accounts payable	5,595			6,092
Employee compensation and benefits	1,522			1,412
Taxes on earnings	186			378
Deferred revenue	3,234			3,177
Accrued restructuring	195			294
Other accrued liabilities	4,002			3,840
Total current liabilities	19,159			17,198
Long-term debt	9,395			10,136
Other non-current liabilities	6,100			6,885
Stockholders’ equity
HPE stockholders’ equity:
Preferred stock, $0.01 par value (300 shares authorized; none issued)	—			—
Common stock, $0.01 par value (9,600 shares authorized; 1,294 and 1,423 issued and outstanding at October 31, 2019 and October 31, 2018, respectively)	13			14
Additional paid-in capital	28,444			30,342
Accumulated deficit ^(l)	(7,632		)	(5,899		)
Accumulated other comprehensive loss	(3,727		)	(3,218		)
Total HPE stockholders’ equity	17,098			21,239
Non-controlling interests	51			35
Total stockholders’ equity	17,149			21,274
Total liabilities and stockholders’ equity	$	51,803		$	55,493

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions)

	Three months ended October 31, 2019			Twelve months ended October 31, 2019
Cash flows from operating activities:
Net earnings	$	480		$	1,049
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	616			2,535
Stock-based compensation expense	61			268
Provision for doubtful accounts and inventory	59			240
Restructuring charges	75			221
Deferred taxes on earnings	194			1,079
Earnings from equity interests	1			(20		)
Dividends received from equity investees	85			156
Other, net	70			204
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	59			374
Financing receivables	(85		)	(410		)
Inventory	(20		)	46
Accounts payable	301			(525		)
Taxes on earnings	28			(1,093		)
Restructuring	(70		)	(331		)
Other assets and liabilities	(422		)	204
Net cash provided by operating activities	1,432			3,997
Cash flows from investing activities:
Investment in property, plant and equipment	(703		)	(2,856		)
Proceeds from sale of property, plant and equipment	149			597
Purchases of available-for-sale securities and other investments	(6		)	(39		)
Maturities and sales of available-for-sale securities and other investments	14			26
Financial collateral posted	(71		)	(403		)
Financial collateral received	4			744
Payments made in connection with business acquisitions, net of cash acquired	(1,445		)	(1,526		)
Net cash used in investing activities	(2,058		)	(3,457		)
Cash flows from financing activities:
Short-term borrowings with original maturities less than 90 days, net	(78		)	(53		)
Proceeds from debt, net of issuance costs	2,507			3,517
Payment of debt	(1,331		)	(2,203		)
Net proceeds related to stock-based award activities	24			48
Repurchase of common stock	(284		)	(2,249		)
Cash dividends paid	(147		)	(608		)
Net cash provided by (used in) financing activities	691			(1,548		)
Increase (decrease) in cash, cash equivalents and restricted cash	65			(1,008		)
Cash, cash equivalents and restricted cash at beginning of period	4,011			5,084
Cash, cash equivalents and restricted at end of period ^(j)	$	4,076		$	4,076

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions)

	Three months ended
	October 31, 2019			July 31, 2019			October 31, 2018
Net revenue: ^(a)(k)
Hybrid IT	$	5,670		$	5,549		$	6,338
Intelligent Edge	723			762			773
Financial Services	878			888			939
Corporate Investments	134			130			139
Total segment net revenue	7,405			7,329			8,189
Elimination of intersegment net revenue and other	(190		)	(112		)	(243		)
Total Hewlett Packard Enterprise consolidated net revenue	$	7,215		$	7,217		$	7,946

Earnings from continuing operations before taxes: ^(k)
Hybrid IT	$	780		$	704		$	716
Intelligent Edge	29			37			86
Financial Services	74			77			71
Corporate Investments	(26		)	(25		)	(12		)
Total segment earnings from operations	857			793			861

Unallocated corporate costs and eliminations	(107		)	(65		)	(90		)
Unallocated stock-based compensation expense	(17		)	(13		)	(9		)
Amortization of intangible assets	(68		)	(58		)	(72		)
Impairment of goodwill	—			—			(88		)
Restructuring charges	—			—			(5		)
Transformation costs	(151		)	(170		)	77
Acquisition, disposition and other related charges ^(b)(g)	(54		)	(563		)	(12		)
Separation costs	—			—			(9		)
Interest and other, net	(38		)	(70		)	(111		)
Tax indemnification adjustments ^(c)	288			(134		)	(12		)
Non-service net periodic benefit credit ^(d)	14			12			31
(Loss) earnings from equity interests	(1		)	3			15
Total Hewlett Packard Enterprise consolidated earnings (loss) from continuing operations before taxes	$	723		$	(265	)	$	576

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions)

	Twelve months ended October 31,
	2019			2018
Net revenue: ^(a)(k)
Hybrid IT	$	22,825		$	24,498
Intelligent Edge	2,837			2,920
Financial Services	3,581			3,671
Corporate Investments	507			543
Total segment net revenue	29,750			31,632
Elimination of intersegment net revenue and other	(615		)	(780		)
Total Hewlett Packard Enterprise consolidated net revenue	$	29,135		$	30,852

Earnings from continuing operations before taxes: ^(k)
Hybrid IT	$	2,804		$	2,503
Intelligent Edge	95			277
Financial Services	305			286
Corporate Investments	(108		)	(91		)
Total segment earnings from operations	3,096			2,975

Unallocated corporate costs and eliminations	(286		)	(259		)
Unallocated stock-based compensation expense	(59		)	(73		)
Amortization of intangible assets	(267		)	(294		)
Impairment of goodwill	—			(88		)
Restructuring charges	—			(19		)
Transformation costs	(453		)	(414		)
Acquisition, disposition and other related charges ^(b)(g)	(764		)	(82		)
Separation costs	—			(9		)
Disaster charges	7			—
Interest and other, net	(177		)	(274		)
Tax indemnification adjustments ^(c)	377			(1,354		)
Non-service net periodic benefit credit ^(d)	59			121
Earnings from equity interests	20			38
Total Hewlett Packard Enterprise consolidated earnings from continuing operations before taxes	$	1,553		$	268

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions, except percentages)

	Three months ended									Change (%)
	October 31, 2019			July 31 2019			October 31, 2018			Q/Q		Y/Y
Net revenue: ^(a)(k)
Hybrid IT
Hybrid IT Product
Compute	$	3,233		$	3,151		$	3,707		3	%	(13	%)
Storage	848			844			959			—		(12	%)
Total Hybrid IT Product	4,081			3,995			4,666			2	%	(13	%)
HPE Pointnext	1,589			1,554			1,672			2	%	(5	%)
Total Hybrid IT	5,670			5,549			6,338			2	%	(11	%)
Intelligent Edge
HPE Aruba Product	620			668			685			(7	%)	(9	%)
HPE Aruba Services	103			94			88			10	%	17	%
Total Intelligent Edge	723			762			773			(5	%)	(6	%)
Financial Services	878			888			939			(1	%)	(6	%)
Corporate Investments	134			130			139			3	%	(4	%)
Total segment net revenue	7,405			7,329			8,189			1	%	(10	%)
Elimination of intersegment net revenue and other	(190		)	(112		)	(243		)	70	%	(22	%)
Total Hewlett Packard Enterprise consolidated net revenue	$	7,215		$	7,217		$	7,946		—		(9	%)

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions, except percentages)

	Twelve months ended October 31,
	2019			2018			Y/Y
Net revenue: ^(a)(k)
Hybrid IT
Hybrid IT Product
Compute	$	12,879		$	14,057		(8	%)
Storage	3,609			3,706			(3	%)
Total Hybrid IT Product	16,488			17,763			(7	%)
HPE Pointnext	6,337			6,735			(6	%)
Total Hybrid IT	22,825			24,498			(7	%)
Intelligent Edge
HPE Aruba Product	2,462			2,599			(5	%)
HPE Aruba Services	375			321			17	%
Total Intelligent Edge	2,837			2,920			(3	%)
Financial Services	3,581			3,671			(2	%)
Corporate Investments	507			543			(7	%)
Total segment net revenue	29,750			31,632			(6	%)
Elimination of intersegment net revenue and other	(615		)	(780		)	(21	%)
Total Hewlett Packard Enterprise consolidated net revenue	$	29,135		$	30,852		(6	%)

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY DATA (Unaudited)

	Three months ended		Change in Operating Margin (pts)
	October 31, 2019		Q/Q	Y/Y
Segment operating margin: ^(k)
Hybrid IT	13.8	%	1.1 pts	2.5 pts
Intelligent Edge	4.0	%	(0.9) pts	(7.1) pts
Financial Services	8.4	%	(0.3) pts	0.8 pts
Corporate Investments	(19.4	)%	(0.2) pts	(10.8) pts
Total segment operating margin	11.6	%	0.8 pts	1.1 pts

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE (Unaudited) (In millions, except per share amounts)

	Three months ended
	October 31, 2019		July 31, 2019			October 31, 2018
Numerator:
GAAP net earnings (loss) from continuing operations	$	480	$	(27	)	$	(772	)
GAAP net earnings from discontinued operations	$	—	$	—		$	15
Non-GAAP net earnings from continuing operations	$	644	$	603		$	633
Non-GAAP net earnings from discontinued operations	$	—	$	—		$	—

Denominator:
Weighted-average shares used to compute basic net earnings per share	1,308		1,334			1,459
Dilutive effect of employee stock plans ^(m)	15		13			17
Weighted-average shares used to compute diluted net earnings per share	1,323		1,347			1,476

GAAP net earnings (loss) per share from continuing operations
Basic	$	0.37	$	(0.02	)	$	(0.53	)
Diluted ^(m)	$	0.36	$	(0.02	)	$	(0.53	)

GAAP net earnings per share from discontinued operations
Basic	$	—	$	—		$	0.01
Diluted ^(m)	$	—	$	—		$	0.01

Non-GAAP net earnings per share from continuing operations
Basic	$	0.49	$	0.45		$	0.43
Diluted ⁽ⁿ⁾	$	0.49	$	0.45		$	0.43

Non-GAAP net earnings per share from discontinued operations
Basic	$	—	$	—		$	—
Diluted	$	—	$	—		$	—

Total Hewlett Packard Enterprise GAAP basic net earnings (loss) per share	$	0.37	$	(0.02	)	$	(0.52	)
Total Hewlett Packard Enterprise GAAP diluted net earnings (loss) per share	$	0.36	$	(0.02	)	$	(0.52	)
Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share	$	0.49	$	0.45		$	0.43
Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share	$	0.49	$	0.45		$	0.43

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE (Unaudited) (In millions, except per share amounts)

	Twelve months ended October 31,
	2019		2018
Numerator:
GAAP net earnings from continuing operations	$	1,049	$	2,012
GAAP net loss from discontinued operations	$	—	$	(104	)
Non-GAAP net earnings from continuing operations	$	2,416	$	2,298
Non-GAAP net earnings from discontinued operations	$	—	$	—

Denominator:
Weighted-average shares used to compute basic net earnings per share	1,353		1,529
Dilutive effect of employee stock plans ^(m)	13		24
Weighted-average shares used to compute diluted net earnings per share	1,366		1,553

GAAP net earnings per share from continuing operations
Basic	$	0.78	$	1.32
Diluted ^(m)	$	0.77	$	1.30

GAAP net loss per share from discontinued operations
Basic	$	—	$	(0.07	)
Diluted ^(m)	$	—	$	(0.07	)

Non-GAAP net earnings per share from continuing operations
Basic	$	1.79	$	1.50
Diluted ⁽ⁿ⁾	$	1.77	$	1.48

Non-GAAP net earnings per share from discontinued operations
Basic	$	—	$	—
Diluted	$	—	$	—

Total Hewlett Packard Enterprise GAAP basic net earnings per share	$	0.78	$	1.25
Total Hewlett Packard Enterprise GAAP diluted net earnings per share	$	0.77	$	1.23
Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share	$	1.79	$	1.50
Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share	$	1.77	$	1.48

(a)		The Company adopted the new revenue recognition accounting standard (ASC 606) on a modified retrospective basis effective the first quarter of fiscal 2019. Fiscal 2019 results are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the prior revenue recognition accounting standard (ASC 605).

(b)		For the three months ended July 31, 2019 and the twelve months ended October 31, 2019, this amount primarily included a charge related to a one-time arbitration settlement.

(c)		For the three and twelve months ended October 31, 2019, the amount was due primarily to the termination of the Tax Matters Agreement with HP Inc. The twelve month period ended October 31, 2019 also included the impact of the effective settlement of the U.S. federal income tax audit of fiscal years 2013 through 2015 for HP Inc. and the effects of U.S. tax reform attributes related to fiscal periods prior to the separation from HP Inc.

		For the three and twelve months ended October 31, 2018 this amount represents the settlement of certain pre- Separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc.

(d)		Effective at the beginning of the first quarter of fiscal 2019, subsequent to the adoption of the accounting standards update for retirement benefits (Topic 715), the Company reclassified its non-service net periodic benefit credit from operating expense to other income and expense in its Condensed Consolidated Statements of Earnings. The Company reflected these changes retrospectively, by transferring the non-service net periodic benefit credit, a portion of which was previously allocated to the segments, and the remainder of which was reported within Unallocated corporate costs and eliminations, Transformation costs, Restructuring charges and Separation costs, to Non-service net periodic benefit credit as other income and expense for periods in fiscal 2018.

		While these changes had no impact on Hewlett Packard Enterprise's previously reported GAAP consolidated net earnings or GAAP net earnings per share, however, the company reflected the change resulting from the reclassification of its non-service net periodic benefit credit by restating its non-GAAP consolidated net earnings and non-GAAP net earnings per share for the previously reported period.

(e)		The three and twelve months ended October 31, 2019, include $123 million and $488 million of net income tax charges, respectively, related to changes in U.S. federal and state valuation allowances as a result of impacts of the Tax Act and a change in the Company's forecasts. The three months ended July 31, 2019 and the twelve months ended October 31, 2019 includes $308 million and $274 million, of income tax benefits, respectively, related to the change in pre- Separation tax liabilities for which the Company shared joint and several liability with HP Inc. and for which the Company was partially indemnified by HP Inc. under the Tax Matters Agreement and continues to be indemnified under the Termination and Mutual Release Agreement in limited circumstances.

		For the three months ended October 31, 2018, this amount primarily includes $1.3 billion expense as a result of the impact of U.S. tax reform.

		For the twelve months ended October 31, 2018, this amount primarily includes a $2.0 billion benefit in connection with the settlement of certain pre- Separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc., a $2.0 billion tax benefit, as the result of U.S. Tax Reform, from the application of the new tax rules including a lower federal tax rate to deferred tax assets and liabilities and a $208 million benefit primarily from foreign tax credits and from the release of non U.S. valuation allowances on deferred taxes established in connection with the Everett Transaction, partially offset by a provisional estimate of $1.7 billion of transition tax expense on accumulated non U.S. earnings, and a provisional estimate of $687 million of tax expense on valuation allowance on foreign tax credits.

(f)		For the three and twelve months ended October 31, 2018, includes transformation costs of $20 million related to cumulative translation adjustments resulting from country exits associated with the HPE Next initiative, which was recorded within Interest and other, net.

(g)		For the three and twelve months ended October 31, 2019, includes acquisition, disposition and other related charges of $7 million related to a non-cash inventory fair value adjustment in connection with the acquisition of Cray, Inc., which was included in Cost of Sales.

(h)		Represents the amortization of basis difference adjustments related to the H3C divestiture.

(i)		Effective the first quarter of fiscal 2019, the Company uses a structural tax rate based on long-term non-GAAP financial projections.

(j)		The Company adopted the guidance for the classification and presentation of restricted cash in the statement of cash flows in the first quarter of fiscal 2019, beginning November 1, 2018, using the retrospective method. As a result of the adoption of this accounting standard update, as of October 31, 2019 and October 31, 2018, the restricted cash balance included in cash, cash equivalents and restricted cash as disclosed in the Statements of Cash Flows above was $323 million and $204 million, respectively, which was included in Other current assets in the Condensed Consolidated Balance Sheets.

(k)		Effective at the beginning of the first quarter of fiscal 2019, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the data center networking ("DC Networking") business, which was previously reported within the Hybrid IT Product business unit in the Hybrid IT segment, to the HPE Aruba Product and HPE Aruba Services business units within the Intelligent Edge segment; (ii) the transfer of the edge compute business, which was previously reported within the HPE Aruba Product business unit in the Intelligent Edge segment, to the Hybrid IT Product business unit within the Hybrid IT segment; and (iii) the transfer of the Communications and Media Solutions ("CMS") business, which was previously reported within the HPE Pointnext business unit in the Hybrid IT segment, to the Corporate Investments segment.

		The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the transfer of net revenue and operating profit for each of the businesses as described above.

		These changes had no impact on Hewlett Packard Enterprise's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.

(l)		The Company adopted the accounting standard update for income taxes related to intra-entity transfers of assets other than inventory, using the modified retrospective method. As a result, the Company recognized $2.3 billion of income taxes as an adjustment to accumulated deficit in the first quarter of fiscal 2019.

(m)		GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards, but the effect is excluded when calculating GAAP diluted net loss per share when it would be anti-dilutive.

(n)		Non-GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards.

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