hpe-20230430

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


(Mark One)
☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended:			April 30, 2023

Or


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Commission file number			001-37483

HEWLETT PACKARD ENTERPRISE COMPANY

(Exact name of registrant as specified in its charter)


Delaware						47-3298624
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification no.)

1701 East Mossy Oaks Road,

Spring,

Texas

77389

(Address of principal executive offices)

(Zip code)

(678)

259-9860

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

HPE

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Hewlett Packard Enterprise Company common stock outstanding as of May 26, 2023 was 1,291,518,139 shares, par value $0.01.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

For the Quarterly Period Ended April 30, 2023

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I, contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties, and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise Company and its consolidated subsidiaries ("Hewlett Packard Enterprise") may differ materially from those expressed or implied by such forward-looking statements and assumptions. The words "believe", "expect", "anticipate", "intend", "will", "estimates", "may", "likely", "could", "should" and similar expressions are intended to identify such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections or expectations of revenue, margins, expenses, investments, effective tax rates, interest rates, the impact of tax law changes (including those in the Inflation Reduction Act of 2022) and related guidance and regulations, net earnings, net earnings per share, cash flows, liquidity and capital resources, inventory, order book, goodwill, impairment charges, hedges and derivatives and related offsets, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates, repayments of debts including our asset-backed debt securities, amortization of intangible assets, or other financial items; recent amendments to accounting guidance and any potential impacts on our financial reporting therefrom; any projections of the amount, execution, timing, and results of any transformation or impact of cost savings or restructuring plans, including estimates and assumptions related to the anticipated benefits, cost savings, or charges of implementing such transformation and restructuring plans; any statements of the plans, strategies, and objectives of management for future operations, as well as the execution and consummation of corporate transactions or contemplated acquisitions and dispositions (including but not limited to the disposition of H3C shares and the receipt of proceeds therefrom), research and development expenditures, and any resulting benefit, cost savings, charges, or revenue or profitability improvements; any statements concerning the expected development, performance, market share, or competitive performance relating to products or services; any statements concerning technological and market trends, the pace of technological innovation, and adoption of new technologies, including products and services offered by Hewlett Packard Enterprise; any statements regarding current or future macroeconomic trends or events and the impacts of those trends and events on Hewlett Packard Enterprise and our financial performance, including but not limited to supply chain, inflation, demand for our products and services, and financial sector volatility, and our actions to mitigate such impacts on our business; any statements regarding future regulatory trends and the resulting legal and reputational exposure, including but not limited to those relating to environmental, social, and governance issues; any statements regarding pending investigations, claims, or disputes; any statements of expectation or belief; and any statements of 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, including but not limited to financial sector volatility, supply chain constraints, the inflationary environment, the ongoing conflict between Russia and Ukraine, and the relationship between China and the U.S.; the need to effectively manage third-party suppliers and distribute Hewlett Packard Enterprise's products and services; 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 (including from public health problems and geopolitical events, such as those mentioned above); the development of and transition to 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, including any impact thereon resulting from macroeconomic or geopolitical events, such as those mentioned above; the hiring and retention of key employees; the execution, integration, and other risks associated with business combination and investment transactions; the impact of changes to privacy, cybersecurity, environmental, global trade, and other governmental regulations; changes in our product, lease, intellectual property, or real estate portfolio; the payment or non-payment of a dividend for any period; the efficacy of using non-GAAP, rather than GAAP, financial measures in business projections and planning; the judgments required in connection with determining revenue recognition; impact of company policies and related compliance; utility of segment realignments; allowances for recovery of receivables and warranty obligations; provisions for, and resolution of, pending investigations, claims, and disputes; the impacts of the Inflation Reduction Act of 2022 and related guidance or regulations; and other risks that are described herein, including but not limited to the items discussed in "Risk Factors" in Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended October 31, 2022 and that are otherwise described or updated from time to time in Hewlett Packard Enterprise's Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and in other filings made with the Securities and Exchange Commission. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements, except as required by applicable law.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Unaudited)


	For the three months ended April 30,				For the six months ended April 30,
	2023		2022		2023		2022
	In millions, except per share amounts
Net revenue:
Products	$	4,242	$	4,040	$	9,356	$	8,283
Services	2,601		2,551		5,173		5,147
Financing income	130		122		253		244
Total net revenue	6,973		6,713		14,782		13,674
Costs and expenses:
Cost of products	2,738		2,834		6,198		5,850
Cost of services(1)	1,633		1,558		3,246		3,113
Financing cost(1)	90		148		168		194
Research and development	570		517		1,193		1,021
Selling, general and administrative	1,269		1,249		2,526		2,450
Amortization of intangible assets	71		74		144		147

Transformation costs	60		98		162		209
Disaster charges(1)	3		20		4		19
Acquisition, disposition and other related charges	19		8		30		16
Total costs and expenses	6,453		6,506		13,671		13,019
Earnings from operations	520		207		1,111		655
Interest and other, net	(54)		—		(79)		(5)
Tax indemnification and related adjustments	6		—		5		(17)
Non-service net periodic benefit credit	1		36		1		72
Earnings from equity interests	49		33		107		64
Earnings before provision for taxes	522		276		1,145		769
Provision for taxes	(104)		(26)		(226)		(6)
Net earnings	$	418	$	250	$	919	$	763
Net earnings per share:
Basic	$	0.32	$	0.19	$	0.71	$	0.58
Diluted	$	0.32	$	0.19	$	0.70	$	0.57

Weighted-average shares used to compute net earnings per share:
Basic	1,304		1,307		1,301		1,306
Diluted	1,318		1,329		1,317		1,327

(1) The three and six months ended April 30, 2022 include amounts for expected credit loss reserves due to the Company's exit from its Russia and Belarus businesses. Refer to Note 1 "Overview and Summary of Significant Accounting Policies", for further information.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income


	For the three months ended April 30,				For the six months ended April 30,
	2023		2022		2023		2022
	In millions
Net earnings	$	418	$	250	$	919	$	763
Other comprehensive income (loss) before taxes:
Change in net unrealized (losses) gains on available-for-sale securities:
Net unrealized (losses) gains arising during the period	—		(7)		5		(8)

	—		(7)		5		(8)
Change in net unrealized gains (losses) on cash flow hedges:
Net unrealized gains (losses) arising during the period	18		345		(500)		560
Net losses (gains) reclassified into earnings	39		(264)		286		(465)
	57		81		(214)		95
Change in unrealized components of defined benefit plans:
Net unrealized gains arising during the period	—		—		—		6
Amortization of net actuarial loss and prior service benefit	36		40		71		81
Curtailments, settlements and other	—		1		—		2
	36		41		71		89
Change in cumulative translation adjustment	(1)		(25)		19		(36)
Other comprehensive income (loss) before taxes	92		90		(119)		140
(Provision) benefit for taxes	(14)		(21)		39		(34)
Other comprehensive income (loss), net of taxes	78		69		(80)		106
Comprehensive income	$	496	$	319	$	839	$	869

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	As of
	April 30, 2023		October 31, 2022
	(Unaudited)		(Audited)
	In millions, except par value
ASSETS
Current assets:
Cash and cash equivalents	$	2,781	$	4,163
Accounts receivable, net of allowances	3,711		4,101
Financing receivables, net of allowances	3,716		3,522
Inventory	4,317		5,161

Other current assets	3,035		3,559
Total current assets	17,560		20,506
Property, plant and equipment	6,013		5,784
Long-term financing receivables and other assets	11,287		10,537
Investments in equity interests	2,281		2,160
Goodwill	17,733		17,403
Intangible assets	675		733
Total assets	$	55,549	$	57,123
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings	$	5,004	$	4,612
Accounts payable	5,501		8,717
Employee compensation and benefits	1,439		1,401
Taxes on earnings	198		176
Deferred revenue	3,621		3,451
Accrued restructuring	166		192
Other accrued liabilities	4,322		4,625
Total current liabilities	20,251		23,174
Long-term debt	8,372		7,853
Other non-current liabilities	6,505		6,187
Commitments and contingencies
Stockholders' equity
HPE stockholders' equity:

Common stock, $0.01 par value (9,600 shares authorized; 1,292 and 1,281 shares issued and outstanding at April 30, 2023 and October 31, 2022, respectively)	13		13
Additional paid-in capital	28,274		28,299
Accumulated deficit	(4,743)		(5,350)
Accumulated other comprehensive loss	(3,178)		(3,098)
Total HPE stockholders' equity	20,366		19,864
Non-controlling interests	55		45
Total stockholders' equity	20,421		19,909
Total liabilities and stockholders' equity	$	55,549	$	57,123

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


	For the six months ended April 30,
	2023		2022
	In millions
Cash flows from operating activities:
Net earnings	$	919	$	763
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	1,307		1,242

Stock-based compensation expense	266		242
Provision for inventory and credit losses	97		213
Restructuring charges	95		68
Deferred taxes on earnings	69		(54)
Earnings from equity interests	(107)		(64)

Other, net	(11)		(46)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	370		817
Financing receivables	(666)		470
Inventory	782		(861)
Accounts payable	(3,220)		(1,323)
Taxes on earnings	(1)		35
Restructuring	(147)		(197)
Other assets and liabilities	307		(1,002)
Net cash provided by operating activities	60		303
Cash flows from investing activities:
Investment in property, plant and equipment	(1,482)		(1,349)
Proceeds from sale of property, plant and equipment	245		258
Purchases of investments	(5)		(40)
Proceeds from maturities and sales of investments	4		72
Financial collateral posted	(1,009)		(40)
Financial collateral received	483		272
Payments made in connection with business acquisitions, net of cash acquired	(406)		—
Net cash used in investing activities	(2,170)		(827)
Cash flows from financing activities:
Short-term borrowings with original maturities less than 90 days, net	344		56
Proceeds from debt, net of issuance costs	2,845		1,582
Payment of debt	(2,428)		(1,340)
Settlement of cash flow hedge	(2)		—
Net payments related to stock-based award activities	(106)		(60)
Repurchase of common stock	(179)		(187)


Cash dividends paid to shareholders	(311)		(311)
Net cash provided by (used in) financing activities	163		(260)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	139		—
Decrease in cash, cash equivalents and restricted cash	(1,808)		(784)
Cash, cash equivalents and restricted cash at beginning of period	4,763		4,332
Cash, cash equivalents and restricted cash at end of period	$	2,955	$	3,548

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)


	Common Stock
For the three months ended April 30, 2023	Number of Shares	Par Value		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Equity Attributable to the Company		Non- controlling Interests		Total Equity
	In millions, except number of shares in thousands
Balance at January 31, 2023	1,296,884	$	13	$	28,259	$	(5,005)	$	(3,256)	$	20,011	$	52	$	20,063
Net earnings						418				418		3		421
Other comprehensive gain								78		78				78
Comprehensive income										496		3		499
Stock-based compensation expense				126						126				126
Tax withholding related to vesting of employee stock plans				(6)						(6)				(6)
Issuance of common stock in connection with employee stock plans and other	1,783			2		(1)				1				1
Repurchases of common stock	(7,164)			(107)						(107)				(107)
Cash dividends declared ($0.12 per share)						(155)				(155)				(155)

Balance at April 30, 2023	1,291,503	$	13	$	28,274	$	(4,743)	$	(3,178)	$	20,366	$	55	$	20,421

) Represents the impact of the adoption of the accounting standard on the s on financial instruments.



For the six months ended April 30, 2023	Number of Shares	Par Value		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Equity Attributable to the Company		Non- controlling Interests		Total Equity
	In millions, except number of shares in thousands
Balance at October 31, 2022	1,281,037	$	13	$	28,299	$	(5,350)	$	(3,098)	$	19,864	$	45	$	19,909
Net earnings						919				919		10		929
Other comprehensive loss								(80)		(80)				(80)
Comprehensive income										839		10		849
Stock-based compensation expense				266						266				266
Tax withholding related to vesting of employee stock plans				(140)						(140)				(140)
Issuance of common stock in connection with employee stock plans and other	22,135			26		(1)				25				25
Repurchases of common stock	(11,669)			(177)						(177)				(177)
Cash dividends declared ($0.24 per share)						(311)				(311)				(311)

Balance at April 30, 2023	1,291,503	$	13	$	28,274	$	(4,743)	$	(3,178)	$	20,366	$	55	$	20,421


	Common Stock
For the three months ended April 30, 2022	Number of Shares	Par Value		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Equity Attributable to the Company		Non- controlling Interests		Total Equity
	In millions, except number of shares in thousands
Balance at January 31, 2022	1,300,259	$	13	$	28,422	$	(5,239)	$	(2,878)	$	20,318	$	47	$	20,365
Net earnings						250				250		3		253
Other comprehensive income								69		69				69
Comprehensive income										319		3		322
Stock-based compensation expense				114						114				114
Tax withholding related to vesting of employee stock plans				(8)						(8)				(8)
Issuance of common stock in connection with employee stock plans and other	2,195			3						3				3
Repurchases of common stock	(3,530)			(58)						(58)				(58)
Cash dividends declared ($0.12 per share)						(156)				(156)				(156)

Balance at April 30, 2022	1,298,924	$	13	$	28,473	$	(5,145)	$	(2,809)	$	20,532	$	50	$	20,582



For the six months ended April 30, 2022	Number of Shares	Par Value		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Equity Attributable to the Company		Non- controlling Interests		Total Equity
	In millions, except number of shares in thousands
Balance at October 31, 2021	1,294,634	$	13	$	28,470	$	(5,597)	$	(2,915)	$	19,971	$	46	$	20,017
Net earnings						763				763		4		767
Other comprehensive income								106		106				106
Comprehensive income										869		4		873
Stock-based compensation expense				242						242				242
Tax withholding related to vesting of employee stock plans				(90)						(90)				(90)
Issuance of common stock in connection with employee stock plans and other	15,644			29						29				29
Repurchases of common stock	(11,354)			(178)						(178)				(178)
Cash dividends declared ($0.24 per share)						(311)				(311)				(311)

Balance at April 30, 2022	1,298,924	$


			Page
Forward-Looking Statements			3
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited)	4
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
	Item 4.	Controls and Procedures	59
Part II.	Other Information
	Item 1.	Legal Proceedings	59
	Item 1A.	Risk Factors	59
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
	Item 5.	Other Information	60
	Item 6.	Exhibits	60
Exhibit Index			61
Signature			66


			Page
Condensed Consolidated Statements of Earnings for the three and six months ended April 30, 2023 and 2022 (Unaudited)			5

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended April 3 0 , 2023 and 2022 (Unaudited)			6

Condensed Consolidated Balance Sheets as of April 3 0 , 2023 (Unaudited) and October 31, 2022 (Audited)			7

Condensed Consolidated Statements of Cash Flows for the six months ended Apri l 3 0 , 2023 and 2022 (Unaudited)			8

Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended April 3 0 , 2023 and 2022 (Unaudited)			9

Notes to Condensed Consolidated Financial Statements (Unaudited)			11

Note 1: Overview and Summary of Significant Accounting Policies			11

Note 2: Segment Information			12

Note 3: Transformation Programs			15

Note 4: Retirement Benefit Plans			17

Note 5: Taxes on Earnings			17

Note 6: Balance Sheet Details			18

Note 7: Accounting for Leases as a Lessor			20

Note 8 : Acquisitions			23

Note 9 : Goodwill			24

Note 10 : Fair Value			24

Note 1 1 : Financial Instruments			26

Note 1 2 : Borrowings			30

Note 1 3 : Stockholders' Equity			31

Note 1 4 : Net Earnings Per Share			31

Note 1 5 : Litigation, Contingencies, and Commitments			32

Note 1 6 : Equity Method Investments			35

Note 1 7 : Subsequent Events			35