HPE Reports Q3 Results

Board of Directors have declared a regular cash dividend of $0.12 per share on the company's common stock. This dividend, the fourth in Hewlett Packard Enterprise's fiscal year 2020, is payable on October 7, 2020, to stockholders of record as of the close of business on September 9, 2020.

FY 2020 Outlook

For the fiscal 2020 fourth quarter, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.02 to $0.06. For fiscal 2020 full-year Hewlett Packard Enterprise estimates GAAP diluted net loss per share of $0.35 to $0.31.

For the fiscal 2020 fourth quarter, Hewlett Packard Enterprise estimates non-GAAP diluted net EPS to be in the range of $0.32 to $0.36. Fiscal 2020 fourth quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.30 per diluted share, primarily related to transformation costs and the amortization of intangible assets.

For fiscal 2020 full-year, Hewlett Packard Enterprise estimates non-GAAP diluted net EPS to be in the range of $1.30 to $1.34. Fiscal 2020 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.65 per diluted share, primarily related to goodwill impairment, transformation costs, amortization of intangible assets, and acquisition, disposition and other related charges.

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 as well as non-GAAP gross profit margin, non-GAAP operating profit (non-GAAP earnings from operations), non-GAAP operating profit margin, non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, free cash flow, 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 profit margin, operating profit (earnings from operations), operating profit margin, net earnings, diluted net earnings per share, 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 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 and its consolidated subsidiaries may differ materially from those expressed or implied by such forward-looking statements and assumptions. The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “aim,” “will,” “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 the scope and duration of the novel coronavirus pandemic (“COVID-19”) and its impact on our business, operations, liquidity and capital resources, employees, customers, partners, supply chain, financial results and the world economy; 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, backlog, 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, restructuring charges, or other transformation actions; 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 or restructuring charges, 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 (including pandemics and public health problems, such as the outbreak of COVID-19); 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, including any impact thereon resulting from events such as the COVID-19 pandemic; the hiring and retention of key employees; execution, integration and other risks associated with business combination and investment transactions; the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the costs and 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 that may be implemented; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s other filings with the Securities and Exchange Commission, including but not limited to the risks described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019, Hewlett Packard Enterprise’s Quarterly Reports on Form 10-Q for the fiscal quarters ended January 31, 2020 and April 30, 2020, Current Reports on Form 8-K, and in other filings made by Hewlett Packard Enterprise from time to time with the Securities and Exchange Commission.

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 Quarterly Report on Form 10-Q for the third quarter ended July 31, 2020. 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
	July 31, 2020			April 30, 2020			July 31, 2019
Net revenue	$	6,816		$	6,009		$	7,217
Costs and expenses:
Cost of sales	4,749			4,095			4,768
Research and development	455			450			481
Selling, general and administrative	1,131			1,109			1,253
Amortization of intangible assets	95			84			58
Impairment of goodwill ^(a)	—			865			—
Transformation costs	357			200			170
Disaster charges ^(b)	2			22			—
Acquisition, disposition and other related charges	15			18			563
Total costs and expenses	6,804			6,843			7,293
Earnings (loss) from operations	12			(834		)	(76		)
Interest and other, net	(71		)	(68		)	(70		)
Tax indemnification adjustments	(30		)	(35		)	(134		)
Non-service net periodic benefit credit	28			36			12
Earnings (loss) from equity interests	27			(10		)	3
Loss before taxes	(34		)	(911		)	(265		)
Benefit from taxes	43			90			238
Net earnings (loss)	$	9		$	(821	)	$	(27	)
Net earnings (loss) per share:
Basic	$	0.01		$	(0.64)		$	(0.02)
Diluted ^(c)	$	0.01		$	(0.64)		$	(0.02)
Cash dividends declared per share	$	—		$	0.1200		$	0.1125
Weighted-average shares used to compute net earnings (loss) per share:
Basic	1,292			1,291			1,334
Diluted ^(c)	1,300			1,291			1,334


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

	Nine months ended July 31,
	2020			2019
Net revenue	$	19,774		$	21,920
Costs and expenses:
Cost of sales	13,511			14,820
Research and development	1,390			1,404
Selling, general and administrative	3,458			3,678
Amortization of intangible assets	299			199
Impairment of goodwill ^(a)	865			—
Transformation costs	646			302
Disaster charges (recovery) ^(b)	24			(7		)
Acquisition, disposition and other related charges	55			710
Total costs and expenses	20,248			21,106
(Loss) earnings from operations	(474		)	814
Interest and other, net	(158		)	(139		)
Tax indemnification adjustments	(86		)	89
Non-service net periodic benefit credit	101			45
Earnings from equity interests	50			21
(Loss) earnings before taxes	(567		)	830
Benefit (provision) for taxes	88			(261		)
Net (loss) earnings	$	(479	)	$	569
Net (loss) earnings per share:
Basic	$	(0.37	)	$	0.42
Diluted ^(c)	$	(0.37	)	$	0.41
Cash dividends declared per share	$0.2400			$0.3375
Weighted-average shares used to compute net (loss) earnings per share:
Basic	1,294			1,367
Diluted ^(c)	1,294			1,380

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Unaudited) (In millions, except percentages and per share amounts)

	Three months ended July 31, 2020			Diluted net earnings per share			Three months ended April 30, 2020			Diluted net earnings per share			Three months ended July 31, 2019			Diluted net earnings per share
GAAP net earnings (loss)	$	9		$	0.01		$	(821)		$	(0.64)		$	(27)		$	(0.02)
Non-GAAP adjustments:
Amortization of initial direct costs	3			—			3			—			—			—
Amortization of intangible assets	95			0.07			84			0.07			58			0.04
Impairment of goodwill ^(a)	—			—			865			0.67			—			—
Transformation costs	357			0.27			200			0.15			170			0.13
Disaster charges ^(b)	2			—			22			0.02			—			—
Acquisition, disposition and other related charges	15			0.01			25			0.02			563			0.42
Tax indemnification adjustments	30			0.03			35			0.03			134			0.10
Non-service net periodic benefit credit	(28		)	(0.02		)	(36		)	(0.03		)	(12		)	(0.01		)
Earnings from equity interests ^(d)	36			0.03			37			0.03			38			0.03
Adjustments for taxes	(100		)	(0.08		)	(129		)	(0.10		)	(321		)	(0.24		)
Non-GAAP net earnings	$	419		$	0.32		$	285		$	0.22		$	603		$	0.45

GAAP earnings (loss) from operations	12						(834)						(76)
Non-GAAP adjustments
Amortization of initial direct costs	3						3						—
Amortization of intangible assets	95						84						58
Impairment of goodwill ^(a)	—						865						—
Transformation costs	357						200						170
Disaster charges ^(b)	2						22						—
Acquisition, disposition and other related charges	15						25						563
Non-GAAP earnings from operations	$	484					$	365					$	715

GAAP operating profit margin	0.2		%				(13.9		)%				(1.1		)%
Non-GAAP adjustments	6.9		%				20.0		%				11.0		%
Non-GAAP operating profit margin	7.1		%				6.1		%				9.9		%

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Unaudited) (In millions, except percentages and per share amounts)

	Three months ended July 31, 2020			Three months ended April 30, 2020			Three months ended July 31, 2019
GAAP net revenue	$	6,816		$	6,009		$	7,217
GAAP cost of sales	4,749			4,095			4,768
GAAP gross profit	$	2,067		$	1,914		$	2,449

Non-GAAP adjustments
Amortization of initial direct costs	$	3		$	3		$	—
Acquisition, disposition and other related charges ^(e)	—			7			—
Non-GAAP gross profit	$	2,070		$	1,924		$	2,449

GAAP gross profit margin	30.3		%	31.9		%	33.9		%
Non-GAAP adjustments	0.1		%	0.1		%	—		%
Non-GAAP gross profit margin	30.4		%	32.0		%	33.9		%

Net cash provided by operating activities	$	1,472		$	100		$	1,196
Investment in property, plant and equipment	(620		)	(591		)	(625		)
Proceeds from sale of property, plant and equipment	72			89			77
Free cash flow	$	924		$	(402	)	$	648

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Unaudited) (In millions, except percentages and per share amounts)

	Nine months ended July 31, 2020			Diluted net earnings per share			Nine months ended July 31, 2019			Diluted net earnings per share
GAAP net (loss) earnings	$	(479	)	$	(0.37	)	$	569		$	0.41
Non-GAAP adjustments:
Amortization of initial direct costs	9			0.01			—			—
Amortization of intangible assets	299			0.23			199			0.14
Impairment of goodwill ^(a)	865			0.67			—			—
Transformation costs	646			0.49			302			0.22
Disaster charges (recovery) ^(b)	24			0.02			(7		)	(0.01		)
Acquisition, disposition and other related charges	82			0.06			710			0.51
Tax indemnification adjustments	86			0.07			(89		)	(0.06		)
Non-service net periodic benefit credit	(101		)	(0.08		)	(45		)	(0.03		)
Earnings from equity interests ^(d)	110			0.09			114			0.08
Adjustments for taxes	(262		)	(0.21		)	19			0.02
Non-GAAP net earnings	$	1,279		$	0.98		$	1,772		$	1.28

GAAP (loss) earnings from operations	(474		)				$	814

Non-GAAP adjustments
Amortization of initial direct costs	9						—
Amortization of intangible assets	299						199
Impairment of goodwill ^(a)	865						—
Transformation costs	646						302
Disaster charges (recovery) ^(b)	24						(7		)
Acquisition, disposition and other related charges	82						710
Non-GAAP earnings from operations	$	1,451					$	2,018

GAAP operating profit margin	(2.4		)%				3.7		%
Non-GAAP adjustments	9.7		%				5.5		%
Non-GAAP operating profit margin	7.3		%				9.2		%

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Unaudited) (In millions, except percentages and per share amounts)

	Nine months ended July 31, 2020			Nine months ended July 31, 2019
GAAP net revenue	$	19,774		$	21,920
GAAP cost of sales	13,511			14,820
GAAP gross profit	$	6,263		$	7,100

Non-GAAP adjustments
Amortization of initial direct costs	$	9		$	—
Acquisition, disposition and other related charges ^(e)	27			—
Non-GAAP gross profit	$	6,299		$	7,100

GAAP gross profit margin	31.7		%	32.4		%
Non-GAAP adjustments	0.2		%	—		%
Non-GAAP gross profit margin	31.9		%	32.4		%

Net cash provided by operating activities	$	1,493		$	2,565
Investment in property, plant and equipment	(1,779		)	(2,153		)
Proceeds from sale of property, plant and equipment	623			448
Free cash flow	$	337		$	860

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

	As of
	July 31, 2020			October 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	8,465		$	3,753
Accounts receivable, net of allowance for doubtful accounts	2,856			2,957
Financing receivables, net of allowance for doubtful accounts	3,797			3,572
Inventory	3,469			2,387
Assets held for sale	3			46
Other current assets	2,793			2,428
Total current assets	21,383			15,143
Property, plant and equipment	5,709			6,054
Long-term financing receivables and other assets ^(f)	10,602			8,918
Investments in equity interests	2,269			2,254
Goodwill and intangible assets	18,276			19,434
Total assets	$	58,239		$	51,803
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and short-term borrowings	$	5,727		$	4,425
Accounts payable	6,001			5,595
Employee compensation and benefits	1,181			1,522
Taxes on earnings	204			186
Deferred revenue	3,343			3,234
Accrued restructuring	386			195
Other accrued liabilities ^(f)	4,768			4,002
Total current liabilities	21,610			19,159
Long-term debt	13,730			9,395
Other non-current liabilities ^(f)	6,693			6,100
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; 1,286 and 1,294 shares issued and outstanding at July 31, 2020 and October 31, 2019, respectively)	13			13
Additional paid-in capital	28,275			28,444
Accumulated deficit ^(g)	(8,377		)	(7,632		)
Accumulated other comprehensive loss ^(g)	(3,756		)	(3,727		)
Total HPE stockholders’ equity	16,155			17,098
Non-controlling interests	51			51
Total stockholders’ equity	16,206			17,149
Total liabilities and stockholders’ equity	$	58,239		$	51,803

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

	Three months ended July 31, 2020			Nine months ended July 31, 2020
Cash flows from operating activities:
Net earnings (loss)	$	9		$	(479	)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	642			1,973
Impairment of goodwill	—			865
Stock-based compensation expense	55			215
Provision for doubtful accounts and inventory	80			208
Restructuring charges	305			553
Deferred taxes on earnings	(111		)	(214		)
Earnings from equity interests	(27		)	(50		)
Dividends received from equity investees	35			35
Other, net	107			115
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(254		)	69
Financing receivables	(338		)	(411		)
Inventory	(57		)	(1,253		)
Accounts payable	504			431
Taxes on earnings	40			(85		)
Restructuring	(106		)	(350		)
Other assets and liabilities	588			(129		)
Net cash provided by operating activities	1,472			1,493
Cash flows from investing activities:
Investment in property, plant and equipment	(620		)	(1,779		)
Proceeds from sale of property, plant and equipment	72			623
Purchases of available-for-sale securities and other investments	(5		)	(78		)
Maturities and sales of available-for-sale securities and other investments	1			29
Financial collateral posted	(522		)	(573		)
Financial collateral received	24			637
Payments made in connection with business acquisitions, net of cash acquired	—			(13		)
Net cash used in investing activities	(1,050		)	(1,154		)
Cash flows from financing activities:
Short-term borrowings with original maturities less than 90 days, net	(46		)	36
Proceeds from debt, net of issuance costs	3,180			6,745
Payment of debt	(468		)	(1,399		)
Net proceeds related to stock-based award activities	13			(34		)
Repurchase of common stock	—			(355		)
Cash dividends paid to non-controlling interests	—			(8		)
Contributions from non-controlling interests	—			1
Cash dividends paid	(154		)	(464		)
Net cash provided by financing activities	2,525			4,522
Increase in cash, cash equivalents and restricted cash	2,947			4,861
Cash, cash equivalents and restricted cash at beginning of period	5,990			4,076
Cash, cash equivalents and restricted cash at end of period	$	8,937		$	8,937

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

	Three months ended
	July 31, 2020			April 30, 2020			July 31, 2019
Net revenue: ^(h)
Compute	$	3,389		$	2,640		$	3,400
HPC & MCS	649			589			633
Storage	1,128			1,086			1,255
A & PS	226			237			242
Intelligent Edge	684			665			781
Financial Services	811			833			888
Corporate Investments	119			124			130
Total segment net revenue	7,006			6,174			7,329
Elimination of intersegment net revenue	(190		)	(165		)	(112		)
Total Hewlett Packard Enterprise consolidated net revenue	$	6,816		$	6,009		$	7,217

Earnings before taxes: ^(h)
Compute	$	288		$	125		$	439
HPC & MCS	36			33			51
Storage	145			145			207
A & PS	(4		)	2			(9		)
Intelligent Edge	59			73			53
Financial Services	65			75			77
Corporate Investments	(27		)	(28		)	(25		)
Total segment earnings from operations	562			425			793

Unallocated corporate costs and eliminations	(65		)	(48		)	(65		)
Unallocated stock-based compensation expense	(13		)	(12		)	(13		)
Amortization of initial direct costs	(3		)	(3		)	—
Amortization of intangible assets	(95		)	(84		)	(58		)
Impairment of goodwill ^(a)	—			(865		)	—
Transformation costs	(357		)	(200		)	(170		)
Disaster charges ^(b)	(2		)	(22		)	—
Acquisition, disposition and other related charges	(15		)	(25		)	(563		)
Interest and other, net	(71		)	(68		)	(70		)
Tax indemnification adjustments	(30		)	(35		)	(134		)
Non-service net periodic benefit credit	28			36			12
Earnings (loss) from equity interests	27			(10)			3
Total Hewlett Packard Enterprise consolidated loss before taxes	$	(34	)	$	(911	)	$	(265	)

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

	Nine months ended July 31,
	2020			2019
Net revenue: ^(h)
Compute	$	9,040		$	10,293
HPC & MCS	2,061			2,133
Storage	3,464			3,929
A & PS	706			743
Intelligent Edge	2,069			2,171
Financial Services	2,503			2,703
Corporate Investments	364			373
Total segment net revenue	20,207			22,345
Elimination of intersegment net revenue	(433		)	(425		)
Total Hewlett Packard Enterprise consolidated net revenue	$	19,774		$	21,920

Earnings before taxes: ^(h)
Compute	$	699		$	1,086
HPC & MCS	118			241
Storage	516			705
A & PS	(4		)	(55		)
Intelligent Edge	202			113
Financial Services	213			231
Corporate Investments	(82		)	(82		)
Total segment earnings from operations	1,662			2,239

Unallocated corporate costs and eliminations	(165		)	(179		)
Unallocated stock-based compensation expense	(46		)	(42		)
Amortization of initial direct costs	(9		)	—
Amortization of intangible assets	(299		)	(199		)
Impairment of goodwill ^(a)	(865		)	—
Transformation costs	(646		)	(302		)
Disaster (charges) recovery ^(b)	(24		)	7
Acquisition, disposition and other related charges	(82		)	(710		)
Interest and other, net	(158		)	(139		)
Tax indemnification adjustments	(86		)	89
Non-service net periodic benefit credit	101			45
Earnings from equity interests	50			21
Total Hewlett Packard Enterprise consolidated (loss) earnings before taxes	$	(567	)	$	830

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

	Three months ended														Change (%)
	July 31, 2020			April 30, 2020					July 31, 2019						Q/Q				Y/Y
Net revenue: ^(h)
Compute	$	3,389		$	2,640				$	3,400					28			%	—	%
HPC & MCS	649			589					633						10			%	3	%
Storage	1,128			1,086					1,255						4			%	(10	%)
A & PS	226			237					242						(5			%)	(7	%)
Intelligent Edge	684			665					781						3			%	(12	%)
Financial Services	811			833					888						(3			%)	(9	%)
Corporate Investments	119			124					130						(4			%)	(8	%)
Total segment net revenue	7,006			6,174					7,329						13			%	(4	%)
Elimination of intersegment net revenue	(190		)	(165				)	(112					)	15			%	70	%
Total Hewlett Packard Enterprise consolidated net revenue	$	6,816		$	6,009				$	7,217					13			%	(6	%)

						Nine months ended July 31,
						2020						2019					Y/Y
Net revenue: ^(h)
Compute						$	9,040					$	10,293				(12			%)
HPC & MCS						2,061						2,133					(3			%)
Storage						3,464						3,929					(12			%)
A & PS						706						743					(5			%)
Intelligent Edge						2,069						2,171					(5			%)
Financial Services						2,503						2,703					(7			%)
Corporate Investments						364						373					(2			%)
Total segment net revenue						20,207						22,345					(10			%)
Elimination of intersegment net revenue						(433					)	(425				)	2			%
Total Hewlett Packard Enterprise consolidated net revenue						$	19,774					$	21,920				(10			%)

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

	Three months ended		Change in Operating Profit Margin (pts)
	July 31, 2020		Q/Q	Y/Y
Segment operating profit margin: ^(h)
Compute	8.5	%	3.8	-4.4
HPC & MCS	5.5	%	-0.1	-2.6
Storage	12.9	%	-0.5	-3.6
A & PS	(1.8	)%	-2.6	1.9
Intelligent Edge	8.6	%	-2.4	1.8
Financial Services	8.0	%	-1.0	-0.7
Corporate Investments	(22.7	)%	-0.1	-3.5
Total segment operating profit margin	8.0	%	1.1	-2.8

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

	Three months ended
	July 31, 2020		April 30, 2020			July 31, 2019
Numerator:
GAAP net earnings (loss)	$	9	$	(821	)	$	(27	)
Non-GAAP net earnings	$	419	$	285		$	603

Denominator:
Weighted-average shares used to compute basic net earnings (loss) per share and diluted net loss per share	1,292		1,291			1,334
Dilutive effect of employee stock plans ^(c)	8		7			13
Weighted-average shares used to compute diluted net earnings per share	1,300		1,298			1,347

GAAP net earnings (loss) per share
Basic	$	0.01	$	(0.64	)	$	(0.02	)
Diluted ^(c)	$	0.01	$	(0.64	)	$	(0.02	)

Non-GAAP net earnings per share
Basic	$	0.32	$	0.22		$	0.45
Diluted ^(c)	$	0.32	$	0.22		$	0.45

	Nine months ended July 31,
	2020			2019
Numerator:
GAAP net (loss) earnings	$	(479	)	$	569
Non-GAAP net earnings	$	1,279		$	1,772

Denominator:
Weighted-average shares used to compute basic net (loss) earnings per share and diluted net loss per share	1,294			1,367
Dilutive effect of employee stock plans ^(c)	10			13
Weighted-average shares used to compute diluted net earnings per share	1,304			1,380

GAAP net (loss) earnings per share
Basic	$	(0.37	)	$	0.42
Diluted ^(c)	$	(0.37	)	$	0.41

Non-GAAP net earnings per share
Basic	$	0.99		$	1.30
Diluted ^(c)	$	0.98		$	1.28

(a)	The Company recorded $865 million of partial goodwill impairment charge in the second quarter of fiscal 2020 as it was determined that the fair value of the HPC & MCS reporting unit was below the carrying value of its net assets.
(b)	Disaster charges (recovery) for the three and nine months ended July 31, 2020 include direct costs resulting from COVID-19. For the nine months ended July 31, 2019, represents insurance recoveries in relation to damage to our facilities in Houston, Texas due to Hurricane Harvey in fiscal 2017.
(c)	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 because it would be anti-dilutive.
(d)	Represents the amortization of basis difference adjustments related to the H3C divestiture.
(e)	For the periods presented, amounts represent Acquisition, disposition and other related charges related to a non-cash inventory fair value adjustment in connection with the acquisition of Cray, Inc., which was included in Cost of sales.
(f)	The Company adopted the new accounting standard for leases in the first quarter of fiscal 2020 which requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset for the lease term. The Company elected the modified retrospective transition method whereby prior comparative periods are not restated. Adoption of the new lease standard resulted in the recognition of $1.0 billion of ROU assets and $1.1 billion of lease liabilities on the Company’s Condensed Consolidated Balance Sheet at November 1, 2019.
(g)	The Company adopted an accounting standard update in the first quarter of fiscal 2020 that allowed it to reclassify $43 million of stranded tax effects resulting from U.S. tax reform from accumulated other comprehensive loss into accumulated deficit.
(h)	Effective at the beginning of the first quarter of fiscal 2020, Hewlett Packard Enterprise Company ("HPE") implemented certain organizational changes to align its segment financial reporting more closely with its current business structure. As a result of these organizational changes, HPE replaced the Hybrid IT reportable segment (and the Compute, Storage and HPE Pointnext business units within it) with four new financial reporting segments: Compute, High Performance Compute & Mission-Critical Systems ("HPC & MCS"), Storage, and Advisory and Profession Services ("A & PS").
	In addition, the Intelligent Edge segment now includes the Data Center Networking ("DC Networking") operational services business that was previously a part of the Hybrid IT Segment. The DC Networking business, other than operational services, had been transferred to the Intelligent Edge segment in a prior realignment.
	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, net earnings or net earnings per share ("EPS").

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