4 unchanged sentences
This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes that appear elsewhere in this document.
−Removed: The financial discussion and analysis in the following MD&A compares the three and six months ended April 30, 2023 to the comparable prior-year periods and where appropriate, as of April 30, 2023, unless otherwise noted.
+Added: The financial discussion and analysis in the following MD&A compares the three and nine months ended July 31, 2023 to the comparable prior-year periods and where appropriate, as of July 31, 2023, unless otherwise noted.
This MD&A is organized as follows:
• Trends and Uncertainties.
−Removed: A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment of supply chain constraints (though easing), conservative customer spending environment, inflationary trend and foreign exchange pressures, and recently enacted tax legislation.
+Added: A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment of supply chain constraints (though easing), increased demand for and adoption of new technologies, conservative customer spending environment, inflationary trend and foreign exchange pressures, and recently enacted tax legislation.
• Executive Overview.
14 unchanged sentences
TRENDS AND UNCERTAINTIES
−Removed: The elevated backlog levels we experienced in fiscal 2022 generally declined in fiscal 2023 as supply chain constraints eased.
−Removed: However, our order book in segments such as Intelligent Edge and Compute remain above historically normal levels.
−Removed: At the same time, in the second quarter of fiscal 2023, new order growth declined on a year-over-year basis, due in part to elongated sales cycles as customers adopted a conservative approach to spending in a mixed macroeconomic environment.
−Removed: Operationally, the year-over-year segment performance was strong while the sequential segment performance was mixed.
−Removed: We expect the mixed macroeconomic environment to continue to moderate our revenue growth in the near term.
−Removed: At the same time, improvements to industry-wide supply constraints have helped to ease certain supply chain challenges we encountered in the recent past, including the increased availability of supply and lower material and logistics costs.
−Removed: Additionally, we are experiencing a challenging foreign exchange environment, which has moderated our revenue and earnings growth.
−Removed: We expect the unfavorable foreign exchange effects along with an inflationary trend to continue in the longer term.
+Added: The elevated order book levels we experienced in fiscal 2022 have generally been declining throughout fiscal 2023, as supply chain constraints eased, though challenges still remain.
+Added: Meanwhile, demand for and adoption of new technologies, such as AI, have increased.
+Added: We have observed, and expect to continue seeing, customers of various segments and sizes pursue such new technologies, including AI computing capabilities and solutions.
+Added: At the same time, we have continued to see elongated sales cycles and customers adopting a more conservative approach to spending in a mixed macroeconomic environment.
+Added: We expect such mixed macroeconomic environment to continue to moderate our revenue growth in the near term.
+Added: As referenced above, mild improvements to industry-wide supply constraints have helped to ease certain supply chain challenges we encountered in the recent past, including the increased availability of supply and lower material and logistics costs.
+Added: Material cost trends are dependent on the strength or weakness of actual end-user demand and supply dynamics, which will continue to evolve and ultimately impact the translation of the cost environment to our pricing actions and, consequently, our operating results.
+Added: Logistics costs continued to decrease from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network.
+Added: Additionally, we are experiencing a challenging foreign exchange environment, which has increased costs of products and services and moderated our revenue and earnings growth.
+Added: We have a large global presence, with more than half of our revenue generated outside of the U.S.
+Added: As a result, our financial results can be, and particularly in recent periods have been, impacted by fluctuations in foreign currency exchange rates.
+Added: Furthermore, inflationary pressures persist, keeping not only material and logistics costs, but also labor costs, somewhat elevated compared to pre-COVID-19 pandemic levels.
+Added: We expect the unfavorable foreign exchange effects and inflationary trend to continue in the longer term.
We expect the substantial completion of our HPE Next Plan and Cost Optimization and Prioritization Plan, coupled with pricing actions we implemented in response to an inflationary trend, related cost reduction measures and operational efficiencies, may moderate the impact of unfavorable foreign exchange effects in fiscal 2023.
22 unchanged sentences
The following table summarizes our condensed consolidated GAAP financial results:
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 Change 2023 2022 Change
8 unchanged sentences
Cash flow provided by operations $ 1,525 $ 1,254 $271 $ 1,585 $ 1,557 $28
−Removed: Three months ended April 30, 2023 compared with the three months ended April 30, 2022
−Removed: Net revenue of $7.0 billion represented an increase of 3.9% (increased 8.6% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Intelligent Edge segment, moderated by unfavorable currency fluctuations.
−Removed: The gross profit margin of 36.0% (or $2.5 billion) represents an increase of 3.6 percentage points from the prior-year period led by the impact of higher-margin networking revenue, higher AUPs in Compute and Intelligent Edge, lower supply chain and commodity costs, and the impact of charges in the prior period from expected credit losses resulting from our exit from Russia and Belarus.
−Removed: The operating profit margin of 7.5% represents an increase of 4.4 percentage points due primarily to the gross profit margin improvement, lower transformation expense, and lower fixed employee costs.
−Removed: Six months ended April 30, 2023 compared with the six months ended April 30, 2022
−Removed: Net revenue of $14.8 billion represented an increase of 8.1% (increased 13.2% on a constant currency basis) primarily due to higher AUPs in the Intelligent Edge segment and higher customer acceptances in the HPC & AI segment, moderated by unfavorable currency fluctuations.
−Removed: The gross profit margin of 35.0% (or $5.2 billion) represents an increase of 2.0 percentage points from the prior-year period due to the impact of higher-margin networking revenue, higher AUPs in Compute and Intelligent Edge, lower supply chain and commodity costs and the impact of charges in the prior period from expected credit losses resulting from our exit from Russia and Belarus.
+Added: Three months ended July 31, 2023 compared with three months ended July 31, 2022
+Added: Net revenue of $7.0 billion represented an increase of 0.7% (increased 3.5% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Intelligent Edge segment, moderated by a decline in server unit volume in the Compute segment and unfavorable currency fluctuations.
+Added: The gross profit margin of 35.8%, (or $2.5 billion), represents an increase of 1.3 percentage points from the prior-year period led by the impact of higher-margin networking revenue, higher AUPs in Intelligent Edge, lower supply chain and commodity costs, and the impact of charges in the prior period from expected credit losses resulting from our exit from Russia and Belarus.
+Added: The operating profit margin of 6.7% remained flat.
+Added: Nine months ended July 31, 2023 compared with nine months ended July 31, 2022
+Added: Net revenue of $21.8 billion represented an increase of 5.6% (increased 10.0% on a constant currency basis) primarily due to higher AUPs in the Intelligent Edge segment and higher customer acceptances in the HPC & AI segment, moderated by a decline in server unit volume in the Compute segment and unfavorable currency fluctuations.
+Added: The gross profit margin of 35.3% (or $7.7 billion) represents an increase of 1.8 percentage points from the prior-year period due to the impact of higher-margin networking revenue, higher AUPs in Intelligent Edge and Compute, lower supply chain and commodity costs, and the impact of charges in the prior period from expected credit losses resulting from our exit from Russia and Belarus.
The operating profit margin of 7.3% represents an increase of 1.9 percentage points primarily due to the aforementioned gross margin improvement and lower transformation expenses moderated by higher planned investments in research and development.
4 unchanged sentences
The following table summarizes our condensed consolidated non-GAAP financial results:
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 Change 2023 2022 Change
11 unchanged sentences
Annualized Revenue Run-rate ("ARR")
−Removed: ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service, software consumption revenue, and other as-a-service offerings, recognized during a quarter and multiplied by four.
−Removed: We believe that ARR is a metric that allows management to better understand and highlight the potential future performance of our as-a-service business.
+Added: ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service, software consumption revenue, and other as-a-service (“aaS”) offerings, recognized during a quarter and multiplied by four.
+Added: We believe that ARR is a metric that allows management to better understand and highlight the potential future performance of our aaS business.
We also believe ARR provides investors with greater transparency to our financial information and of the performance metric used in our financial and operational decision making and allows investors to see our results “through the eyes of management.” We use ARR as a performance metric.
2 unchanged sentences
ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.
−Removed: The following presents our ARR calculated as of April 30, 2023 and 2022:
−Removed: As of April 30,
+Added: The following presents our ARR calculated as of July 31, 2023 and 2022:
+Added: As of July 31,
Dollars in millions
Year-over-year growth rate 48% 22%
−Removed: The 35% year-over year increase in ARR was due primarily to growth in our HPE GreenLake edge-to-cloud platform and related financial services moderated by unfavorable currency fluctuations.
−Removed: The growth in the HPE GreenLake edge-to-cloud platform was led by an expanding customer installed base.
−Removed: At the segment level, the growth was led by Intelligent Edge as-a-service activity and Storage as-a-service including Zerto.
+Added: The 48% year-over year increase in ARR was due primarily to growth in our HPE GreenLake edge-to-cloud platform, which was due to an expanding customer installed base.
+Added: At the segment level, the growth was led by Intelligent Edge aaS and Storage aaS activity.
Returning capital to our shareholders remains an important part of our capital allocation framework, which also consists of strategic investments.
−Removed: During the second quarter of fiscal 2023, we paid a quarterly dividend of $0.12 per share to our shareholders.
−Removed: On May 30, 2023, we declared a regular cash dividend of $0.12 per share on our common stock, payable on July 14, 2023, to our shareholders of record as of the close of business on June 15, 2023.
−Removed: As of April 30, 2023, we had a remaining authorization of $1.2 billion for future share repurchases.
+Added: During the third quarter of fiscal 2023, we paid a quarterly dividend of $0.12 per share to our shareholders.
+Added: On August 29, 2023, we declared a regular cash dividend of $0.12 per share on our common stock, payable on October 13, 2023, to our shareholders of record as of the close of business on September 14, 2023.
+Added: As of July 31, 2023, we had a remaining authorization of $1.0 billion for future share repurchases.
Table of Content
12 unchanged sentences
Results of operations in dollars and as a percentage of net revenue were as follows:
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 2023 2022
14 unchanged sentences
Tax indemnification and related adjustments 45 0.6 (30) (0.4) 50 0.2 (47) (0.2)
−Removed: Non-service net periodic benefit credit 1 — 36 0.5 1 — 72 0.4
+Added: Non-service net periodic benefit (cost) credit (3) — 34 0.5 (2) — 106 0.5
Earnings from equity interests 73 1.0 68 1.0 180 0.8 132 0.6
2 unchanged sentences
Net earnings $ 464 6.6 % $ 409 5.9 % $ 1,383 6.3 % $ 1,172 5.7 %
−Removed: Three and six months ended April 30, 2023 compared with the three and six months ended April 30, 2022
−Removed: For the three months ended April 30, 2023, total net revenue of $7.0 billion represented an increase of $260 million, or 3.9% (increased 8.6% on a constant currency basis).
+Added: Three and nine months ended July 31, 2023 compared with the three and nine months ended July 31, 2022
+Added: For the three months ended July 31, 2023, total net revenue of $7.0 billion represented an increase of $51 million, or 0.7% (increased 3.5% on a constant currency basis).
net revenue increased by $172 million, or 7.6% to $2.4 billion, and net revenue from outside of the U.S.
−Removed: increased by $24 million, or 0.5%, to $4.6 billion.
+Added: decreased by $121 million, or 2.6%, to $4.6 billion.
Table of Content
2 unchanged sentences
Financial Condition and Results of Operations (Continued)
−Removed: For the six months ended April 30, 2023, total net revenue of $14.8 billion represented an increase of $1,108 million, or 8.1% (increased 13.2% on a constant currency basis).
+Added: For the nine months ended July 31, 2023, total net revenue of $21.8 billion represented an increase of $1,159 million, or 5.6% (increased 10.0% on a constant currency basis).
net revenue increased by $976 million, or 14.5% to $7.7 billion, and net revenue from outside of the U.S.
1 unchanged sentence
The components of the weighted net revenue change by segment were as follows:
−Removed: For the three months ended April 30, 2023 For the six months ended April 30, 2023
+Added: For the three months ended July 31, 2023 For the nine months ended July 31, 2023
Percentage Points
8 unchanged sentences
Total HPE 0.7 5.6
−Removed: Three months ended April 30, 2023 compared with three months ended April 30, 2022
+Added: Three months ended July 31, 2023 compared with three months ended July 31, 2022
From a segment perspective, the primary factors contributing to the change in total net revenue are summarized as follows:
−Removed: • Compute net revenue decrease of $250 million, or 8.3%, primarily due to a decline in server unit volume and unfavorable currency fluctuations moderated by higher AUPs
−Removed: • HPC & AI net revenue increase of $130 million, or 18.3%, primarily due to higher customer acceptance
−Removed: • Storage net revenue decrease of $29 million, or 2.7%, primarily due to unfavorable currency fluctuations, partially offset by improvements in the supply environment
−Removed: • Intelligent Edge net revenue increase of $437 million, or 50.4%, primarily due to increased AUPs and volume and product mix effect
+Added: • Compute net revenue decrease of $403 million, or 13.3%, primarily due to a decline in server unit volume
+Added: • HPC & AI net revenue increase of $6 million, or 0.7%, primarily due to increased AUPs
+Added: • Storage net revenue decrease of $55 million, or 4.9%, primarily due to unfavorable currency fluctuations and decreased AUPs
+Added: • Intelligent Edge net revenue increase of $474 million, or 50.4%, primarily due to increased AUPs, volume and product mix effect
• Financial Services net revenue increase of $56 million, or 6.9%, primarily due to higher rental revenue from higher average operating leases and higher finance income on finance leases due to an increasing interest rate environment
−Removed: • Corporate Investments and Other net revenue decrease of $31 million, or 9.5%, primarily due to unfavorable currency fluctuations
−Removed: Six months ended April 30, 2023 compared with six months ended April 30, 2022
+Added: • Corporate Investments and Other net revenue increase of $18 million, or 6.0%, primarily due to orders strength and the recent acquisition of OpsRamp
+Added: Nine months ended July 31, 2023 compared with nine months ended July 31, 2022
From a segment perspective, the primary factors contributing to the change in total net revenue are summarized as follows:
−Removed: • Compute net revenue increase of $162 million, or 2.7%, primarily due to higher AUPs moderated by lower server unit volume and unfavorable currency fluctuations
+Added: • Compute net revenue decrease of $241 million, or 2.7%, primarily due to a decline in server unit volume and unfavorable currency fluctuations
• HPC & AI net revenue increase of $402 million, or 17.3%, primarily due to higher customer acceptances
−Removed: • Storage net revenue increase of $30 million, or 1.4%, primarily due to improvements in the supply environment, partially offset by unfavorable currency fluctuations
−Removed: • Intelligent Edge net revenue increase of $663 million, or 37.5%, primarily due to increased AUPs and volume and product mix effect
+Added: • Storage net revenue decrease of $25 million, or 0.8%, primarily due to unfavorable currency fluctuations
+Added: • Intelligent Edge net revenue increase of $1,137 million, or 42.0%, primarily due to increased AUPs, volume and product mix effect
• Financial Services net revenue increase of $122 million, or 4.9%, primarily due to higher rental revenue from higher average operating leases and higher finance income on finance leases due to an increasing interest rate environment
5 unchanged sentences
Please refer to the section "Segment Information" further below for a discussion of our results of operations for each reportable segment.
−Removed: For the three and six months ended April 30, 2023, the total gross profit margin of 36.0% and 35.0%, respectively, represents an increase of 3.6 and 2.0 percentage points, respectively, as compared to the respective prior year periods.
−Removed: The increase in both periods was due to the impact of higher-margin networking revenue, higher AUPs in Compute and Intelligent Edge, lower supply chain and commodity costs, and the impact of charges in the prior period from expected credit losses resulting from our exit from Russia and Belarus.
−Removed: Additionally, the increase for the six months ended April 30, 2023, was partially offset by lower support services revenue.
+Added: For the three and nine months ended July 31, 2023, the total gross profit margin of 35.8% and 35.3%, respectively, represents an increase of 1.3 and 1.8 percentage points, respectively, as compared to the respective prior year periods.
+Added: The increase in both periods was due to the impact of higher-margin networking revenue, higher AUPs in Intelligent Edge and Compute, lower supply chain and commodity costs, and the impact of charges in prior periods from expected credit losses resulting from our exit from Russia and Belarus.
+Added: The increase in the total gross profit for the nine months ended July 31, 2023, was partially offset by lower gross profit from support services.
Operating expenses
Research and development ("R&D")
−Removed: For the three months ended April 30, 2023, R&D expense increased by $53 million, or 10.3%, led by Intelligent Edge and Storage.
−Removed: The increase was driven by higher employee costs due to an increase in software engineers to pursue our strategic goals, and incremental operational expenses from recent business acquisitions, which contributed 7.0 percentage points and 1.9 percentage points, respectively, to the change.
−Removed: The increase was partially offset by favorable currency fluctuations which contributed 1.2 percentage points to the change.
−Removed: For the six months ended April 30, 2023, R&D expense increased by $172 million, or 16.8%, led by Intelligent Edge, HPC & AI and Storage.
−Removed: The increase was driven by higher employee costs due to an increase in software engineers to pursue our strategic goals, and incremental operational expenses from recent business acquisitions, which contributed 12.3 percentage points and 3.8 percentage points, respectively, to the change.
−Removed: The increase was partially offset by favorable currency fluctuations which contributed 1.4 percentage points to the change.
+Added: For the three months ended July 31, 2023, R&D expense increased by $69 million, or 13.6%, led by Intelligent Edge, HPC & AI and Storage.
+Added: The increase was primarily driven by higher employee costs due to an increase in software engineers to pursue our strategic goals, which contributed 15.7 percentage points to the change.
+Added: For the nine months ended July 31, 2023, R&D expense increased by $241 million, or 15.8%, led by Intelligent Edge, HPC & AI and Storage.
+Added: The increase was driven by higher employee costs due to an increase in software engineers to pursue our strategic goals, which contributed 15.7 percentage points to the change.
Selling, general and administrative ("SG&A")
−Removed: For the three months ended April 30, 2023, SG&A expense increased by $20 million, or 1.6%, due primarily to factoring fees and other general expenses, higher travel expenses as the economy opens up, and higher software expenditures, all of which contributed 1.7, 1.6 and 0.6 percentage points, respectively, to the change.
−Removed: The increase was partially offset by a combination of lower employee costs, contractor and consulting costs, which contributed 3.6 percentage points to the change, and favorable currency fluctuations driven by lower field selling costs.
−Removed: For the six months ended April 30, 2023, SG&A expense increased by $76 million, or 3.1%, due primarily to factoring fees, charitable donations, and other general expenses, higher travel expenses as the economy opens up and higher software expenditures, all of which contributed 1.6, 1.4 and 1.0 percentage points, respectively, to the change.
−Removed: The increase was partially offset by a combination of lower contractor and consulting costs, which contributed 1.4 percentage points to the change, and favorable currency fluctuations driven by lower field selling costs.
+Added: For the three months ended July 31, 2023, SG&A expense increased by $73 million, or 5.9%, due primarily to increased employee costs and higher travel and marketing expenses, which contributed 3.7 and 1.9 percentage points, respectively, to the change.
+Added: The increase was partially offset by a combination of lower consulting costs and cost savings from our transformation programs.
+Added: For the nine months ended July 31, 2023, SG&A expense increased by $149 million, or 4.1%, due primarily to increased employee costs by 2.1 percentage points;
+Added: higher travel and marketing expenses by 1.6 percentage points;
+Added: factoring fees, charitable donations, other general expenses and higher software expenditures, all of which contributed 2.1 percentage points to the change.
+Added: The increase was partially offset by a combination of lower consulting costs and cost savings from our transformation programs.
Transformation programs and costs
Our transformation programs consist of the Cost Optimization and Prioritization Plan (launched in 2020) and the HPE Next Plan (launched in 2017).
−Removed: For the three and six months ended April 30, 2023, transformation costs decreased by $38 million, or 38.8%, and $47 million, or 22.5%, respectively due to lower charges incurred in the current period as these plans approach completion through fiscal 2023.
+Added: For the three and nine months ended July 31, 2023, transformation costs decreased by $15 million, or 18.8%, and $62 million, or 21.5%, respectively, due to lower charges incurred in the current period as these plans approach completion through fiscal 2023.
For a further discussion, refer to Note 3, "Transformation Programs" to the Condensed Consolidated Financial Statements in Item 1 of Part I.
+Added: Disaster charges
+Added: For the three and nine months ended July 31, 2023, disaster charges decreased by $29 million or 96.7% and $44 million or 89.8%, respectively, due to charges recorded in the prior year periods driven by the Company’s exit from its Russia and Belarus businesses.
Interest and other, net
−Removed: For the three months ended April 30, 2023, interest and other, net expense increased by $54 million, due primarily to the impact of the prior period containing both gains from equity investments and the sale of certain assets, and unfavorable currency fluctuations in the current period.
+Added: For the three months ended July 31, 2023, interest and other, net expense decreased by $24 million, due primarily to the impact of the prior period containing losses from equity investments.
+Added: For the nine months ended July 31, 2023, interest and other, net expense increased by $50 million, due primarily to the impact of the prior period containing both gains from equity investments and the sale of certain assets.
+Added: This increase was moderated by favorable currency fluctuations and increased net interest income from higher interest rates in the current period.
Table of Content
2 unchanged sentences
Financial Condition and Results of Operations (Continued)
−Removed: For the six months ended April 30, 2023, interest and other, net expense increased by $74 million, due primarily to the impact of the prior period containing both gains from equity investments and the sale of certain assets.
−Removed: This increase was moderated by favorable currency fluctuations and increased net interest income from higher interest rates in the current period.
Tax indemnification and related adjustments
We record changes to certain pre-separation and pre-divestiture tax liabilities and tax receivables for which we remain liable on behalf of the separated or divested business, but which may not be subject to indemnification.
−Removed: We recorded tax indemnification and related adjustments income of $6 million for the three months ended April 30, 2023 and none for the three months ended April 30, 2022, and tax indemnification income of $5 million and tax indemnification expense of $17 million for the six months ended April 30, 2023 and 2022, respectively.
−Removed: Non-service net periodic benefit credit
−Removed: For the three and six months ended April 30, 2023, non-service net periodic benefit credit decreased by $35 million and $72 million, respectively, due primarily to increased interest cost resulting from higher discount rates, partially offset by higher expected returns on assets and lower amortized actuarial losses in the current periods.
+Added: We recorded tax indemnification income of $45 million and tax indemnification expense of $30 million for the three months ended July 31, 2023 and 2022, respectively and tax indemnification income of $50 million and tax indemnification expense of $47 million for the nine months ended July 31, 2023 and 2022, respectively.
+Added: For the three and nine months ended July 31, 2023, the amount primarily included the favorable settlement of tax indemnification liabilities and audit settlement.
+Added: For the three and nine months ended July 31, 2022, the amount primarily related to changes in tax liabilities for which we shared joint and several liability with HP Inc., for which we were indemnified by HP Inc.
+Added: Non-service net periodic benefit (cost) credit
+Added: For the three and nine months ended July 31, 2023, non-service net periodic benefit credit decreased by $37 million and $108 million, respectively, resulting in non-service net periodic benefit cost in the current periods as compared to non-service net periodic benefit credit in the prior-year period.
+Added: The decrease was due primarily to increased interest cost resulting from higher discount rates, partially offset by higher expected returns on assets and lower amortized actuarial losses in the current periods.
Earnings from equity interests
Earnings from equity interests primarily represents our 49% interest in H3C Technologies Co., Limited ("H3C") and the amortization of our interest in basis difference.
−Removed: For the three months ended April 30, 2023, earnings from equity interests increased by $16 million due primarily to lower amortization expense from basis difference.
−Removed: For the six months ended April 30, 2023, earnings from equity interests increased by $43 million due primarily to lower amortization expense from basis difference and higher net income earned by H3C in the current period.
+Added: For the three months ended July 31, 2023, earnings from equity interests increased by $5 million due primarily to lower amortization expense from basis difference.
+Added: For the nine months ended July 31, 2023, earnings from equity interests increased by $48 million due primarily to lower amortization expense from basis difference and higher net income earned by H3C in the current period.
Provision for taxes
−Removed: For the three months ended April 30, 2023 and 2022, we recorded income tax expense of $104 million and $26 million, respectively, which reflects an effective tax rate of 19.9% and 9.4%, respectively.
−Removed: For the six months ended April 30, 2023 and 2022, we recorded income tax expense of $226 million and $6 million, respectively, which reflect an effective tax rate of 19.7% and 0.8%, respectively.
+Added: For the three months ended July 31, 2023 and 2022, we recorded income tax expense of $72 million and $55 million, respectively, which reflects an effective tax rate of 13.4% and 11.9%, respectively.
+Added: For the nine months ended July 31, 2023 and 2022, we recorded income tax expense of $298 million and $61 million, respectively, which reflect an effective tax rate of 17.7% and 5.0%, respectively.
Our effective tax rate generally differs from the U.S.
4 unchanged sentences
The segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.
−Removed: As described in Note 1, "Overview and Summary of Significant Accounting Policies," effective at the beginning of the first quarter of fiscal 2023, HPE implemented an organizational change to align its segment financial reporting more closely with its current business structure resulting in changes to the previously reported segment net revenue and earnings from operations of the Compute and Storage segments.
+Added: As described in Note 1, "Overview and Summary of Significant Accounting Policies," effective as of the beginning of the first quarter of fiscal 2023, HPE implemented an organizational change to align its segment financial reporting more closely with its current business structure resulting in changes to the previously reported segment net revenue and earnings from operations of the Compute and Storage segments.
These changes had no impact to HPE’s previously reported consolidated GAAP results.
5 unchanged sentences
Segment Results
−Removed: The following table and ensuing discussion provide an overview of our key financial metrics by segment for the three months ended April 30, 2023, as compared to the prior-year period:
+Added: The following table and ensuing discussion provide an overview of our key financial metrics by segment for the three months ended July 31, 2023, as compared to the prior-year period:
HPE Consolidated Compute HPC & AI Storage Intelligent Edge Financial Services Corporate Investments and Other
7 unchanged sentences
Year-over-year change percentage points — pts (2.6) pts (4.2) pts (3.6) pts 13.2 pts (3.4) pts (1.6) pts
−Removed: The following table and ensuing discussion provide an overview of our key financial metrics by segment for the six months ended April 30, 2023, as compared to the prior-year period:
+Added: The following table and ensuing discussion provide an overview of our key financial metrics by segment for the nine months ended July 31, 2023, as compared to the prior-year period:
HPE Consolidated Compute HPC & AI Storage Intelligent Edge Financial Services Corporate Investments and Other
8 unchanged sentences
(1) HPE consolidated net revenue excludes intersegment net revenue.
+Added: Segment net revenues include intersegment net revenue.
(2) Segment earnings from operations exclude stock-based compensation expense, certain unallocated corporate costs and eliminations, transformation costs, amortization of intangible assets, acquisition, disposition and other related charges, and disaster charges.
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 % Change 2023 2022 % Change
3 unchanged sentences
Earnings from operations as a % of net revenue 10.9 % 13.5 % 14.9 % 13.9 %
−Removed: Three months ended April 30, 2023 compared with three months ended April 30, 2022
+Added: Three months ended July 31, 2023 compared with three months ended July 31, 2022
Compute net revenue decreased by $403 million, or 13.3% (decreased 9.6% on a constant currency basis), primarily due to a $418 million, or 18.0%, decrease in product revenue.
6 unchanged sentences
Financial Condition and Results of Operations (Continued)
−Removed: Compute earnings from operations as a percentage of net revenue increased 1.1 percentage points due to a decrease in costs of products and services as a percentage of net revenue while operating expenses as a percentage of net revenue increased.
−Removed: The decrease in costs of products and services as a percentage of net revenue was primarily due to higher AUPs and lower commodity costs moderated by unfavorable currency fluctuations.
−Removed: The increase in operating expenses as a percentage of net revenue was primarily due to the scale of the net revenue decline while total operating expenses remained relatively flat.
−Removed: Six months ended April 30, 2023 compared with six months ended April 30, 2022
−Removed: Compute net revenue increased by $162 million, or 2.7% (increased 8.2% on a constant currency basis), primarily due to a $170 million, or 3.7%, increase in product revenue.
−Removed: The product revenue increase was primarily due to an increase in AUPs of $872 million, or 18.9%, led by higher sales of server configurations with more complex component architectures in our next generation products.
−Removed: The product revenue increase was moderated by unfavorable currency fluctuations of $257 million, and lower server unit volume of $445 million, or 9.7%, resulting from an uneven demand environment.
−Removed: Services net revenue remained relatively flat as an increase in services contracts was moderated by unfavorable currency fluctuations.
−Removed: Compute earnings from operations as a percentage of net revenue increased 2.5 percentage points due to a decrease in costs of products and services as a percentage of net revenue while operating expenses as a percentage of net revenue remained relatively flat.
−Removed: The decrease in costs of products and services as a percentage of net revenue was primarily due to higher AUPs and lower commodity costs, moderated by unfavorable currency fluctuations.
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: Compute earnings from operations as a percentage of net revenue decreased 2.6 percentage points due to an increase in costs of products and services and operating expenses as a percentage of net revenue.
+Added: The increase in costs of products and services as a percentage of net revenue was primarily due to unfavorable currency fluctuations and higher supply chain costs, moderated by higher AUPs, and favorable mix of higher margin services.
+Added: The increase in operating expenses as a percentage of net revenue was primarily due to the scale of the net revenue decline relative to the decrease in total operating expenses driven by our cost containment measures.
+Added: Nine months ended July 31, 2023 compared with nine months ended July 31, 2022
+Added: Compute net revenue decreased by $241 million, or 2.7% (increased 2.3% on a constant currency basis), primarily due to a $248 million, or 3.6%, decrease in product revenue.
+Added: The decline in product revenue was primarily due to lower server unit volume of $841 million, or 12.1%, and unfavorable currency fluctuations of $353 million.
+Added: The product revenue decline was moderated by an increase in AUPs of $946 million, or 13.7%, led by higher sales of server configurations with more complex component architectures in our next generation products.
+Added: Compute earnings from operations as a percentage of net revenue increased 1.0 percentage point primarily due to a decrease in costs of products and services as a percentage of net revenue.
+Added: The decrease in costs of products and services as a percentage of net revenue was primarily due to higher AUPs moderated by higher supply chain costs and unfavorable currency fluctuations.
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 % Change 2023 2022 % Change
1 unchanged sentence
Net revenue $ 836 $ 830 0.7 % $ 2,732 $ 2,330 17.3 %
−Removed: Loss from operations $ (2) $ (40) (95.0) % $ (1) $ (47) (97.9) %
−Removed: Loss from operations as a % of net revenue (0.2) % (5.6) % (0.1) % (3.1) %
−Removed: Three months ended April 30, 2023 compared with three months ended April 30, 2022
−Removed: HPC & AI net revenue increased by $130 million, or 18.3% (increased 22.3% on a constant currency basis), primarily due to a $140 million, or 29.4%, increase in product revenue.
−Removed: The produ ct revenue increase w as led by the HPE Cray XD (formerly known as HPE Apollo) and HPE Cray Supercomputing product portfolios, as operational and supply improvements addressed recent challenges with achieving certain customer acceptance milestones for revenue recognition.
−Removed: The product revenue increase was led by HPE Cray XD with higher AUPs of $74 million, or 15.2%, and a unit volume increase of $17 million, or 3.6%.
−Removed: HPE Cray Supercomputing product unit and deal volume increased by $194 million, or 39.7%, moderated by a decrease in AUPs of $140 million, or 28.6%.
−Removed: Additionally, HPC & AI experienced unfavorable currency fluctuations of $23 million.
−Removed: HPC & AI earnings from operations as a percentage of net revenue increased 5.4 percentage points due to decreases in cost of products and services as a percentage of net revenue and operating expenses as a percentage of net revenue.
−Removed: The decrease in cost of products and services as a percentage of net revenue was due primarily to a favorable mix of higher-margin products, moderated by unfavorable currency fluctuations.
−Removed: The decrease in operating expenses as a percentage of net revenue was primarily due to the scale of the net revenue increase.
−Removed: Six months ended April 30, 2023 compared with six months ended April 30, 2022
+Added: (Loss)/earnings from operations $ (7) $ 28 (125.0) % $ (8) $ (19) 57.9 %
+Added: (Loss)/earnings from operations as a % of net revenue (0.8) % 3.4 % (0.3) % (0.8) %
+Added: Three months ended July 31, 2023 compared with three months ended July 31, 2022
+Added: HPC & AI net revenue increased by $6 million, or 0.7% (increased 3.0% on a constant currency basis), primarily due to a $24 million, or 4.1%, in crease in product revenue.
+Added: The product revenue increase was led by the HPE Cray XD (formerly known as HPE Apollo) product portfolio due to higher AUPs of $197 million, or 33.3%, moderated by a decrease in unit volume of $58 million, or 9.8%.
+Added: This revenue increase was partially offset by a decline in revenue in the HPE Cray Supercomputing product portfolio.
+Added: The product revenue was also impacted by unfavorable currency fluctuation of $17 million.
+Added: Services revenue declined by $18 million, or 7.6%, primarily due to unfavorable portfolio mix of service offerings.
+Added: HPC & AI earnings from operations as a percentage of net revenue decreased 4.2 percentage points due to increases in cost of products and services and operating expenses as a percentage of net revenue.
+Added: The increase in cost of products and services as a percentage of net revenue was primarily due to unfavorable currency fluctuations, partially offset by lower supply chain costs.
+Added: Nine months ended July 31, 2023 compared with nine months ended July 31, 2022
HPC & AI net revenue increased by $402 million, or 17.3% (increased 20.5% on a constant currency basis), primarily due to a $444 million, or 27.3%, increase in product revenue.
−Removed: The product revenue increase was led by the HPE Cray Supercomputing product portfolio, as operational and supply improvements addressed recent challenges with achieving certain customer acceptance milestones for revenue recognition.
−Removed: The product revenue increase was led by HPE Cray Supercomputing with a unit volume increase of $246 million, or 23.3%, and higher AUPs of $172 million, or 16.3%.
−Removed: The increase was moderated by unfavorable currency fluctuations of $43 million and lower services revenue of $24 million, or 5.2%, due primarily to an unfavorable portfolio mix of service offerings.
+Added: The product revenue increase was led by the HPE Cray Supercomputing product portfolio, as operational and supply improvements addressed challenges with achieving certain customer acceptance milestones for revenue recognition.
+Added: HPE Cray Supercomputing experienced a deal volume increase of $822 million, or 50.5%, moderated by lower AUPs of $487 million, or 29.9%.
+Added: The product revenue increase was moderated by unfavorable currency fluctuations of $60 million.
+Added: Service revenue declined by $42 million, or 6.0%, primarily due to unfavorable currency fluctuations and an unfavorable portfolio mix of service offerings.
+Added: HPC & AI earnings from operations as a percentage of net revenue remained relatively flat, driven by an increase in cost of products and services as a percentage of net revenue, partially offset by a decrease in operating expenses as a percentage of net revenue.
Table of Content
2 unchanged sentences
Financial Condition and Results of Operations (Continued)
−Removed: HPC & AI earnings from operations as a percentage of net revenue increased 3.0% percentage points due to a decrease in operating expenses as a percentage of net revenue, while the cost of products and services as a percentage of net revenue was unchanged from the prior-year period.
−Removed: The decrease in operating expenses as a percentage of net revenue was primarily due to the scale of the net revenue increase, moderated by higher investments in research and development.
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 % Change 2023 2022 % Change
3 unchanged sentences
Earnings from operations as a % of net revenue 10.7 % 14.3 % 10.3 % 13.4 %
−Removed: Three months ended April 30, 2023 compared with three months ended April 30, 2022
−Removed: Storage ne t revenue decreased by $29 million or 2.7% (increased 2.1% on a constant currency basis), primarily due to unfavorable currency fluctuations, partially offset by improvements in the supply environment.
−Removed: Storage product revenue decreased $23 million, or 3.8%, primarily due to unfavorable currency fluctuations of $36 million and a decrease in AUPs of $21 million, or 3.4%.
−Removed: Sales volume increased by $37 million, or 6.1%, led by traditional storage and big data products.
−Removed: Storage services revenue decreased by $6 million, or 1.3%, primarily due to unfavorable currency fluctuations of $15 million, moderated by a sales volume increase of $12 million, or 2.6%.
−Removed: The services sales volume increase was led by higher subscription services as we continue our transition to a more services-intensive, software-rich set of offerings, partially offset by lower Storage support services.
−Removed: Storage earnings from operations as a percentage of net revenue decreased 3.9 percentage points due to increases in cost of products and services as a percentage of net revenue and operating expenses as a percentage of net revenue.
−Removed: The increase in cost of products and services as a percentage of net revenue was primarily due to unfavorable currency fluctuations.
−Removed: These impacts were partially offset by certain reduced operating expenses.
−Removed: Six months ended April 30, 2023 compared with six months ended April 30, 2022
−Removed: Storage net revenue increased by $30 million, or 1.4%, (increased 6.4% on a constant currency basis), as improvements in the supply environment were partially offset by unfavorable currency fluctuations.
−Removed: The increase in Storage product revenue of $65 million, or 5.2%, was primarily due to an increase in AUPs of $114 million, or 9.2%, led by traditional storage and HPE Alletra Storage products and a unit volume increase of $52 million or 4.2%, led by hyperconverged, traditional storage and big data products.
−Removed: Moderating factors to the revenue increase were unfavorable currency fluctuations of $82 million and lower revenue from Russia of $20 million.
−Removed: Storage services revenue declined by $35 million, or 3.7%, primarily due to lower AUPs of $58 million, or 6.0%, unfavorable currency fluctuations of $29 million, and lower revenue from Russia of $16 million and lower Storage support services.
+Added: Three months ended July 31, 2023 compared with three months ended July 31, 2022
+Added: Storage net revenue decreased by $55 million, or 4.9% (decreased 1.9% on a constant currency basis), primarily due to unfavorable currency fluctuations and a decrease in AUPs.
+Added: Storage product revenue decreased by $59 million, or 8.8%, primarily due to a decrease in AUPs of $33 million, or 4.9%, led by traditional storage products and unfavorable currency fluctuations of $27 million.
+Added: Sales volume remained relatively flat.
+Added: Storage services revenue increased by $4 million, or 0.9%, primarily due to an increase in AUPs of $10 million, or 2.1%, led by subscription services, partially offset by unfavorable currency fluctuations of $7 million.
+Added: Storage earnings from operations as a percentage of net revenue decreased 3.6 percentage points as cost of products and services as a percentage of net revenue remained relatively flat and operating expenses as a percentage of net revenue increased.
+Added: The cost of products and services as a percentage of net revenue remained relatively flat, as the impact of increased sales of higher-margin subscription services was moderated by unfavorable currency fluctuations.
+Added: The increase in operating expenses as a percentage of net revenue was due to incremental investments in R&D.
+Added: Nine months ended July 31, 2023 compared with nine months ended July 31, 2022
+Added: Storage net revenue decreased by $25 million, or 0.8%, (increased 3.5% on a constant currency basis), primarily due to unfavorable currency fluctuations, partially offset by improvements in the supply environment.
+Added: The increase in Storage product revenue of $6 million, or 0.3%, was primarily due to an increase in AUPs of $82 million, or 4.3%, led by traditional storage, HPE Alletra Storage and Zerto products and a unit volume increase of $52 million, or 2.7%, led by big data and hyperconverged products.
+Added: Moderating factors to the product revenue increase were unfavorable currency fluctuations of $108 million and lower revenue from Russia of $20 million.
+Added: Storage services revenue declined by $31 million, or 2.2%, primarily due to lower AUPs of $49 million, or 3.4%, led by subscription services, unfavorable currency fluctuations of $35 million, and lower revenue from Russia of $16 million.
This decline was moderated by higher sales volume of $68 million, or 4.8%, led by higher subscription service as we continue our transition to more services-intensive, software-rich offerings.
Storage earnings from operations as a percentage of net revenue decreased 3.1 percentage points due to increases in cost of products and services as a percentage of net revenue and operating expenses as a percentage of net revenue.
−Removed: The increase in cost of products and services as a percentage of net revenue was due primarily to lower revenue from support services as we continue our transition to more software-rich products and unfavorable currency fluctuations.
+Added: The increase in cost of products and services as a percentage of net revenue was due primarily to unfavorable currency fluctuations, and lower revenue from Storage support services as we continue our transition to more software-rich products.
These impacts were partially offset by lower supply chain costs to expedite product delivery and favorable mix of higher margin products.
+Added: The increase in operating expenses as a percentage of net revenue was due to incremental investments in R&D.
Intelligent Edge
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 % Change 2023 2022 % Change
7 unchanged sentences
Financial Condition and Results of Operations (Continued)
−Removed: Three months ended April 30, 2023 compared with three months ended April 30, 2022
+Added: Three months ended July 31, 2023 compared with three months ended July 31, 2022
Intelligent Edge net revenue increased by $474 million, or 50.4% (increased 52.8% on a constant currency basis).
Product revenue increased by $427 million, or 55.5%, led by higher AUPs of $359 million, or 46.7%, and a volume and product mix effect of $87 million, or 11.3%, moderated by unfavorable currency fluctuations of $19 million.
−Removed: The product revenue increase was led by wireless local area network (“WLAN”) and Switching products, which benefited from improvements in the supply environment.
−Removed: Services net revenue increased $34 million, or 20.2%, primarily led by our as-a-service offerings.
+Added: The product revenue increase was primarily led by Switching products, which benefited from improvements in the supply environment, and high order book levels at the beginning of the period.
+Added: Services net revenue increased $47 million, or 27.3%, primarily led by attached support service and our aaS offerings.
Intelligent Edge earnings from operations as a percentage of net revenue increased 13.2 percentage points primarily due to decreases in cost of products and services as a percentage of net revenue and operating expenses as a percentage of net revenue.
−Removed: The decrease in cost of product and services as a percentage of net revenue was primarily due to lower supply chain costs and higher AUPs, moderating the decrease was a lower mix of higher-margin support services revenue.
+Added: The decrease in cost of product and services as a percentage of net revenue was primarily due to lower supply chain costs and higher AUPs, moderated by a lower mix of higher-margin support services revenue.
Operating expenses as a percentage of net revenue decreased primarily due to our cost containment measures.
−Removed: Six months ended April 30, 2023 compared with six months ended April 30, 2022
+Added: Nine months ended July 31, 2023 compared with nine months ended July 31, 2022
Intelligent Edge net revenue increased by $1,137 million, or 42.0% (increased 46.5% on a constant currency basis).
Product revenue increased by $1,038 million, or 47.2%, led by higher AUPs of $933 million, or 42.4%, and a volume and product mix effect of $216 million, or 9.8%, moderated by unfavorable currency fluctuations of $111 million.
−Removed: The product revenue increase was led by WLAN and Switching products, which benefited from improvements in the supply environment.
−Removed: Services net revenue increased $52 million, or 15.4%, primarily led by our as-a-service offerings.
+Added: The product revenue increase was led by Switching and wireless local area network products, which benefited from improvements in the supply environment, and high order book levels at the beginning of the period.
+Added: Services net revenue increased $99 million, or 19.4%, primarily led by our aaS offerings.
Intelligent Edge earnings from operations as a percentage of net revenue increased 11.0 percentage points primarily due to decreases in cost of products and services as a percentage of net revenue and operating expenses as a percentage of net revenue.
−Removed: The decrease in cost of product and services as a percentage of net revenue was primarily due to lower supply chain costs and higher AUPs, moderating the decrease was a lower mix of higher-margin support services revenue.
+Added: The decrease in cost of product and services as a percentage of net revenue was primarily due to lower supply chain costs, moderating the decrease was a lower mix of higher-margin support services revenue.
Operating expenses as a percentage of net revenue decreased primarily due to our cost containment measures.
Financial Services
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 % Change 2023 2022 % Change
3 unchanged sentences
Earnings from operations as a % of net revenue 8.4 % 11.8 % 9.2 % 12.2 %
−Removed: Three months ended April 30, 2023 compared with three months ended April 30, 2022
−Removed: FS net revenue increased by $35 million, or 4.3% (increased 6.8% on a constant currency basis) due primarily to higher rental revenue from higher average operating leases and higher finance income on finance leases due to an increasing interest rate environment, partially offset by unfavorable currency fluctuations.
+Added: Three months ended July 31, 2023 compared with three months ended July 31, 2022
+Added: FS net revenue increased by $56 million, or 6.9% (increased 7.0% on a constant currency basis) due primarily to higher rental revenue from higher average operating leases and higher finance income on finance leases due to a rising interest rate environment.
FS earnings from operations as a percentage of net revenue decreased 3.4 percentage points due to an increase in cost of services as a percentage of net revenue, while operating expenses as a percentage of net revenue were relatively flat.
−Removed: The increase to cost of services as a percentage of net revenue resulted primarily from a combination of higher borrowing costs and higher depreciation expense, partially offset by lower bad debt expense.
−Removed: Six months ended April 30, 2023 compared with six months ended April 30, 2022
+Added: The increase to cost of services as a percentage of net revenue resulted primarily from a combination of higher borrowing costs and higher depreciation expense.
+Added: Nine months ended July 31, 2023 compared with nine months ended July 31, 2022
FS net revenue increased by $122 million, or 4.9% (increased 7.3% on a constant currency basis) due primarily to higher rental revenue from higher average operating leases and higher finance income on finance leases due to an increasing interest rate environment, along with higher asset management revenue from lease buyouts, partially offset by unfavorable currency fluctuations.
6 unchanged sentences
Financing Volume
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 2023 2022
Financing volume $ 1,655 $ 1,559 $ 4,923 $ 4,420
−Removed: Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, increased by 13.2% and 14.2% for the three and six months ended April 30, 2023, respectively, as compared to the corresponding prior-year periods, due primarily to higher financing of HPE product sales and services, partially offset by unfavorable currency fluctuations.
+Added: Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, increased by 6.2% and 11.4% for the three and nine months ended July 31, 2023, respectively, as compared to the corresponding prior-year periods, due primarily to higher financing of HPE product sales and services, partially offset by lower financing of third-party product sales and services and unfavorable currency fluctuations.
Portfolio Assets and Ratios
The portfolio assets and ratios derived from the segment balance sheets for FS were as follows:
−Removed: April 30, 2023 October 31, 2022
+Added: July 31, 2023 October 31, 2022
Dollars in millions
13 unchanged sentences
(3) Debt benefiting FS consists of intercompany equity that is treated as debt for segment reporting purposes, intercompany debt, and borrowing- and funding-related activity associated with FS and its subsidiaries.
−Removed: Debt benefiting FS totaled $11.7 billion and $11.5 billion at April 30, 2023 and October 31, 2022, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies.
−Removed: FS equity at April 30, 2023 and October 31, 2022 was $1.7 billion and $1.6 billion, respectively.
−Removed: As of April 30, 2023 and October 31, 2022, FS net cash and cash equivalents balances were approximately $0.8 billion and $0.9 billion, respectively.
−Removed: Net portfolio assets as of April 30, 2023 increased 6.2% from October 31, 2022.
+Added: Debt benefiting FS totaled $11.9 billion and $11.5 billion as of July 31, 2023 and October 31, 2022, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies.
+Added: FS equity as of July 31, 2023 and October 31, 2022 was $1.7 billion and $1.6 billion, respectively.
+Added: As of July 31, 2023 and October 31, 2022, FS net cash and cash equivalents balances were approximately $0.7 billion and $0.9 billion, respectively.
+Added: Net portfolio assets as of July 31, 2023 increased 7.8% from October 31, 2022.
The increase generally resulted from favorable currency fluctuations, along with new financing volume exceeding portfolio runoff during the period.
FS bad debt expense includes charges to general reserves, specific reserves, and write-offs for sales-type, direct-financing, and operating leases.
−Removed: For the three and six months ended April 30, 2023, FS recorded net bad debt expense of $11 million and $30 million, respectively.
−Removed: For the three and six months ended April 30, 2022, Financial Services recorded net bad debt expense of $22 million and $45 million, respectively.
+Added: For the three and nine months ended July 31, 2023, FS recorded net bad debt expense of $16 million and $46 million, respectively.
+Added: For the three and nine months ended July 31, 2022, Financial Services recorded net bad debt expense of $17 million and $62 million, respectively.
Table of Content
2 unchanged sentences
Financial Condition and Results of Operations (Continued)
−Removed: As of April 30, 2023, FS experienced an increase in billed finance receivables compared to October 31, 2022, which included a limited impact to collections from customers in Russia.
+Added: As of July 31, 2023, FS experienced an increase in billed finance receivables compared to October 31, 2022, which included a limited impact to collections from customers in Russia.
We are currently unable to fully predict the extent to which our exit from Russia and Belarus businesses may adversely impact future collections of our receivables.
Corporate Investments and Other
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 % Change 2023 2022 % Change
3 unchanged sentences
Loss from operations as a % of net revenue (11.9) % (10.3) % (15.4) % (6.9) %
−Removed: Three months ended April 30, 2023 compared with three months ended April 30, 2022
−Removed: Corporate Investments and Other net revenue decreased by $31 million, or 9.5% (decreased 4.0% on a constant currency basis), primarily due to unfavorable currency fluctuations.
+Added: Three months ended July 31, 2023 compared with three months ended July 31, 2022
+Added: Corporate Investments and Other net revenue increased by $18 million, or 6.0% (increased 7.3% on a constant currency basis), due to Advisory and Professional Services orders strength and the recent acquisition of OpsRamp.
Corporate Investments and Other loss from operations as a percentage of net revenue increased by 1.6 percentage points primarily due to increases in cost of services as a percentage of net revenue and operating expenses as a percentage of net revenue.
−Removed: The increase in cost of services as a percentage of net revenue was primarily due to the scale of the net revenue decline driven by unfavorable currency fluctuations and fixed services delivery costs.
−Removed: The increase in operating expenses as a percentage of net revenue was primarily due to the scale of the net revenue decline in the Communications and Media Solutions business.
−Removed: Six months ended April 30, 2023 compared with six months ended April 30, 2022
+Added: The increase in cost of services as a percentage of net revenue was primarily due to higher services delivery costs.
+Added: The increase in operating expenses as a percentage of net revenue was primarily due to the recent acquisition of OpsRamp.
+Added: Nine months ended July 31, 2023 compared with nine months ended July 31, 2022
Corporate Investments and Other net revenue decreased by $45 million, or 4.7% (decreased 0.6% on a constant currency basis), primarily due to unfavorable currency fluctuations.
Corporate Investments and Other loss from operations as a percentage of net revenue increased by 8.5 percentage points due primarily to increases in cost of services as a percentage of net revenue and operating expenses as a percentage of net revenue.
−Removed: The increase in cost of services as a percentage of net revenue was primarily due to the scale of the net revenue decline driven by unfavorable currency fluctuations and higher services delivery costs due to higher variable compensation expense.
+Added: The increase in cost of services as a percentage of net revenue was primarily due to the scale of the net revenue decline driven by unfavorable currency fluctuations, higher services delivery costs and higher variable compensation expense.
The increase in operating expenses as a percentage of net revenue was primarily due to higher variable compensation expense.
7 unchanged sentences
Accounting policies that are critical in the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, or complex judgements include revenue recognition, taxes on earnings, business combinations, impairment assessment of goodwill and intangible assets, and contingencies.
−Removed: As of April 30, 2023, there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.
+Added: As of July 31, 2023, there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.
Table of Content
11 unchanged sentences
Our cash balances are held in numerous locations throughout the world, with a substantial amount held outside the U.S.
−Removed: as of April 30, 2023.
+Added: as of July 31, 2023.
We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed.
9 unchanged sentences
to have a material effect on our overall liquidity, financial condition, or results of operations.
−Removed: In connection with the share repurchase program previously authorized by our Board of Directors, during the first six months of fiscal 2023, we repurchased and settled an aggregate amount of $179 million.
−Removed: As of April 30, 2023, we had a remaining authorization of $1.2 billion for future share repurchases.
+Added: In connection with the share repurchase program previously authorized by our Board of Directors, we repurchased and settled an aggregate amount of $366 million during the first nine months of fiscal 2023.
+Added: As of July 31, 2023, we had a remaining authorization of $1.0 billion for future share repurchases.
For more information on our share repurchase program, refer to the section entitled "Unregistered Sales of Equity Securities and Use of Proceeds" in Item 2 of Part II.
3 unchanged sentences
The disposition remains subject to obtaining required regulatory approvals and completion of certain conditions necessary for closing.
+Added: Table of Content
+Added: HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
+Added: Management's Discussion and Analysis of
+Added: Financial Condition and Results of Operations (Continued)
Our cash, cash equivalents, restricted cash, total debt, and available borrowing resources were as follows:
−Removed: April 30, 2023 October 31, 2022
+Added: July 31, 2023 October 31, 2022
Cash, cash equivalents and restricted cash $ 3,132 $ 4,763
3 unchanged sentences
Uncommitted lines of credit $ 1,019 $ 953
−Removed: Table of Content
−Removed: HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
−Removed: Management's Discussion and Analysis of
−Removed: Financial Condition and Results of Operations (Continued)
(1) The maximum aggregate borrowing amount of the commercial paper programs and revolving credit facility is $5.75 billion.
The following tables represent the way in which management reviews cash flows:
−Removed: For the six months ended April 30,
+Added: For the nine months ended July 31,
Net cash provided by operating activities $ 1,585 $ 1,557
Net cash used in investing activities (3,186) (1,224)
−Removed: Net cash provided by (used in) financing activities 163 (260)
+Added: Net cash used in financing activities (168) (216)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 138 —
−Removed: Net decrease in cash, cash equivalents and restricted cash $ (1,808) $ (784)
+Added: Net (decrease) increase in cash, cash equivalents and restricted cash $ (1,631) $ 117
Free cash flow $ (83) $ (201)
Operating Activities
−Removed: For the six months ended April 30, 2023, net cash provided by operating activities decreased by $0.2 billion, as compared to the corresponding period in fiscal 2022.
−Removed: The decrease was primarily due to unfavorable working capital primarily resulting from higher vendor payments, an increase in financing receivables, moderated by unfavorable hedging positions, the prior-year period containing higher cash payouts for variable compensation, and higher cash generated from earnings.
+Added: For the nine months ended July 31, 2023, net cash provided by operating activities increased by $28 million, as compared to the corresponding period in fiscal 2022.
+Added: The increase was primarily due to unfavorable hedging positions, the prior-year period containing higher cash payouts for variable compensation, favorable impacts from other assets and liabilities, and higher cash generated from earnings, moderated by unfavorable working capital primarily resulting from higher vendor payments and an increase in financing receivables.
Our working capital metrics and cash conversion impacts were as follows:
−Removed: April 30, 2023 October 31, 2022 Change April 30, 2022 October 31, 2021 Change Y/Y Change
+Added: July 31, 2023 October 31, 2022 Change July 31, 2022 October 31, 2021 Change Y/Y Change
Days of sales outstanding in accounts receivable ("DSO") 44 47 (3) 44 49 (5) —
4 unchanged sentences
Items which may cause the cash conversion cycle in a particular period to differ include, but are not limited to, changes in business mix, changes in payment terms (including extended payment terms to customers or from suppliers), early or late invoice payments from customers or to suppliers, the extent of receivables factoring, seasonal trends, the timing of the revenue recognition and inventory purchases within the period, the impact of commodity costs, and acquisition activity.
+Added: Table of Content
+Added: HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
+Added: Management's Discussion and Analysis of
+Added: Financial Condition and Results of Operations (Continued)
DSO measures the average number of days our receivables are outstanding.
DSO is calculated by dividing ending accounts receivable, net of allowance for doubtful accounts, by a 90-day average of net revenue.
−Removed: Compared to the corresponding three-month period in fiscal 2022, the increase in DSO in the current period was primarily due to unfavorable billings linearity and increased billings with extended payment terms.
+Added: Compared to the corresponding three-month period in fiscal 2022, the DSO remained flat.
DOS measures the average number of days from procurement to sale of our products.
DOS is calculated by dividing ending inventory by a 90-day average of cost of goods sold.
−Removed: Compared to the corresponding three-month period in fiscal 2022, the decrease in DOS in the current period was primarily due to lower levels of inventory resulting from a reduction in our backlog positions and a lower replenishment of materials.
+Added: Compared to the corresponding three-month period in fiscal 2022, the decrease in DOS in the current period was primarily due to lower levels of inventory resulting from a reduction in our order book positions and a lower replenishment of materials.
DPO measures the average number of days our accounts payable balances are outstanding.
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Compared to the corresponding three-month period in fiscal 2022, the decrease in DPO in the current period was primarily due to lower inventory purchases during the current period.
−Removed: Table of Content
−Removed: HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
−Removed: Management's Discussion and Analysis of
−Removed: Financial Condition and Results of Operations (Continued)
Investing Activities
−Removed: For the six months ended April 30, 2023, net cash used in investing activities increased by $1.3 billion, as compared to the corresponding period in fiscal 2022.
−Removed: The increase was primarily due to higher cash utilized in net financial collateral activities of $0.8 billion, higher net payments made in connection with business acquisitions of $0.4 billion, and higher cash utilized for investment in property, plant and equipment, net of sales proceeds of $0.1 billion, as compared to the prior-year period.
+Added: For the nine months ended July 31, 2023, net cash used in investing activities increased by $2.0 billion, as compared to the corresponding period in fiscal 2022.
+Added: The increase was primarily due to higher cash utilized in net financial collateral activities of $1.0 billion, payments made in connection with business acquisitions of $0.8 billion, and lower proceeds from maturities and sales of investments, net of purchases of $0.2 billion, as compared to the prior-year period.
Financing Activities
−Removed: For the six months ended April 30, 2023, net cash provided by financing activities increased by $0.4 billion, as compared to the corresponding period in fiscal 2022.
−Removed: This was primarily due to higher proceeds from debt, net of issuance costs and higher cash from short term borrowings of $1.5 billion, partially offset by higher debt repayments of $1.1 billion, as compared to the prior-year period.
+Added: For the nine months ended July 31, 2023, net cash used in financing activities decreased by $48 million, as compared to the corresponding period in fiscal 2022.
+Added: This was primarily due to an increase in proceeds from debt, net of issuance costs of $1.4 billion, offset by higher repayments of debt and short-term borrowings of $1.3 billion, as compared to the prior-year period.
Free Cash Flow
−Removed: Free cash flow represents cash flow from operations less net capital expenditures (investments in property, plant and equipment ("PP&E") less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.
−Removed: For the six months ended April 30, 2023, free cash flow decreased by $0.3 billion, as compared to the corresponding period in fiscal 2022.
−Removed: The decrease was due to lower cash generated from operations due to unfavorable working capital resulting from higher vendor payments, higher cash utilized for investments in PP&E, net of sales proceeds, moderated by a favorable currency impact on cash, cash equivalents, and restricted cash, as compared to the prior-year period.
−Removed: For more information on our free cash flow, refer to the section entitled "GAAP to non-GAAP Reconciliations" included in this MD&A.
+Added: Free cash flow (“FCF”) represents cash flow from operations less net capital expenditures (investments in property, plant and equipment ("PP&E") less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.
+Added: For the nine months ended July 31, 2023, FCF increased by $118 million, as compared to the corresponding period in fiscal 2022.
+Added: The increase was due to a favorable currency impact on cash, cash equivalents, and restricted cash, as compared to the prior-year period.
+Added: For more information on our FCF, refer to the section entitled "GAAP to non-GAAP Reconciliations" included in this MD&A.
For more information on the impact of operating assets and liabilities to our cash flows, see Note 6, "Balance Sheet Details" to the Condensed Consolidated Financial Statements in Item 1 of Part I.
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There have been no changes to our commercial paper programs, revolving credit facility and shelf registration statement since October 31, 2022.
−Removed: For further information on our capital resources, see Note 12, "Borrowings" to the Condensed Consolidated Financial Statements in Item 1 of Part I.
−Removed: In March 2023, we completed an offering of $1.3 billion of 5.9% Senior Notes due October 1, 2024 and $400 million of 6.102% Senior Notes due April 1, 2026.
−Removed: The net proceeds from these offerings will be used to refinance upcoming debt maturities and for general corporate purposes.
−Removed: In March and April 2023, we issued $643 million of asset-backed debt securities in five tranches at a weighted average price of 99.99% and a weighted average interest rate of 5.593%, payable monthly from April 2023 with a stated final maturity date of April 2028.
−Removed: In April 2023, we repaid $1.0 billion of 2.25% fixed rate Senior Notes on their original maturity date of April 1, 2023.
−Removed: In April 2023, we redeemed at par value the outstanding $35 million of asset-backed debt securities on a transaction, with an interest rate of 2.26% and an original maturity date of February 2030.
−Removed: At deal inception, in February 2020, $755 million of asset-backed debt securities were issued, with a weighted average price of 99.99%, a weighted average interest rate of 1.87%, and an original maturity date of February 2030.
−Removed: As of April 30, 2023 and October 31, 2022, no borrowings were outstanding under our $4.75 billion revolving credit facility.
+Added: Significant funding and liquidity activities for the nine months ended July 31, 2023 were as follows:
+Added: Debt Issuances:
+Added: • In March 2023 and June 2023, we issued $1.3 billion and $250 million, respectively, of 5.9% Senior Notes due October 1, 2024
Table of Content
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Financial Condition and Results of Operations (Continued)
−Removed: As of April 30, 2023, $399 million was outstanding under the Parent Programs.
−Removed: As of October 31, 2022, no borrowings were outstanding under the Parent Programs.
−Removed: As of April 30, 2023 and October 31, 2022, $629 million and $542 million, respectively, were outstanding under our subsidiary’s program.
−Removed: During the first six months of fiscal 2023, we issued $4.6 billion and repaid $4.2 billion of commercial paper.
+Added: • In March 2023, we issued $400 million of 6.102% Senior Notes due April 1, 2026
+Added: • In March and April 2023, we issued $643 million of asset-backed debt securities in five tranches with a weighted average interest rate of 5.593% and final maturity date of April 2028
+Added: • In June 2023, we issued $550 million of 5.25% Senior Notes due July 1, 2028
+Added: Debt Repayments:
+Added: • In April 2023, we repaid $1.0 billion of 2.25% fixed rate Senior Notes
+Added: • During the nine months ended July 31, 2023, we repaid $1.3 billion of the outstanding asset-backed debt securities.
+Added: As of July 31, 2023 and October 31, 2022, no borrowings were outstanding under our $4.75 billion revolving credit facility.
+Added: For the nine months ended July 31, 2023, we drew and repaid $0.4 billion under the revolving credit facility.
+Added: As of July 31, 2023 and October 31, 2022, no borrowings were outstanding under the Parent Programs.
+Added: As of July 31, 2023 and October 31, 2022, $651 million and $542 million, respectively, were outstanding under our subsidiary’s program.
+Added: For the nine months ended July 31, 2023, we issued $6.0 billion and repaid $5.9 billion of commercial paper.
+Added: For further information on our capital resources, see Note 12, "Borrowings" to the Condensed Consolidated Financial Statements in Item 1 of Part I.
Cash Requirements and Commitments
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Restructuring Plans
−Removed: As of April 30, 2023, we expect to make future cash payments of approximately $370 million in connection with our approved restructuring plans, which includes $220 million expected to be paid through the remainder of fiscal 2023 and $150 million expected to be paid thereafter.
+Added: As of July 31, 2023, we expect to make future cash payments of approximately $310 million in connection with our approved restructuring plans, which includes $170 million expected to be paid through the remainder of fiscal 2023 and $140 million expected to be paid thereafter.
For more information on our restructuring activities, see Note 3, "Transformation Programs" to the Condensed Consolidated Financial Statements in Item 1 of Part I.
Uncertain Tax Positions
−Removed: As of April 30, 2023, we had approximately $306 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions.
+Added: As of July 31, 2023, we had approximately $292 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions.
These liabilities and related interest and penalties include $26 million expected to be paid within one year.
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Reconciliation of GAAP gross profit and gross profit margin to non-GAAP gross profit and gross profit margin.
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 2023 2022
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Stock-based compensation expense 9 0.1 % 9 0.1 % 38 0.1 % 38 0.2 %
−Removed: Disaster charges (1)
−Removed: — — % 105 1.6 % — — % 105 0.8 %
+Added: Disaster (recovery) charges (3) — % 6 0.1 % (3) — % 111 0.6 %
Non-GAAP gross profit $ 2,516 35.9 % $ 2,412 34.7 % $ 7,715 35.4 % $ 7,065 34.3 %
Reconciliation of GAAP earnings from operations and operating profit margin to non-GAAP earnings from operations and operating profit margin.
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 2023 2022
8 unchanged sentences
Transformation costs 65 0.9 % 80 1.2 % 227 1.0 % 289 1.4 %
−Removed: Disaster charges (1)
−Removed: 3 — % 125 1.9 % 4 — % 124 0.9 %
+Added: Disaster (recovery) charges (2) — % 36 0.5 % 2 — % 160 0.8 %
Stock-based compensation expense 91 1.3 % 64 0.9 % 357 1.6 % 306 1.5 %
6 unchanged sentences
Reconciliation of GAAP net earnings and diluted net earnings per share to non-GAAP net earnings and diluted net earnings per share.
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 2023 2022
6 unchanged sentences
Transformation costs 65 0.05 80 0.06 227 0.17 289 0.22
−Removed: Disaster charges (1)
−Removed: 3 — 125 0.09 4 — 124 0.09
+Added: Disaster (recovery) charges (2) — 36 0.03 2 — 160 0.12
Stock-based compensation expense 91 0.07 64 0.05 357 0.28 306 0.22
1 unchanged sentence
Tax indemnification and related adjustments (45) (0.03) 30 0.02 (50) (0.04) 47 0.04
−Removed: Non-service net periodic benefit credit (1) — (36) (0.03) (1) — (72) (0.05)
+Added: Non-service net periodic benefit cost (credit) 3 — (34) (0.03) 2 — (106) (0.08)
Earnings from equity interests (1)
2 unchanged sentences
Non-GAAP net earnings $ 639 $ 0.49 $ 629 $ 0.48 $ 2,152 $ 1.63 $ 1,909 $ 1.44
−Removed: (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.
−Removed: Refer to Note 1 "Overview and Summary of Significant Accounting Policies", for further information.
−Removed: During the three and six months ended April 30, 2022, Disaster charges also included a recovery of $1 million and $2 million, respectively, related to COVID-19.
(1) Represents the amortization of basis difference adjustments related to H3C.
−Removed: The six months ended April 30, 2023 includes the Company's portion of intangible asset impairment charges from H3C of $8 million.
+Added: For the nine months ended July 31, 2023, the Company's portion of intangible asset impairment charges from H3C of $8 million are also included.
Reconciliation of net cash provided by operating activities to free cash flow.
−Removed: For the three months ended April 30, For the six months ended April 30,
+Added: For the three months ended July 31, For the nine months ended July 31,
2023 2022 2023 2022
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Use of Non-GAAP Financial Measures
−Removed: The non-GAAP financial measures presented are net revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, and free cash flow.
+Added: The non-GAAP financial measures presented are net revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, and FCF.
These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States.
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The GAAP measure most directly comparable to non-GAAP diluted net earnings per share is diluted net earnings per share.
−Removed: The GAAP measure most directly comparable to free cash flow is cash flow from operations.
+Added: The GAAP measure most directly comparable to FCF is cash flow from operations.
We believe that providing the non-GAAP measures stated above, in addition to the related GAAP measures provides greater transparency to the information used in our financial and operational decision making and allows the reader of our Condensed Consolidated Financial Statements to see our financial results “through the eyes” of management.
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Although stock-based compensation is a key incentive offered to our employees, we exclude these charges for the purpose of calculating these non-GAAP measures, primarily because they are non-cash expenses and our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding stock-based compensation expense.
−Removed: • Disaster charges are primarily related to the exit of our businesses in Russia and Belarus, and include credit losses of financing and trade receivables, employee severance and abandoned assets.
−Removed: Disaster charges also include direct costs or recovery of these costs related to COVID-19 as a result of Hewlett Packard Enterprise-hosted, co-hosted, or sponsored event cancellations and subsequent shift to a virtual format.
−Removed: While we present various items as Disaster
+Added: • Disaster (recovery) charges are primarily related to the exit of our businesses in Russia and Belarus, and include credit losses of financing and trade receivables, employee severance and abandoned assets.
+Added: Disaster (recovery) charges also include direct costs or recovery of these costs related to COVID-19 as a result of Hewlett Packard Enterprise-hosted, co-hosted, or sponsored event cancellations and subsequent shift to a virtual format.
+Added: While we present various items as
Table of Content
2 unchanged sentences
Financial Condition and Results of Operations (Continued)
−Removed: charges, we exclude Disaster charges from these non-GAAP measures as the specific charges are non-recurring charges and not indicative of the operational performance of our business.
+Added: Disaster (recovery) charges, we exclude Disaster (recovery) charges from these non-GAAP measures as the specific charges are non-recurring charges and not indicative of the operational performance of our business.
Non-GAAP earnings from operations and non-GAAP operating profit margin consist of earnings from operations or earnings from operations as a percentage of net revenue excluding the items mentioned above and charges relating to the amortization of intangible assets, transformation costs and acquisition, disposition and other related charges.
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In addition, our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding these charges.
−Removed: Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings or diluted net earnings per share excluding those same charges mentioned above, as well as other items such as tax indemnification and related adjustments, non-service net periodic benefit credit, earnings from equity interests, and adjustments for taxes.
+Added: Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings or diluted net earnings per share excluding those same charges mentioned above, as well as other items such as tax indemnification and related adjustments, non-service net periodic benefit cost (credit), earnings from equity interests, and adjustments for taxes.
The Adjustments for taxes line item includes certain income tax valuation allowances and separation taxes, the impact of tax reform, structural rate adjustment, excess tax benefit from stock-based compensation, and adjustments for additional taxes or tax benefits associated with each non-GAAP item.
2 unchanged sentences
We exclude these income or charges and the associated tax impact for the purpose of calculating non-GAAP measures to facilitate an evaluation of our current operating performance and comparisons to operating performance in prior periods.
−Removed: • Non-service net periodic benefit credit includes certain market-related factors such as (i) interest cost, (ii) expected return on plan assets, (iii) amortization of prior plan amendments, (iv) amortized actuarial gains or losses, (v) the impacts of any plan settlements/curtailments and (vi) impacts from other market-related factors associated with our defined benefit pension and post-retirement benefit plans.
+Added: • Non-service net periodic benefit cost (credit) includes certain market-related factors such as (i) interest cost, (ii) expected return on plan assets, (iii) amortization of prior plan amendments, (iv) amortized actuarial gains or losses, (v) the impacts of any plan settlements/curtailments and (vi) impacts from other market-related factors associated with our defined benefit pension and post-retirement benefit plans.
These market-driven retirement-related adjustments are primarily due to the change in pension plan assets and liabilities which are tied to financial market performance.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.