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HPE Reports Q3 Results

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HPE Reports Q3 Results

SAN JOSE, Calif.–(BUSINESS WIRE)–Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for its fiscal 2020 third quarter, ended July 31, 2020.

“Our Q3 results are marked by strong execution and sequential growth,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “We significantly improved operational and supply chain execution and advanced our innovation agenda with the introduction of HPE GreenLake cloud services solutions, our new HPE Ezmeral software portfolio, and our planned acquisition of SD-WAN leader Silver Peak.”

“We gained momentum in key areas of differentiation and accelerated our as-a-service pivot with strong ARR growth and a record number of HPE GreenLake services orders,” he continued. “Navigating through the pandemic and planning for a post-COVID world have increased customers’ needs for as-a-service offerings, secure connectivity, remote work capabilities and analytics to unlock insights from data that are aligned to our strategy. We see a tremendous opportunity to help our customers drive digital transformations as they continue to adapt to operate in a new world.”

Third Quarter Fiscal Year 2020 Results

Net revenue of $6.8 billion, down 6% from the prior-year period or 4% when adjusted for currency. Revenue grew 13% sequentially or 14% when adjusted for currency driven by solid execution in clearing historic backlog by approximately $500 million during the quarter.

Annualized revenue run-rate (ARR) of $528 million, up 11% from the prior-year period. We are reiterating our 2019 Securities Analyst Meeting ARR guidance of 30-40% Compounded Annual Growth Rate from fiscal year 2019 to fiscal year 2022.

Gross Profit of $2.1 billion, up 8% sequentially due to strong operation execution.

GAAP gross profit margin of 30.3%, compared to 33.9% from the prior-year period and Non-GAAP gross profit margin of 30.4%, compared to 33.9% from the prior-year period.

GAAP Operating Profit of $12 million, up 101% sequentially and Non-GAAP operating profit of $484 million, up 33% sequentially.

GAAP operating profit margin of 0.2%, compared to (1.1%) from the prior-year period and Non-GAAP operating profit margin of 7.1%, compared to 9.9% from the prior-year period.

GAAP diluted net earnings per share (“EPS”) was $0.01 due to the acceleration of transformation program, compared to ($0.02) in the prior-year period.

Non-GAAP diluted net EPS was $0.32, compared to $0.45 in the prior-year period. Third quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $410 million and $0.31 per diluted earnings per share, respectively, primarily related to transformation costs and amortization of purchased intangible assets.

Cash flow from operations of $1.5 billion, compared to $1.2 billion in the prior-year period.

Free cash flow of $924 million, compared to $648 million in the prior-year period.

Segment Results

Intelligent Edge revenue was $684 million, down 12% year over year or 11% when adjusted for currency, with 8.6% operating profit margin, compared to 6.8% from the prior-year period. Revenue grew 3% sequentially demonstrating continued momentum.

Compute revenue was $3.4 billion, flat year over year or up 1% when adjusted for currency, with 8.5% operating profit margin, compared to 12.9% from the prior-year period. Revenue grew 28% sequentially or 29% when adjusted for currency as we executed against the backlog and improved our supply chain execution.

High Performance Compute & Mission Critical Systems (HPC & MCS) revenue was $649 million, up 3% year over year, with 5.5% operating profit margin, compared to 8.1% from the prior-year period. Revenue grew 10% sequentially as installations and customer acceptance of systems improved.

Storage revenue was $1.1 billion, down 10% year over year or 9% when adjusted for currency, with 12.9% operating profit margin, compared to 16.5% from the prior-year period. Revenue grew 4% sequentially driven by improved operational execution and reduction of backlog.

Advisory & Professional Services (A&PS) revenue was $226 million, down 7% year over year or 5% when adjusted for currency, with (1.8%) operating profit margin, compared to (3.7%) from the prior-year period. Revenue was down 5% sequentially or 4% when adjusted for currency as COVID-19 impacted consulting activities of our team members. A&PS is a strategic business that pulls through significant infrastructure and operational services sales.

Financial Services revenue was $811 million, down 9% year over year or 6% when adjusted for currency and down 3% sequentially or 2% when adjusted for currency, with 8.0% operating profit margin, compared to 8.7% from the prior-year period. Net portfolio assets were up 3% year over year and up 4% sequentially or 1% when adjusted for currency, and financing volume was down 12% year over year or 9% when adjusted for currency and flat sequentially or up 1% when adjusted for currency despite the impact of COVID-19. The business delivered return on equity of 12.8%, down 3.0 points from the prior-year period.

Q4 2020 Dividend

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”).

Use of non-GAAP financial measures

To supplement Hewlett Packard Enterprise’s condensed consolidated financial statement information presented on a GAAP basis, Hewlett Packard Enterprise provides revenue on a constant currency basis, 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.

These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to revenue on a constant currency basis is revenue. The GAAP measure most directly comparable to non-GAAP gross profit margin is gross profit margin. The GAAP measure most directly comparable to non-GAAP operating profit (non-GAAP earnings from operations) is operating profit (earnings from operations). The GAAP measure most directly comparable to non-GAAP operating profit margin is operating profit margin. The GAAP measure most directly comparable to non-GAAP income tax rate is income tax rate. The GAAP measure most directly comparable to non-GAAP net earnings is net earnings. The GAAP measure most directly comparable to non-GAAP diluted net earnings per share is diluted net earnings per share. The GAAP measure most directly comparable to gross cash is cash and cash equivalents. The GAAP measure most directly comparable to free cash flow is cash flow from operations. The GAAP measure most directly comparable to net debt and operating company net debt is total company debt. The GAAP measure most directly comparable to each of net cash and operating company net cash is cash and cash equivalents. Reconciliations of each of these non-GAAP financial measures to GAAP information are included in the tables above or elsewhere in the materials accompanying this news release.

Use and economic substance of non-GAAP financial measures used by Hewlett Packard Enterprise

Revenue on a constant currency basis assumes no change in the foreign exchange rate from the prior-year period. Non-GAAP gross profit margin is defined to exclude charges relating to the amortization of initial direct costs and certain acquisition, disposition and other related charges. Non-GAAP operating profit (non-GAAP earnings from operations), and non-GAAP operating profit margin are defined to exclude any charges relating to the amortization of intangible assets, amortization of initial direct costs, impairment of goodwill, transformation costs, disaster charges (recovery) and acquisition, disposition and other related charges. 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, as well as an adjustment to earnings in equity interests, non-service net periodic benefit credit, tax indemnification adjustments, certain income tax valuation allowances and separation taxes, the impact of U.S. tax reform and excess tax benefit from stock-based compensation. In addition, non-GAAP net earnings and non-GAAP diluted net earnings per share are adjusted by the amount of additional taxes or tax benefits associated with each non-GAAP item.

Hewlett Packard Enterprise’s management uses these non-GAAP financial measures for purposes of evaluating Hewlett Packard Enterprise’s historical and prospective financial performance, as well as Hewlett Packard Enterprise’s performance relative to its competitors. Hewlett Packard Enterprise’s management also uses these non-GAAP measures to further its own understanding of Hewlett Packard Enterprise’s segment operating performance. Hewlett Packard Enterprise believes that excluding the items mentioned above from these non-GAAP financial measures allows Hewlett Packard Enterprise’s management to better understand Hewlett Packard Enterprise’s consolidated financial performance in relation to the operating results of Hewlett Packard Enterprise’s segments, as Hewlett Packard Enterprise’s management does not believe that the excluded items are reflective of ongoing operating results. More specifically, Hewlett Packard Enterprise’s management excludes each of those items mentioned above for the following reasons:

  • Amortization of initial direct costs represents the portion of lease origination costs incurred in prior fiscal years that do not qualify for capitalization under the new leasing standard. Hewlett Packard Enterprise excludes these costs as the Company elected the practical expedient under the new leasing standard. As a result, the company did not adjust these historical costs to accumulated deficit. We believe that most financing companies did not elect this practical expedient and therefore we excluded these costs to facilitate a more meaningful evaluation of our current operating performance and comparisons to our peers.
  • Hewlett Packard Enterprise incurs charges relating to the amortization of intangible assets. Those charges are included in Hewlett Packard Enterprise’s GAAP earnings, operating profit margin, net earnings and diluted net earnings per share. Such charges are significantly impacted by the timing and magnitude of Hewlett Packard Enterprise’s acquisitions and any related impairment charges. Consequently, Hewlett Packard Enterprise excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods.
  • In the second quarter of fiscal 2020, Hewlett Packard Enterprise recorded an impairment charge for the goodwill associated with its HPC & MCS reporting unit following an impairment review. Hewlett Packard Enterprise excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods
  • Transformation costs represent net costs related to the Cost Optimization and Prioritization Plan and HPE Next initiative and include restructuring charges, program design and execution costs, costs incurred to transform Hewlett Packard Enterprise’s IT infrastructure and gains from the sale of real-estate identified as part of the initiative as well as any impairment charges on real-estate assets identified as part of the initiative. Hewlett Packard Enterprise believes that eliminating such expenses and gains for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s past operating performance.
  • Disaster charges (recovery) for the three and nine months ended July 31, 2020 include direct costs resulting from COVID-19, primarily relating to HPE hosted, co-hosted, or sponsored event cancellations and shift to a virtual format and donations. 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. Hewlett Packard Enterprise believes that eliminating these amounts for purposes of calculating non-GAAP operating profit (non-GAAP earnings from operations) facilitates a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods.
  • Hewlett Packard Enterprise incurs costs related to its acquisitions, disposition and other related charges, most of which are treated as non-cash or non-capitalized expenses. The charges are direct expenses such as professional fees and retention costs, as well as non-cash adjustments to the fair value of certain acquired assets such as inventory. Charges may also include expenses associated with disposal activities including legal and arbitration settlements in connection with certain dispositions. Because non-cash or non-capitalized acquisition-related expenses are inconsistent in amount and frequency and are significantly impacted by the timing and nature of Hewlett Packard Enterprise’s acquisitions and divestitures, Hewlett Packard Enterprise believes that eliminating such expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s past operating performance.
  • Adjustment to earnings from equity interests includes the amortization of the basis difference in relation to the H3C divestiture and the resulting equity method investment in H3C. Hewlett Packard Enterprise believes that eliminating this amount for purposes of calculating non-GAAP operating profit (non-GAAP earnings from operations) facilitates a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods.
  • 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 Hewlett Packard Enterprise’s 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. Hewlett Packard Enterprise excludes these adjustments and considers them to be outside the operational performance of the business.
  • Tax indemnification adjustments are related to changes in the indemnification positions between Hewlett Packard Enterprise and HP Inc., DXC and Micro Focus that are recorded by Hewlett Packard Enterprise as pre-tax income or expense and not considered tax expense. Hewlett Packard Enterprise excludes these income or charges and the associated tax impact for the purpose of calculating these non-GAAP measures to facilitate a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods.
  • Hewlett Packard Enterprise utilizes a structural long-term projected non-GAAP tax rate in order to provide better consistency across the interim reporting periods and to eliminate the effects of items not directly related to the Company’s operating structure that can vary in size and frequency. When projecting this long-term rate, Hewlett Packard Enterprise evaluated a three-year financial projection. The projected rate assumes no incremental acquisitions in the three-year projection period, and considers other factors including Hewlett Packard Enterprise’s expected tax structure, its tax positions in various jurisdictions and current impacts from key legislation implemented in major jurisdictions where Hewlett Packard Enterprise operates. For fiscal 2020, the Company will use a projected non-GAAP tax rate of 12%, which reflects currently available information, including the impact of the Tax Act and interpretations thereof, as well as other factors and assumptions. The non-GAAP tax rate could be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in Hewlett Packard Enterprise’s geographic earnings mix including due to acquisition activity, or other changes to the Company’s strategy or business operations. The Company will re-evaluate its long-term rate as appropriate. Hewlett Packard Enterprise believes that making these adjustments facilitates a better evaluation of our current operating performance and comparisons to past operating results.

Material limitations associated with use of non-GAAP financial measures

These non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of Hewlett Packard Enterprise’s results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are:

  • Amortization of initial direct cost is excluded from non-GAAP gross profit margin, non-GAAP operating profit (non-GAAP earnings from operations), non-GAAP operating profit margin, non-GAAP net earnings and non-GAAP diluted net earnings per share can have an impact on the equivalent GAAP earnings measure and HPE Financial Services Segment results.
  • Amortization of intangible assets, though not directly affecting Hewlett Packard Enterprise’s cash position, represent the loss in value of intangible assets over time. The expense associated with this loss in value is non-GAAP operating profit (non-GAAP earnings from operations), non-GAAP operating profit margin, non-GAAP net earnings and non-GAAP diluted net earnings per share, and therefore does not reflect the full economic effect of the loss in value of those intangible assets.
  • Items such as impairment of goodwill, transformation costs, disaster charges (recovery) and acquisition, and disposition and other related costs that are excluded from non-GAAP gross profit margin, non-GAAP operating expenses, non-GAAP operating profit (non-GAAP earnings from operations), non-GAAP operating profit margin, non-GAAP net earnings and non-GAAP diluted net earnings per share can have a material impact on the equivalent GAAP earnings measure.
  • Items such as adjustment to earnings from equity interests and non-service net periodic benefit credit that are excluded from non-GAAP net earnings, and non-GAAP diluted net earnings per share can have a material impact on the equivalent GAAP earnings measure.
  • Items such as tax indemnification adjustments, certain income tax valuation allowances and separation taxes, the impact of U.S. tax reform, excess tax benefits from stock-based compensation and the related tax impacts from other non-GAAP measures that are excluded from the non-GAAP tax rate, non-GAAP net earnings and non-GAAP diluted net earnings per share can also have a material impact on the equivalent GAAP earnings measures.
  • Hewlett Packard Enterprise may not be able to immediately liquidate the short-term and long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure.
  • Other companies may calculate revenue on a constant currency basis, non-GAAP gross profit margin, non-GAAP operating profit (non-GAAP earnings from operations), non-GAAP operating profit margin, non-GAAP net earnings and non-GAAP diluted net earnings per share differently than Hewlett Packard Enterprise does, limiting the usefulness of those measures for comparative purposes.

Compensation for limitations associated with use of non-GAAP financial measures

Hewlett Packard Enterprise compensates for the limitations on its use of non-GAAP financial measures by relying primarily on its GAAP results and using non-GAAP financial measures only as a supplement. Hewlett Packard Enterprise also provides a reconciliation of each non-GAAP financial measure to its most directly comparable GAAP measure within this news release and in other written materials that include these non-GAAP financial measures, and Hewlett Packard Enterprise encourages investors to review carefully those reconciliations.

Usefulness of non-GAAP financial measures to investors

Hewlett Packard Enterprise believes that providing revenue on a constant currency basis, 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 to investors in addition to the related GAAP measures provides investors with greater transparency to the information used by Hewlett Packard Enterprise’s management in its financial and operational decision making and allows investors to see Hewlett Packard Enterprise’s results “through the eyes” of management. Hewlett Packard Enterprise further believes that providing this information better enables Hewlett Packard Enterprise’s investors to understand Hewlett Packard Enterprise’s operating performance and to evaluate the efficacy of the methodology and information used by Hewlett Packard Enterprise’s management to evaluate and measure such performance. Disclosure of these non-GAAP financial measures also facilitates comparisons of Hewlett Packard Enterprise’s operating performance with the performance of other companies in Hewlett Packard Enterprise’s industry that supplement their GAAP results with non-GAAP financial measures that may be calculated in a similar manner.

Business

ESG Strategies for Small Business and Private Companies | JD Supra

becker blake

Published

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ESG Strategies for Small Business and Private Companies | JD Supra

As a violinist, I was interested to learn that Irish violinist Patricia Treacy performed at President Biden’s inaugural mass held at 7:30 AM on Inauguration Day at a Washington cathedral. For the occasion, Ms. Treacy performed on a Stradivari violin worth around $4 million.

This Stradivari wasn’t made by the famous 17th century Cremonese luthier Antonio Stradivari whose instruments have become the gold standard for violin makers ever since. Instead, the violin Ms. Treacy played was made by Antonio’s son, Omobono Stradivari.

Omobono likely was primarily assigned repair work in Antonio’s shop. Compared to Antonio, few surviving violins are attributed to Omobono, and those are considered “clumsy” compared to his father’s work. And there is speculation that Omobono’s business interests primarily laid outside violin making.

Omobono might not have kept up with the productivity or workmanship of his illustrious father. But his instruments still reflect considerable artistry compared to other makers of his day and are not to be overlooked.

The same comparison might be made of large, publicly-traded corporations and their small, privately-held business counterparts. Although the former may generate more news reports and generate more revenue and government regulation, privately-held businesses far outstrip public companies in number. And small business is the backbone of many local communities.

On March 4, 2021, the Securities and Exchange Commission (SEC) announced that it was creating a Climate and ESG Task Force to focus on disclosure and ESG-related misconduct. Although the SEC’s focus likely primarily will be on disclosures by reporting companies and ESG funds, small businesses and privately-held companies also can create a significant impact with ESG programs.

This article provides a basic primer on ESG principles and discusses how small businesses and privately-held companies can positively affect their communities and stakeholders with ESG initiatives.

What is ESG?

Environmental, Social, and Governance (ESG) focuses on a company’s efforts in those three areas. ESG is used by investors when considering where to invest. ESG also should be a factor in developing a company’s policies and products.

ESG requires a holistic evaluation of the business to determine how it serves its stakeholders inside and outside of the company and the environment where it has influence. The relative focus on environment, social, and governance will vary by company.

Focus on environmental should include the company’s use of natural resources, conservation efforts, and recycling and sustainability. Companies also may evaluate their carbon footprint and energy use. If the business involves the use of chemicals, the company might determine if there is a more environmentally friendly option.

Social issues require evaluation of the company’s diversity and inclusion efforts from the boardroom to entry-level employees. Wellness programs and work environment must be evaluated to assure that employees are treated fairly and can work safely and without harassment. Companies also should consider their opportunities for social impact to make the world a better, safer, and more just place where all people can thrive.

Governance focuses on a company’s leadership and how it guides the company to have a positive impact. Governance also will include evaluating the board, executive, and management composition for diversity and inclusion. It also focuses on equity in compensation, transparency with investors and other stakeholders, and integrity.

Why is ESG Important?

Not only is it important that companies use their resources to make the world a better place, but ESG also is good business. For example, conserving energy, using renewable energy, and recycling can reduce costs and help the environment. Creating a diverse workforce where employees are valued and treated fairly will attract top talent, improve morale, and reduce turnover.

Millennial job hunters, consumers, and investors value ESG and may bypass a company that doesn’t. And Gen Z, which are entering adulthood, is the most diverse generation ever, with only 52%. For Gen Z, addressing climate change, equity, and social justice aren’t optional for Gen Z. With Millennials and Gen Z becoming important stakeholders, companies that ignore ESG initiatives aren’t likely to survive.

Eight of the top ten global risks to business identified by the World Economic Form are ESG-related. Further, according to McKinsey & Company, ESG can improve the bottom line. ESG can lead a company to new markets and business opportunities since consumers may seek companies dedicated to ESG.

Conservation efforts can lead to significant cost savings, for instance, in energy costs. And creating an ESG program can help a company futureproof its operations by anticipating changes (eg, carbon credits, bans on plastic bags, etc.).

Finally, employees who are treated well and enjoy a workplace free of discrimination and harassment are likely to be more productive and less likely to leave their jobs. And employees who are treated fairly are less likely to leave their jobs or file regulatory complaints.

Why Should Small Businesses and Privately-Held Companies Care about ESG?

In March, Acting SEC Chair Allison Herren Lee spoke about the SEC’s enhanced focus on ESG, which she said was driven by a “shift in investor focus.” She noted that “ESG risks and metrics now underpin many traditional investment analyses on investments of all types–a dynamic sometimes referred to as ‘ESG integration.’”

According to Lee, the “perceived barrier between social value and market value is breaking down. This change is driven by investors, lenders, asset managers, and ultimately consumers, making it an essential consideration for every business, whether or not under SEC regulation.

Further, the SEC now has set the expectation that reporting companies accurately disclose ESG information and programs. Investors and other stakeholders naturally will come to expect similar information from private businesses. Indeed, Lee Gardella, head of Investment Risk and Monitoring at private equity asset manager Schroder Adveq believes “private markets are a better place for an investor to apply their sustainable goals than the public markets.

The Process of Developing an ESG Strategy

The first step in developing an ESG program is self-reflection. Every business needs to ask difficult questions such as:

  • Is there diverse leadership and employees at every level in the company? What effort is the business making to recruit a diverse workforce?

  • Is the work environment free from discrimination and harassment? What does the company do to foster employees’ mental and physical health? Do employees receive a fair, living wage?

  • How does the company use natural resources? Does it use renewable energy sources and conserve water? What is the company’s carbon footprint? Does the company recycle and purchase recycled goods where possible? How do the company’s operations impact the land, water, and plant and animal life?

  • Do leadership and management deal fairly and transparently with stakeholders, including employees, customers, vendors, and investors?

  • What governmental regulation is the business subject to? Is the business in compliance with equal opportunity, wage hour, environmental, and ethical requirements?

After a business identifies its ESG successes and areas for improvement, it should develop strategies to address areas needing improvement. That ESG strategy should be integrated into the business’ culture and operations.

Key Elements of an ESG Strategy

Although contents of a business’ ESG strategy will depend upon its industry and the business’ unique circumstances, every ESG strategy should include these considerations:

360-Degree Engagement

A successful ESG strategy will involve all of a business’ stakeholders, including the board, executives, staff, investors, and consumers. The board may adopt the ESG strategy, but only after seeking information from other stakeholders. In addition to involving management and employees, a business may also seek customer or investor input through surveys.

Address All Three ESG Components

Balance is essential in business and in ESG strategies. An effective ESG strategy will not emphasize one or two of the areas to the neglect or exclusion of the other(s).

Many businesses may find it easier to have a strategy for one or two of the three ESG components (environmental, social, governance) than the others. Frequently the area where the business finds it most challenging to develop a strategy will be the one where the business needs to place the most focus.

For example, a business whose C-suite and board comprised of white men may find it difficult to attract women, people of color, and LGBTQ persons. Or the company may be in an industry where such individuals are underrepresented. Yet, a strong diversity program might be the best way for the business to demonstrate its commitment to ESG. A diversity initiative also may help futureproof the business by bringing new ideas and opportunities to the table.

Or on the social side, it may be difficult for a business to obtain management or owner approval for initiatives that increase employee or worker safety costs above minimum required levels at the expense of owner profit. Yet, in the long run, a happy and healthy workforce may lead to improved financial results.

Top to Bottom Education and Commitment

360-degree engagement doesn’t end when the ESG strategy is developed. Instead, all business personnel, from the board chair to the entry-level employee who started yesterday, needs to be educated about and engaged in carrying out the business’ ESG strategy.

Board, management, and staff must be educated about and committed to the business’ ESG strategy. And ESG should become a consideration in every business decision.

Asset Allocation

The book of Matthew in the Christian Bible says, “For where your treasure is, there will your heart be also.” As with a person, a business’ “treasure” might not refer just to money but also time and focus.

The business that adopts a strong ESG strategy but continues to place the lion’s share of its funds or employee time on practices that undermine that strategy isn’t likely to succeed. The business’ allocation of time and money and choices for community involvement should support its ESG strategy.

Disclosure and Marketing

Usually, it is a good idea for a business to promote its ESG strategy, even if it isn’t legally obligated to do so. By publicly committing to its ESG strategy, the business is more likely to follow through. Plus, public discussion shows customers, investors, and competitors of the business’ commitment to ESG and could encourage those stakeholders to make similar commitments.

Continued Self-Reflection and Evaluation

Businesses should develop metrics so they can continuously evaluate the effectiveness of their ESG strategies. If ESG strategy isn’t effective in one or more areas, the business should make changes designed to increase impact

Futurecasting

ESG is dynamic. Yesterday’s social and environmental concerns different from today’s concerns, and tomorrow’s concerns will be different yet. The most effective ESG strategies will proactively anticipate and be ready for future industry ESG concerns. And the business should make the investments necessary, so it isn’t left behind when those ESG concerns become reality.

This series draws from Elizabeth Whitman’s background in and passion for classical music to illustrate creative solutions for legal challenges experienced by businesses and real estate investors.

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These Are the Most Influential People in the DC-Area Weed Business

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These Are the Most Influential People in the DC-Area Weed Business

Caroline Phillips
Founder, National Cannabis Festival and National Cannabis Policy Summit

As a kid growing up in 16th Street Heights during the ’90s and early 2000s, she’d watch her neighbors’ residences being raided for pot offenses. As an adult, she has turned her hometown into a destination for weed stans, organizing the area’s first cannabis festival in 2016. Nearly 20,000 people attended the last in-person event, at RFK; it now includes a policy component, too.

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Andras Kirschner and Ed Weidenfeld
Co-owners, Phyto Management and Maryland Cultivation and Processing

When longtime lawyer and Reagan campaign counsel Ed Weidenfeld was diagnosed with Parkinson’s, his son introduced him to farmer and Landon alum Andras Kirschner. The pair became partners in pot-growing ventures in Hagerstown and DC. The latter, Phyto, was DC’s highest-grossing in 2019, with $3.2 million in revenue. “I once thought cannabis would put users on the path to inevitable addiction,” Weidenfeld says. Now it “keeps me close to the beauty of life.”

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Jeffrey Kahn and Stephanie Reifkind Kahn
Owners, Takoma Wellness Center

After decades working in healthcare (Stephanie) and using his rabbinate to help families face illness (Jeffrey), the couple opened their dispensary in 2013, making it one of the longest-running in DC. It was also the city’s top-grossing in 2019, with $7.6 million in revenue. Pot is a family business: Son Josh works with his parents, and his brother, James, has worked for other local weed outfits.


Chanda macias

Owner/CEO, National Holistic Healing Center; CEO, Women Grow; first vice chair, National Cannabis Roundtable

The former director of STEM education at Howard University runs a six-year-old dispensary in Dupont Circle, the second-highest-grossing outfit in DC in 2019. She has national sway, too, mentoring people through the networking organization Women Grow and working to influence US policy as a leader in the cannabis-reform group chaired by former House speaker John Boehner.


Linda Greene Market

Owner/CEO, Anacostia Organics; chair, DC Cannabis Trade Association

A former chief of staff to Marion Barry saw opportunity when DC paused its dispensary licensing and no licenses had been granted east of the Anacostia River. She convinced the city to resume licensing and subsequently set up her dispensary in early 2019, just up from the Big Chair on MLK Avenue. On the side, she heads the advocacy group for the city’s growers and sellers.


Hope Wiseman

Owner/CEO, Mary & Main

When Wiseman—the former Falcons cheerleader who starred on the E! reality show WAGS Atlanta—opened her dispensary in Prince George’s County in 2018 at age 26, she became the youngest Black female dispensary owner in the US. This year, she plans to begin franchising to other minority entrepreneurs while organizing a canna-centric conference, “The 420 Experience.” Weed, she says, is “a great opportunity for minorities to build wealth.”


Bill Askinazi

Owner, Potomac Holistics

His Rockville dispensary was the first in Maryland, selling out every day for two months after it opened in 2017. As a former top official at the state’s economic-development agency, he worked with small businesses—his is now one of the only mom-and-pop pot shops left in Montgomery County.

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Josh Genderson

CEO, Holistic Industries

He learned about heavily regulated industries while working at his family’s longtime liquor store, Schneider’s of Capitol Hill, and made the leap to pot in 2010. His company now operates two of the eight cultivation centers in the District. Holistic has also opened a dispensary division (it runs Lib­erty Cannabis in Rockville), has expanded to seven states, and is projected to gross $200 million in sales this year.


Corey Barnette

Owner/CEO, District Growers and Kinfolk

This MBA and former finance guy is the only person to head both a dispensary and a growing operation in DC: He founded a cultivation center in the Langdon neighborhood and acquired Kinfolk, formerly Metropolitan Wellness Center, a dispensary that’s relocating from Eastern Market to Mount Vernon Triangle. Barnette is often a spokesman for the local industry, testifying on the Hill and advocating for inclusivity within the business.


Erich Mauff

Cofounder/president, Jushi

Mauff is used to the competitive world of Big Cannabis: Before working at Deutsche Bank for nearly two decades, he rowed in the Olympics. Last year, his company acquired one of five licensees in Virginia’s inaugural class of “pharmaceutical processors”—facilities that house every step of the medical-cannabis process, from seed to sale. With a dispensary open in Manassas (called Beyond/Hello) and five more slated to open by mid-2022, Jushi-operated storefronts will be the only places to get medical marijuana in Northern Virginia.

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Jamila Hogan

Founder, the Green Life Learning Center and Pass the Jay

A cannabis judge who anoints prize-winning “strain hunters” at international contests—“When I say it’s good, it’s good”—Mills is to weed what a master somm is to wine. She may be the most erudite kush critic in DC, using her background as a former grower to review dispensary products and locally grown flowers on her website, Pass the Jay. Mills also consults and teaches, schooling growers and consumers in the olfactory elements that differentiate pot strains and their effects. Her pitch: More education + more discerning buyers = better bud.

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Giadha A. DeCarcer

Founder, New Frontier Data

She honed her Big Data skills working in the intelligence field and at JP Morgan Chase. Now she churns out GFN and market forecasts for weed investors and business owners. Her seven-year-old firm expanded its stake in the industry in 2018 when it bought Hemp Business Journal and again last year when it acquired Higher Data, an industry database.

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“DC Scroger”

@dcscroger

His alias derives from “scrogging,” a growing technique that maximizes yield per plant—helpful for pot growers in DC, where residents are restricted to six flowering plants apiece. He teaches classes for serious homegrowers, throws Bring Your Own Bucket soil-mixing parties, and preaches the virtues of self-sufficiency on his Instagram.

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Leah Sera

Director, MS Program in Medical Cannabis Science and Therapeutics, University of Maryland School of Pharmacy

Sera oversees the first medical-marijuana master’s degree in the country, helping train the next generation of cannabis professionals. The two-year-old program covers the scientific, cultural, and political aspects of weed—from a distance. Because of federal laws, neither Sera nor her 400 students can actually touch what they’re studying.

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Mark Nagib

Co-owner/creative director, Pink Fox

After being laid off from their lobbying-firm gigs a few years ago, Nagib and his partner, who goes by “Keo,” started developing DC-centric designs for their high-end gifting company. (Gifters sell token items and give pot away for free, a workaround of District law.) Instead of cheap stickers or trinkets, Pink Fox sells limited-edition loungewear, vibing weed-as-your-best-life. Naturally, Nagib and Keo also host a podcast.


Davis Clayton Kiyo

Owner/CEO, Myster and Octave

His two local storefronts shuttered after a 2016 police raid at one of them, but the Bethesda native continues to sell Myster’s high-end hardware online. The accessories—including the best-known all-in-one Stashtray, inspired by minimalist and modern design—are crafted to be cool enough for the Insta generation but also appeal to the clean-cut sensibilities of a corporate type. Octave, a new venture launched last year, makes high-tech smoking ware for the techy stoner crowd.

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Michael J. Correia

Director of government relations, National Cannabis Industry Association

Before becoming Big Pot’s head lobbyist in 2013, he worked for its prototypical enemy: Republicans. He spent a decade-plus on the Hill and was director of federal affairs at ALEC, the clearinghouse for conservative legislation. Today at NCIA he represents more than 1,000 cannabusinesses.


Queen Adesuyi

Policy manager, Drug Policy Alliance

The 26-year-old Bronx native saw the disparate impacts of pot policing on her hometown versus at her alma mater, Georgetown. Now she lobbies for racial justice in weed policy, pushing for federal criminal-justice reform in Congress and for equity in how the District regulates the industry.


Jenn Michelle Pedini

Executive director, Virginia NORML; development director, NORML

A veteran of Disney World and corporate marketing, Pedini has a background in storytelling, which has been useful at NORML’s chapter in the Old Dominion. During the 2021 legislative session, Pedini’s years-long effort to get Virginia to legalize recreational marijuana was successful—a first among Southern states.

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Diamond Riley

Founder, DC Bake Shop

The former pop-up player has been an innovator in edibles. She gifts Milk Bar–inspired treats and pizzas with sativa-infused sauce to people who make top-dollar donations; a half dozen cupcakes go to a donor of $110, for instance. Pre-pandemic, Riley brought cannabis programming to the Wing coworking club.


Jazmine Moore

Owner/CEO, Green Panther Chef

Diagnosed with Crohn’s disease in 2007, the chef weighed 84 pounds and was desperate for relief, which she found by infusing juice with cannabis. Today Moore caters spreads of edibles for patients and parties, dosing niçoise salads and coq au vin for up to $10,000 per spread. She also has a line of CBD condiments designed to aid gut health.

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Adam Eidinger and Nikolas Schiller
Founders, DC Marijuana Justice

Their fame in local pot circles goes back to 2011, when police raided the Capitol Hemp store that Eidinger then co-owned. (He avoided prosecution by closing the shop.) Schiller and Eidinger later formed their advocacy group, helping craft and pass Initiative 71, the ballot measure that legalized pot possession in the District. When it became law in 2015, Mayor Bowser awarded Eidinger a “420” license plate. Now that the city is debating full legalization, expect to see more of their joint effort—Eidinger getting handcuffed for the cause (he’s currently at 26 arrests) and Schiller staying behind to tell the story.

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Meredith Kinner and Johnny McGowan
Partners, Kinner & McGowan

They opened their litigation practice in 2015, becoming one of the first firms to dedicate themselves to DC’s cannabis market. The Capitol Hill–based duo help cannabusinesses unravel the Gordian knot of banking, zoning, and licensing regulations in a shifting legal landscape.


Lonny Bramzon

Owner, Street Lawyer Services

A Miami-raised criminal-defense attorney with a weed side hustle, Bramzon started an H Street gifting operation to market his Silver Spring law firm: The shop sells coupons for legal services, and the weed is free. His “budtenders,” a fleet of young women who work the counters (and call themselves SLS Women), help market the shop to their own micro-influencer followings and are at work with Bramzon to develop a women-focused pot line. He also just launched an expungement-advocacy campaign to get DC-area courts to wipe records clean of weed-related convictions.

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Natalie done

Reporter, Politico

When Politico launched its pot vertical a year and a halfago, it became the first mainstream publication with a cannabis team. Fertig, its federal-policy reporter, covers everything pot-related on Capitol Hill, from financial regulation to agriculture and criminal justice. It’s “the ultimate policy-reporting job,” she says, “because it’s completely new.”

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7 dispensaries

8 cultivation centers

9,276 patients registered

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19 dispensaries

0 cultivation centers

22,455 patients registered

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8 dispensaries

1 cultivation center

12,952 patients registered

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4 pharmaceutical processors

0 Pounds of flower sold. That’s because the Commonwealth’s current medical program is limited to non-combustible forms such as oils, creams, and capsules.

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Democratic Mayoral Candidates Talk Making the City More Business-Friendly

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A Warby Parker event (photo: Demetrius Freeman/Mayor’s Office)


This past week, advocacy group Tech:NYC and glasses company Warby Parker, among others, co-hosted a forum with seven leading Democratic candidates for mayor, who appeared one at a time to answer questions from Business Insider columnist Josh Barro about the city’s future and their agendas.

The participating candidates, in order of appearance, were entrepreneur Andrew Yang, former sanitation commissioner Kathryn Garcia, Brooklyn Borough President Eric Adams, former federal housing secretary Shaun Donovan, former Wall Street executive Ray McGuire, Comptroller Scott Stringer, and Maya Wiley, a civil rights attorney and former counsel to Mayor de Blasio. The event was co-hosted by AT&T, Bowery Farming, Etsy, Harry’s, Via, WeWork, and Zola, among others.

The questions, somewhat uniform to each candidate, focused on issues relevant to the tech and business communities, such as how to attract business to New York City in the post-COVID-19 economy, the failed Amazon ‘HQ2’ deal, housing development, and expanding broadband access.

Andrew Yang
Barro asked Yang as a businessman how he thought that businesses choose to locate in New York, and how as mayor Yang would make them more interested in the city. Citing his experience in start-ups, Yang argued that the location of companies depends on where their employees would like to be. He said that “if there’s one thing that makes the world goes around for founders, it’s talent.”

To make the city more attractive to employees, Yang honed in rectifying quality-of-life issues such as “getting schools open to garbage pick up to public safety concerns.” He reiterated his oft-cited stance that the city must restore its “value proposition” to business owners and others alike to make some of the challenges of the city, like cost and commutes, worth it.

Barro asked why “garbage is piled high on the sidewalks” and why the city has not moved to containerized pick-up. Yang called out the cuts to the Department of Sanitation budget, saying that “if you’ve noticed more trash on the street, that’s why,” and saying that is something he would restore funding to.

Barro moved on to ‘HQ2,’ which was slated for Queens before activists and elected officials who opposed the Amazon deal pushed the company to back out, and the role of subsidies in attracting major technology companies to New York City. Saying that “Manhattan has a natural draw,” Yang acknowledged the role of subsidies in attracting companies to the other boroughs.

Yang said that he supported ‘HQ2’ for Queens, and falsely said, “I’m one of the only mayoral candidates who’s said on the record that losing Amazon was a mistake for the city.” Barro pressed Yang on whether the “billions in subsidies” that Amazon would have received would have been worth it. Yang said it wasn’t great policy. “You can’t just let them walk away,” Yang said, citing the many thousands of jobs the campus was slated to create and support of the service industry it would have provided.

Barro then asked if changes to corporate structures that allow for remote work, accelerated by the demands of the COVID-19 pandemic, affected the city’s ability to attract tech companies. “New York City is fundamentally a place-based economy,” Yang said, and “the New York City advantage will still be there.” Barro pressed Yang further on the difference of attracting workers versus attracting firms, asking Yang how his strategy to attract companies would change. Yang admitted that the city will have to “compete and make its case” in a way it did not have to in the past, adding that he is exploring “incentives” for workers to commute to the city five times a week, mentioning gift cards to New York City bars and restaurants as a possibility, and making investments to increase tourism.

Barro asked Yang about reducing the sky-high costs of the city’s capital projects. Yang said he would have the city “be more disciplined” about having contractors focus on the quality of their work rather than sub-contracting. He also mentioned he would streamline bureaucracy, saying that it was not user-friendly for small businesses.

Asked how many housing units the city should build over the next ten years, Yang did not present a specific figure, saying only that it would be in “the tens of thousands” for his first term and that he would want to increase the rate of housing development in the city. Seemingly underprepared to discuss housing development goals, Yang pivoted to his pledge to reduce street homelessness “by 50%” over his first term, and said he would want to convert some vacant hotels into affordable and supportive housing.

Barro concluded by asking Yang if he had connected with any of the other mayoral candidates, to which Yang responded that he was “a huge Kathryn Garcia fan” and that she was someone he “admired a great deal.”

Kathryn Garcia
Asked why she is the best candidate for mayor, Garcia told Barro that “understanding how the city works is absolutely critical, because then you can actually fix things” and “know where the pain points are.” She said her managerial experience in various roles in city government made her the strongest potential next leader for New York City.

Barro asked Garcia about the city’s garbage situation, asking if it was possible to “get it off the sidewalks and into closed containers,” to which Garcia said it was fully possible, and that part of that effort would require the city “rethink the public realm” about how street space is used. She mentioned that as sanitation commissioner she had launched a pilot program for commercial corridors that is being implemented.

Asked how she thought public spaces were being underutilized, Garcia advocated that “you need people walking the streets of New York, spending money” and that public space management efforts should look at “Open Restaurants, Open Culture, but also thinking about greening the city,” with references to two recent pandemic-era public space programs launched by the city.

On attracting companies to the city, Garcia said she would focus on a “liveable city,” as companies “locate where they have really strong labor forces.”

“We have to do way better” building housing, Garcia said, adding that her efforts would target “unlocking the private sector by getting rid of the bureaucracy” and building between 20,000 and 30,000 units a year. Citing that “time is money in construction” and that “we don’t actually do good planning,” Garcia said she would increase community input and reduce bureaucracy. Barro challenged her on this point, asking how she would resolve situations where increased considerations would conflict with expeditiousness, citing her support while working under de Blasio for special construction permits for hotels. Garcia sidestepped the first part of the question, only defending her support of special permits for hotels.

On expanding broadband access, Garcia said she would target lowering costs, facilitating rule changes to make the expansion of broadband easier in communities, and having the city connect residents to broadband themselves if companies did not create broadband access where the city would like.

Eric Adams
Adams said that he is the best candidate for mayor because of his life experiences from growing up in poverty, experiencing police brutality, becoming a police officer himself, and his diabetes diagnosis that he went on to beat through a healthy lifestyle. As “someone who has gone through a lot,” Adams said he was in the best position to help other people “going through a lot.”

On how companies should be “respectful” in the city and be good neighbors, something Barro brought up as Adams has discussed it in the past, Adams said he would challenge corporations to think on the question “how do I involve myself in the communities put in place long before me?” such as working with the Department of Education to teach children life skills. On how he would actually accomplish these partnerships, Adams pointed towards working with specific organizations and not “demonizing companies” and creating “this synergy that we are in this together.”

Examining his stated plan to name an “efficiency czar” to make city government work better, Barro asked how Adams’ approach to reducing waste differed from past tactics under Bloomberg and de Blasio. Adams argued that “the city is dysfunctional” because “agencies are not aligned” and pointed to his record in the NYPD using data and technology as part of the department’s modern evolution. When pressed by Barro on how agencies would operate differently, Adams cited his mother saying “What gets measured, gets done. If you don’t inspect what you expect, it’s all suspect,” and said he would want real-time data for examining basic city services.

Barro gave Adams the same question he gave to Yang on whether the city should push for tech companies to locate in boroughs other than Manhattan and whether Adams would support subsidies to make that happen. Adams denied that the city needed a subsidy program, and turned to discussing quality-of-life issues. To “build the proper environment” for companies to locate all over the city, he would focus on providing services such as access to transportation, public safety, and high-speed internet, he said.

Barro brought up the defeated Industry City rezoning in Brooklyn, an expansion and development proposal promising thousands of jobs and more economic activity along the Brooklyn waterfront that was ultimately defeated by local activists and City Council Member Carlos Menchaca. “It’s really unfortunate that we could not seal the deal in Industry City,” Adams said, adding that on development projects in general he would want to focus on being inclusive but also on “how can we get to a yes.” On whether or not local Council members have too much power to kill projects in their districts, Adams argued that for projects that affect the entire city, one member of the City Council should not have the power to shut them down, an informal practice known as “member deference” where the full Council defers to the local member whose district the proposal is slated for.

On housing, Adams told Barro that asking how many units of housing to add was “the wrong question” and that the city should audit its current housing to see where there are vacancies or lack of use and go from there. Barro pushed back, saying that even with auditing vacant housing more housing must be developed because of the city’s growing population, on which Adams deflected and instead pressed his desire to identify unused housing.

Shaun Donovan
Barro opened his conversation with Donovan, the former head of housing in the city and nationally under Mayor Bloomberg and President Obama, on housing. Donovan said the city should add 50,000 units per year, a very large goal, and touted his “15-minute neighborhoods” plan to ensure every New Yorkers lives in a great neighborhood with access to everything they need.

On rezonings, Donovan said he was open to upzonings for more housing, such as what the de Blasio administration is currently attempting in SoHo. He added that there should be a “citywide land use budget” to “make sure every community is doing its fair share,” through looking at ways to add density and using citywide inclusionary zoning.

After Barro asked what he would do differently to add housing from his time under Bloomberg, Donovan said the scope of the city’s housing problem is wide enough that “changing the trajectory” for the city takes years. He also said he was proud of the Bloomberg legacy on upzoning wealthier communities.

On lowering the cost of construction, Donovan discussed “building differently” such as using new technologies and having an administration “that brings innovation to every phase of what government does.”

On attracting increasingly mobile workers and firms to New York City, Donovan called himself “an urban optimist” and that the question was about whether or not specifically New York City could manage the challenge. New York City can become the “tech center” of the world, he said, and he would make it happen through his specific plans and by focusing on quality-of-life issues.

Ray McGuire
McGuire argued that he was the best candidate for mayor because of his private sector experience, where he was one of the top executives at Citi and on Wall Street more generally, saying that “this is not the time where someone gets to the mayoral spot to learn how to manage or lead.”

On attracting businesses, McGuire said that the city should “incentivize businesses to do more business here, not less” and that he would work on uniting business interests with the rest of the city, rather than pursuing divisive measures such as increasing taxes.

To move “job centers out to the outer boroughs,” McGuire supported using subsidies, which he referred to as incentives. McGuire said the collapse of the Amazon ‘HQ2’ deal was a mistake and that the project would have been a big net positive for the city, even with the subsidies.

On expanding broadband access, McGuire said it’s essential for education, and pointed to his economic comeback plan, which would include efforts to create universal broadband access.

To improve the efficiency of the city’s capital projects and “to bring costs under control,” McGuire said he would “bring all constituents to the table.” He said that he “wasn’t in anyone’s pocket” and that his “sole focus” is on what is best for the city, that he’s not “focused on sub-agendas.” He referenced de Blasio’s tagline of the “Tale of Two Cities,” saying that now New York City was a “fractured city.”

Calling his answer “nonspecific,” Barro pushed McGuire to elaborate on what made his leadership skills unique. McGuire said that, having led a global business, he was the only candidate with the skills to unite the diverse constituencies of New York City and focus on “shared prosperity.”

On housing, McGuire said he would like to increase the city’s housing units by 10%, or 350,000 units. Barro asked McGuire for a timeline on such development, which McGuire side-stepped, pointing to lowering construction costs and the economic benefits new construction would bring.

Scott Stringer
Stringer said he should be the next mayor in part because he is a “real seasoned government leader, who has vision and experience.”

Barro asked Stringer how he would seek to regain jobs lost in the COVID-19 pandemic, confronted with “an economy that may be permanently different in certain ways,” citing business travel as something that may permanently decrease.

Stringer replied that he would focus on small businesses, including by directing $1 billion from the city’s federal stimulus money to them. He would provide tax incentives for new businesses to locate in the city in “vacant corridors” and would make sure small businesses are not “fined and fee-ed into oblivion.” He said small business owners would not need to hire an expediter to get projects approved in the city and he would create a tech platform for small businesses to use to efficiently navigate city processes.

Asked what he would do differently from Bloomberg and de Blasio on the issues of inefficiency in small business processes, Stringer lambasted de Blasio by saying “what he didn’t do was govern.” Saying “you gotta manage this town,” Stringer said that he would focus on actually accomplishing goals that the city sets for itself.

On attracting tech companies to boroughs other than Manhattan and the role of subsidies in those conversations, Stringer said “it’s exciting that we’re spreading our economy out,” that “if we build it, they will come,” that he would focus on quality-of-life issues such as transportation, and that attracting businesses relies on the “value proposition” of what the city can offer businesses.

On how many housing units he would seek to create as mayor, Stringer said “as many as possible,” but he said key to his vision is creating enough “low-income housing” to actually meet the need in the city. Looking at the legacies of Bloomberg and de Blasio, he said, “We’ve had mayors talking about these big numbers, but they have not helped people get housing.” His efforts would focus on housing that targets those close to homelessness and would focus on true affordability. He would create 10,000 units of low-income housing and “catalogue” the vacant parcels the city owns for potential developments.

Maya Wiley
Saying that the COVID-19 pandemic “pulled the curtain back” on the issues the city faced, Wiley said that the challenge for the next mayor would be to “create a more unified city.” Doing this requires “very different leadership” to pursue “transformative policy,” Wiley said, adding, “I’m not a politician, and I think that’s the point.”

On expanding broadband, Wiley pointed to her work on universal broadband when working for de Blasio at City Hall by soliciting input from outside groups such as Girls Who Code, and by unifying the efforts of different agencies to work on the project. When Barro pushed Wiley for concrete steps for accomplishing universal broadband, she said she would focus government efforts on the “last mile problem in highly, highly, underserved areas” by “asset-mapping” current city resources that could be used to provide universal broadband. She would also pursue public-private partnerships, and look at technological innovations, she said.

On small businesses, Barro asked about why Wiley’s platform would have the city increase the number of restaurant health inspections, but to have those inspections announced in advance. Wiley said sometimes the city’s efforts to protect health can backfire by “jeopardizing the business rather than serving the public,” and that her plan would maintain restaurants’ compliance with health code violations while

Adding to her response, Wiley said she would streamline small businesses’ interactions with the city and grow their relationship with the city. She would want the city to be more proactive in their assistance to small businesses, so that they work together to solve problems rather than having the city shutting down actions after the fact. As an example, she mentioned having the city release blueprints for COVID-19-safe outdoor dining vestibules, rather than punishing restaurants for non-compliant vestibules after those businesses spent thousands of dollars “that they don’t have” on them. This would be “business-friendly, without sacrificing the issues we have to protect for the public,” she said.

Barro asked Wiley if there were other “big pilots” such as Open Streets she would want to pursue as mayor. “City government is a city unto itself,” she replied, and said that it is important to “recognize where government needs to partner with itself” better. To that end, she mentioned her plan to create an Office of Public Space Management, which would unite different agencies to create a centralized approach.

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