HPE Reports Q3 Results

Q3 2020 Finan짯cial Highlights:

  • Reve짯nue: $6.8 bil짯li짯on, up 13% sequen짯ti짯al짯ly or 14% when adjus짯ted for currency
  • Gross Pro짯fit: $2.1 bil짯li짯on, up 8% sequentially
  • Ope짯ra짯ting Pro짯fit: GAAP of $12 mil짯li짯on, up 101% sequen짯ti짯al짯ly and Non-GAAP of $484 mil짯li짯on, up 33% sequentially
  • Annua짯li짯zed reve짯nue run-rate (ARR): $528 mil짯li짯on, up 11% from the pri짯or-year period
  • Diluted net ear짯nings per share:
  • GAAP of $0.01 due to the acce짯le짯ra짯ti짯on of trans짯for짯ma짯ti짯on pro짯gram, com짯pared to ($0.02) from the pri짯or-year period
  • Non-GAAP of $0.32, com짯pared to $0.45 from the pri짯or-year period
  • Cash flow from Ope짯ra짯ti짯ons of $1.5 bil짯li짯on, up 23% from the pri짯or-year period
  • Free Cash Flow of $924 mil짯li짯on, up 43% from the pri짯or-year period
  • Q4 FY20 divi짯dend of $0.12 a share, paya짯ble on Octo짯ber 7, 2020

Q3 2020 Key Highlights:

  • Redu짯ced our Q2 FY20 back짯log by more than $500 mil짯li짯on through impro짯ved sup짯p짯ly chain execution
  • Gai짯ned momen짯tum in key invest짯ment are짯as: HPE Green짯La짯ke ser짯vices orders grew a record 80% from the pri짯or-year peri짯od or 82% when adjus짯ted for currency
  • Announ짯ced intent to acqui짯re SD-WAN lea짯der Sil짯ver Peak
  • Laun짯ched next-gene짯ra짯ti짯on HPE Green짯La짯ke cloud ser짯vices, HPE Ezme짯ral soft짯ware port짯fo짯lio and the Aru짯ba Edge Ser짯vices Platform

FY 2020 Outlook:

  • Ear짯nings per Share: Q4 2020 GAAP diluted net ear짯nings per share of $0.02 to $0.06 and non-GAAP diluted net ear짯nings per share of $0.32 to $0.36. FY 2020 GAAP diluted net loss per share of $0.35 to $0.31. FY 2020 non-GAAP diluted net ear짯nings per share of $1.30 to $1.34.

Our Q3 results are mark짯ed by strong exe짯cu짯ti짯on and sequen짯ti짯al growth, said Anto짯nio Neri, pre짯si짯dent and CEO of Hew짯lett Packard Enter짯pri짯se. 쏻e signi짯fi짯cant짯ly impro짯ved ope짯ra짯tio짯nal and sup짯p짯ly chain exe짯cu짯ti짯on and advan짯ced our inno짯va짯ti짯on agen짯da with the intro짯duc짯tion of HPE Green짯La짯ke cloud ser짯vices solu짯ti짯ons, our new HPE Ezme짯ral soft짯ware port짯fo짯lio, and our plan짯ned acqui짯si짯ti짯on of SD-WAN lea짯der Sil짯ver Peak.

We gai짯ned momen짯tum in key are짯as of dif짯fe짯ren짯tia짯ti짯on and acce짯le짯ra짯ted our as-a-ser짯vice pivot with strong ARR growth and a record num짯ber of HPE Green짯La짯ke ser짯vices orders, he con짯tin짯ued. 쏯avi짯ga짯ting through the pan짯de짯mic and plan짯ning for a post-COVID world have increased cus짯to짯mers needs for as-a-ser짯vice offe짯rings, secu짯re con짯nec짯ti짯vi짯ty, remo짯te work capa짯bi짯li짯ties and ana짯ly짯tics to unlock insights from data that are ali짯gned to our stra짯tegy. We see a tre짯men짯dous oppor짯tu짯ni짯ty to help our cus짯to짯mers dri짯ve digi짯tal trans짯for짯ma짯ti짯ons as they con짯ti짯nue to adapt to ope짯ra짯te in a new world.

Third Quar짯ter Fis짯cal Year 2020 Results

Net reve짯nue of $6.8 bil짯li짯on, down 6% from the pri짯or-year peri짯od or 4% when adjus짯ted for cur짯ren짯cy. Reve짯nue grew 13% sequen짯ti짯al짯ly or 14% when adjus짯ted for cur짯ren짯cy dri짯ven by solid exe짯cu짯ti짯on in clea짯ring his짯to짯ric back짯log by appro짯xi짯m짯ate짯ly $500 mil짯li짯on during the quarter.

Annua짯li짯zed reve짯nue run-rate (ARR) of $528 mil짯li짯on, up 11% from the pri짯or-year peri짯od. We are rei짯te짯ra짯ting our 2019 Secu짯ri짯ties Ana짯lyst Mee짯ting ARR gui짯dance of 3040% Com짯poun짯ded Annu짯al Growth Rate from fis짯cal year 2019 to fis짯cal year 2022.

Gross Pro짯fit of $2.1 bil짯li짯on, up 8% sequen짯ti짯al짯ly due to strong ope짯ra짯ti짯on execution.

GAAP gross pro짯fit mar짯gin of 30.3%, com짯pared to 33.9% from the pri짯or-year peri짯od and Non-GAAP gross pro짯fit mar짯gin of 30.4%, com짯pared to 33.9% from the pri짯or-year period.

GAAP Ope짯ra짯ting Pro짯fit of $12 mil짯li짯on, up 101% sequen짯ti짯al짯ly and Non-GAAP ope짯ra짯ting pro짯fit of $484 mil짯li짯on, up 33% sequentially.

GAAP ope짯ra짯ting pro짯fit mar짯gin of 0.2%, com짯pared to (1.1%) from the pri짯or-year peri짯od and Non-GAAP ope짯ra짯ting pro짯fit mar짯gin of 7.1%, com짯pared to 9.9% from the pri짯or-year period.

GAAP diluted net ear짯nings per share (EPS) was $0.01 due to the acce짯le짯ra짯ti짯on of trans짯for짯ma짯ti짯on pro짯gram, com짯pared to ($0.02) in the pri짯or-year period.

Non-GAAP diluted net EPS was $0.32, com짯pared to $0.45 in the pri짯or-year peri짯od. Third quar짯ter non-GAAP net ear짯nings and non-GAAP diluted net EPS exclude after-tax adjus짯t짯ments of $410 mil짯li짯on and $0.31 per diluted ear짯nings per share, respec짯tively, pri짯ma짯ri짯ly rela짯ted to trans짯for짯ma짯ti짯on cos짯ts and amor짯tiza짯ti짯on of purcha짯sed intan짯gi짯ble assets.

Cash flow from ope짯ra짯ti짯ons of $1.5 bil짯li짯on, com짯pared to $1.2 bil짯li짯on in the pri짯or-year period.

Free cash flow of $924 mil짯li짯on, com짯pared to $648 mil짯li짯on in the pri짯or-year period.

Seg짯ment Results

Intel짯li짯gent Edge reve짯nue was $684 mil짯li짯on, down 12% year over year or 11% when adjus짯ted for cur짯ren짯cy, with 8.6% ope짯ra짯ting pro짯fit mar짯gin, com짯pared to 6.8% from the pri짯or-year peri짯od. Reve짯nue grew 3% sequen짯ti짯al짯ly demons짯t짯ra짯ting con짯tin짯ued momentum.

Com짯pu짯te reve짯nue was $3.4 bil짯li짯on, flat year over year or up 1% when adjus짯ted for cur짯ren짯cy, with 8.5% ope짯ra짯ting pro짯fit mar짯gin, com짯pared to 12.9% from the pri짯or-year peri짯od. Reve짯nue grew 28% sequen짯ti짯al짯ly or 29% when adjus짯ted for cur짯ren짯cy as we exe짯cu짯ted against the back짯log and impro짯ved our sup짯p짯ly chain execution.

High Per짯for짯mance Com짯pu짯te & Mis짯si짯on Cri짯ti짯cal Sys짯tems (HPC & MCS) reve짯nue was $649 mil짯li짯on, up 3% year over year, with 5.5% ope짯ra짯ting pro짯fit mar짯gin, com짯pared to 8.1% from the pri짯or-year peri짯od. Reve짯nue grew 10% sequen짯ti짯al짯ly as instal짯la짯ti짯ons and cus짯to짯mer accep짯tance of sys짯tems improved.

Sto짯rage reve짯nue was $1.1 bil짯li짯on, down 10% year over year or 9% when adjus짯ted for cur짯ren짯cy, with 12.9% ope짯ra짯ting pro짯fit mar짯gin, com짯pared to 16.5% from the pri짯or-year peri짯od. Reve짯nue grew 4% sequen짯ti짯al짯ly dri짯ven by impro짯ved ope짯ra짯tio짯nal exe짯cu짯ti짯on and reduc짯tion of backlog.

Advi짯so짯ry & Pro짯fes짯sio짯nal Ser짯vices (A&PS) reve짯nue was $226 mil짯li짯on, down 7% year over year or 5% when adjus짯ted for cur짯ren짯cy, with (1.8%) ope짯ra짯ting pro짯fit mar짯gin, com짯pared to (3.7%) from the pri짯or-year peri짯od. Reve짯nue was down 5% sequen짯ti짯al짯ly or 4% when adjus짯ted for cur짯ren짯cy as COVID-19 impac짯ted con짯sul짯ting acti짯vi짯ties of our team mem짯bers. A&PS is a stra짯te짯gic busi짯ness that pulls through signi짯fi짯cant infra짯struc짯tu짯re and ope짯ra짯tio짯nal ser짯vices sales.

Finan짯cial Ser짯vices reve짯nue was $811 mil짯li짯on, down 9% year over year or 6% when adjus짯ted for cur짯ren짯cy and down 3% sequen짯ti짯al짯ly or 2% when adjus짯ted for cur짯ren짯cy, with 8.0% ope짯ra짯ting pro짯fit mar짯gin, com짯pared to 8.7% from the pri짯or-year peri짯od. Net port짯fo짯lio assets were up 3% year over year and up 4% sequen짯ti짯al짯ly or 1% when adjus짯ted for cur짯ren짯cy, and finan짯cing volu짯me was down 12% year over year or 9% when adjus짯ted for cur짯ren짯cy and flat sequen짯ti짯al짯ly or up 1% when adjus짯ted for cur짯ren짯cy despi짯te the impact of COVID-19. The busi짯ness deli짯ver짯ed return on equi짯ty of 12.8%, down 3.0 points from the pri짯or-year period.

Q4 2020 Dividend

Board of Direc짯tors have declared a regu짯lar cash divi짯dend of $0.12 per share on the company셲 com짯mon stock. This divi짯dend, the fourth in Hew짯lett Packard Enterprise셲 fis짯cal year 2020, is paya짯ble on Octo짯ber 7, 2020, to stock짯hol짯ders of record as of the clo짯se of busi짯ness on Sep짯tem짯ber 9, 2020.

FY 2020 Outlook

For the fis짯cal 2020 fourth quar짯ter, Hew짯lett Packard Enter짯pri짯se esti짯ma짯tes GAAP diluted net EPS to be in the ran짯ge of $0.02 to $0.06. For fis짯cal 2020 full-year Hew짯lett Packard Enter짯pri짯se esti짯ma짯tes GAAP diluted net loss per share of $0.35 to $0.31.

For the fis짯cal 2020 fourth quar짯ter, Hew짯lett Packard Enter짯pri짯se esti짯ma짯tes non-GAAP diluted net EPS to be in the ran짯ge of $0.32 to $0.36. Fis짯cal 2020 fourth quar짯ter non-GAAP diluted net EPS esti짯ma짯tes exclude after-tax cos짯ts of appro짯xi짯m짯ate짯ly $0.30 per diluted share, pri짯ma짯ri짯ly rela짯ted to trans짯for짯ma짯ti짯on cos짯ts and the amor짯tiza짯ti짯on of intan짯gi짯ble assets.

For fis짯cal 2020 full-year, Hew짯lett Packard Enter짯pri짯se esti짯ma짯tes non-GAAP diluted net EPS to be in the ran짯ge of $1.30 to $1.34. Fis짯cal 2020 non-GAAP diluted net EPS esti짯ma짯tes exclude after-tax cos짯ts of appro짯xi짯m짯ate짯ly $1.65 per diluted share, pri짯ma짯ri짯ly rela짯ted to good짯will impair짯ment, trans짯for짯ma짯ti짯on cos짯ts, amor짯tiza짯ti짯on of intan짯gi짯ble assets, and acqui짯si짯ti짯on, dis짯po짯si짯ti짯on and other rela짯ted charges.

About Hew짯lett Packard Enterprise

Hew짯lett Packard Enter짯pri짯se is the glo짯bal edge-to-cloud plat짯form-as-a-ser짯vice com짯pa짯ny that helps orga짯niza짯ti짯ons acce짯le짯ra짯te out짯co짯mes by unlo짯cking value from all of their data, ever짯y짯whe짯re. Built on deca짯des of reim짯agi짯ning the future and inno짯vat짯ing to advan짯ce the way we live and work, HPE deli짯vers uni짯que, open and intel짯li짯gent tech짯no짯lo짯gy solu짯ti짯ons, with a con짯sis짯tent expe짯ri짯ence across all clouds and edges, to help cus짯to짯mers deve짯lop new busi짯ness models, enga짯ge in new ways, and increase ope짯ra짯tio짯nal per짯for짯mance. For more infor짯ma짯ti짯on, visit: www.hpe.com.

Use of non-GAAP finan짯cial information

To sup짯ple짯ment Hew짯lett Packard Enterprise셲 con짯den짯sed con짯so짯li짯da짯ted finan짯cial state짯ment infor짯ma짯ti짯on pre짯sen짯ted on a gene짯ral짯ly accept짯ed accoun짯ting prin짯ci짯ples (GAAP) basis, Hew짯lett Packard Enter짯pri짯se pro짯vi짯des reve짯nue on a con짯stant cur짯ren짯cy basis as well as non-GAAP gross pro짯fit mar짯gin, non-GAAP ope짯ra짯ting pro짯fit (non-GAAP ear짯nings from ope짯ra짯ti짯ons), non-GAAP ope짯ra짯ting pro짯fit mar짯gin, non-GAAP inco짯me tax rate, non-GAAP net ear짯nings, non-GAAP diluted net ear짯nings per share, gross cash, free cash flow, net debt, net cash, ope짯ra짯ting com짯pa짯ny net debt and ope짯ra짯ting com짯pa짯ny net cash finan짯cial mea짯su짯res. Hew짯lett Packard Enter짯pri짯se also pro짯vi짯des fore짯casts of non-GAAP diluted net ear짯nings per share and free cash flow. A recon짯ci짯lia짯ti짯on of adjus짯t짯ments to GAAP finan짯cial mea짯su짯res for this quar짯ter and pri짯or peri짯ods is included in the tables below or else짯whe짯re in the mate짯ri짯als accom짯pany짯ing this news release. In addi짯ti짯on, an expl짯ana짯ti짯on of the ways in which Hew짯lett Packard Enterprise셲 manage짯ment uses the짯se non-GAAP mea짯su짯res to eva짯lua짯te its busi짯ness, the sub짯s짯tance behind Hew짯lett Packard Enterprise셲 decis짯i짯on to use the짯se non-GAAP mea짯su짯res, the mate짯ri짯al limi짯ta짯ti짯ons asso짯cia짯ted with the use of the짯se non-GAAP mea짯su짯res, the man짯ner in which Hew짯lett Packard Enterprise셲 manage짯ment com짯pen짯sa짯tes for tho짯se limi짯ta짯ti짯ons, and the sub짯stan짯ti짯ve reasons why Hew짯lett Packard Enterprise셲 manage짯ment belie짯ves that the짯se non-GAAP mea짯su짯res pro짯vi짯de useful infor짯ma짯ti짯on to inves짯tors is included under 쏹se of non-GAAP finan짯cial mea짯su짯res fur짯ther below. This addi짯tio짯nal non-GAAP finan짯cial infor짯ma짯ti짯on is not meant to be con짯side짯red in iso짯la짯ti짯on or as a sub짯sti짯tu짯te for reve짯nue, gross pro짯fit mar짯gin, ope짯ra짯ting pro짯fit (ear짯nings from ope짯ra짯ti짯ons), ope짯ra짯ting pro짯fit mar짯gin, net ear짯nings, diluted net ear짯nings per share, cash, cash equi짯va짯lents and rest짯ric짯ted cash, cash flow from ope짯ra짯ti짯ons, invest짯ments in pro짯per짯ty, plant and equip짯ment, or total com짯pa짯ny debt pre짯pared in accordance with GAAP.

For짯ward-loo짯king statements

This press release con짯ta짯ins for짯ward-loo짯king state짯ments within the mea짯ning of the safe har짯bor pro짯vi짯si짯ons of the Pri짯va짯te Secu짯ri짯ties Liti짯ga짯ti짯on Reform Act of 1995. Such state짯ments invol짯ve risks, uncer짯tain짯ties and assump짯ti짯ons. If the risks or uncer짯tain짯ties ever mate짯ria짯li짯ze or the assump짯ti짯ons pro짯ve incor짯rect, the results of Hew짯lett Packard Enter짯pri짯se and its con짯so짯li짯da짯ted sub짯si짯dia짯ries may dif짯fer mate짯ri짯al짯ly from tho짯se expres짯sed or impli짯ed by such for짯ward-loo짯king state짯ments and assump짯ti짯ons. The words 쐀elie짯ve, 쐃xpect, 쏿nti짯ci짯pa짯te, 쐎pti짯mi짯stic, 쐇ntend, 쏿im, 쐗ill, 쐓hould and simi짯lar expres짯si짯ons are inten짯ded to iden짯ti짯fy such for짯ward-loo짯king state짯ments. All state짯ments other than state짯ments of his짯to짯ri짯cal fact are state짯ments that could be dee짯med for짯ward-loo짯king state짯ments, inclu짯ding but not limi짯t짯ed to the scope and dura짯ti짯on of the novel coro짯na짯vi짯rus pan짯de짯mic (COVID-19) and its impact on our busi짯ness, ope짯ra짯ti짯ons, liqui짯di짯ty and capi짯tal resour짯ces, employees, cus짯to짯mers, part짯ners, sup짯p짯ly chain, finan짯cial results and the world eco짯no짯my; any pro짯jec짯tions of reve짯nue, mar짯gins, expen짯ses, effec짯ti짯ve tax rates, the impact of the U.S. Tax Cuts and Jobs Act of 2017, net ear짯nings, net ear짯nings per share, cash flows, back짯log, bene짯fit plan fun짯ding, defer짯red tax assets, share repurcha짯ses, cur짯ren짯cy exch짯an짯ge rates or other finan짯cial items; any pro짯jec짯tions of the amount, timing or impact of cost savings, res짯truc짯tu짯ring char짯ges, or other trans짯for짯ma짯ti짯on actions; any state짯ments of the plans, stra짯te짯gies and objec짯ti짯ves of manage짯ment for future ope짯ra짯ti짯ons, as well as the exe짯cu짯ti짯on of cor짯po짯ra짯te tran짯sac짯tions or con짯tem짯pla짯ted acqui짯si짯ti짯ons, trans짯for짯ma짯ti짯on and res짯truc짯tu짯ring plans and any resul짯ting bene짯fit, cost savings or res짯truc짯tu짯ring char짯ges, reve짯nue or pro짯fi짯ta짯bi짯li짯ty impro짯ve짯ments; any state짯ments con짯cer짯ning the expec짯ted deve짯lo짯p짯ment, per짯for짯mance, mar짯ket share or com짯pe짯ti짯ti짯ve per짯for짯mance rela짯ting to pro짯ducts or ser짯vices; any state짯ments regar짯ding cur짯rent or future macroe짯co짯no짯mic trends or events and the impact of tho짯se trends and events on Hew짯lett Packard Enter짯pri짯se and its finan짯cial per짯for짯mance; any state짯ments regar짯ding pen짯ding inves짯ti짯ga짯ti짯ons, claims or dis짯pu짯tes; any state짯ments of expec짯ta짯ti짯on or belief; and any state짯ments or assump짯ti짯ons under짯ly짯ing any of the foregoing.

Risks, uncer짯tain짯ties and assump짯ti짯ons include the need to address the many chal짯lenges facing Hew짯lett Packard Enterprise셲 busi짯nesses; the com짯pe짯ti짯ti짯ve pres짯su짯res faced by Hew짯lett Packard Enterprise셲 busi짯nesses; risks asso짯cia짯ted with exe짯cu짯ting Hew짯lett Packard Enterprise셲 stra짯tegy; the impact of macroe짯co짯no짯mic and geo짯po짯li짯ti짯cal trends and events; the need to mana짯ge third-par짯ty sup짯pli짯ers and the dis짯tri짯bu짯ti짯on of Hew짯lett Packard Enterprise셲 pro짯ducts and the deli짯very of Hew짯lett Packard Enterprise셲 ser짯vices effec짯tively; the pro짯tec짯tion of Hew짯lett Packard Enterprise셲 intellec짯tu짯al pro짯per짯ty assets, inclu짯ding intellec짯tu짯al pro짯per짯ty licen짯sed from third par짯ties and intellec짯tu짯al pro짯per짯ty shared with its for짯mer parent; risks asso짯cia짯ted with Hew짯lett Packard Enterprise셲 inter짯na짯tio짯nal ope짯ra짯ti짯ons (inclu짯ding pan짯de짯mics and public health pro짯blems, such as the out짯break of COVID-19); the deve짯lo짯p짯ment and tran짯si짯ti짯on of new pro짯ducts and ser짯vices and the enhance짯ment of exis짯ting pro짯ducts and ser짯vices to meet cus짯to짯mer needs and respond to emer짯ging tech짯no짯lo짯gi짯cal trends; the exe짯cu짯ti짯on and per짯for짯mance of con짯tracts by Hew짯lett Packard Enter짯pri짯se and its sup짯pli짯ers, cus짯to짯mers, cli짯ents and part짯ners, inclu짯ding any impact the짯re짯on resul짯ting from events such as the COVID-19 pan짯de짯mic; the hiring and reten짯ti짯on of key employees; exe짯cu짯ti짯on, inte짯gra짯ti짯on and other risks asso짯cia짯ted with busi짯ness com짯bi짯na짯ti짯on and invest짯ment tran짯sac짯tions; the exe짯cu짯ti짯on, timing and results of any trans짯for짯ma짯ti짯on or res짯truc짯tu짯ring plans, inclu짯ding esti짯ma짯tes and assump짯ti짯ons rela짯ted to the cos짯ts and anti짯ci짯pa짯ted bene짯fits of imple짯men짯ting the trans짯for짯ma짯ti짯on and res짯truc짯tu짯ring plans; the effects of the U.S. Tax Cuts and Jobs Act and rela짯ted gui짯dance and regu짯la짯ti짯ons that may be imple짯men짯ted; the reso짯lu짯ti짯on of pen짯ding inves짯ti짯ga짯ti짯ons, claims and dis짯pu짯tes; and other risks that are descri짯bed in Hew짯lett Packard Enterprise셲 other filings with the Secu짯ri짯ties and Exch짯an짯ge Com짯mis짯si짯on, inclu짯ding but not limi짯t짯ed to the risks descri짯bed in Hew짯lett Packard Enterprise셲 Annu짯al Report on Form 10멚 for the fis짯cal year ended Octo짯ber 31, 2019, Hew짯lett Packard Enterprise셲 Quar짯ter짯ly Reports on Form 10멡 for the fis짯cal quar짯ters ended Janu짯ary 31, 2020 and April 30, 2020, Cur짯rent Reports on Form 8멚, and in other filings made by Hew짯lett Packard Enter짯pri짯se from time to time with the Secu짯ri짯ties and Exch짯an짯ge Commission.

As in pri짯or peri짯ods, the finan짯cial infor짯ma짯ti짯on set forth in this press release, inclu짯ding tax-rela짯ted items, reflects esti짯ma짯tes based on infor짯ma짯ti짯on available at this time. While Hew짯lett Packard Enter짯pri짯se belie짯ves the짯se esti짯ma짯tes to be reasonable, the짯se amounts could dif짯fer mate짯ri짯al짯ly from repor짯ted amounts in the Hew짯lett Packard Enter짯pri짯se Quar짯ter짯ly Report on Form 10멡 for the third quar짯ter ended July 31, 2020. Hew짯lett Packard Enter짯pri짯se assu짯mes no obli짯ga짯ti짯on and does not intend to update the짯se for짯ward-loo짯king statements.

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