Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Q3 FY2023 Earnings Presentation
46 slides from Hewlett Packard Enterprise's earnings presentation, Aug 29, 2023
Slide 1: HPE Q3 FY23 Earnings Announcement
HPE Q3 FY23 Earnings Announcement , August 29, 2023
Slide 2: Forward-looking statements
Forward-looking statements This presentation contains forward-looking statements that 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 (Hewlett
Slide 3: Use of non-GAAP financial information
Use of non-GAAP financial information HPE’s management uses net revenue on a constant currency basis, including at the business segment level as more than half of HPE’s revenue is generated outside of the US., non-GAAP gross profit, non- GAAP gross profit margin, non-GAAP operating profit, non-GAAP
Slide 4: Edge momentum and portfolio mix shift continue to drive revenue growth and gross margin expansion
Edge momentum and portfolio mix shift continue to drive revenue growth and gross margin expansion Net Revenue $7.0 billion Up 3.5% y/y Non-GAAP Gross Margin® 35.9% Up 120bps y/y Reiterating 4%-6% y/y® growth for the full year HPE GreenLake Highlights * ARR® up 48% y/y * Q3'23 as-a-Service orders inc
Slide 5: Q3 FY23 Financial highlights
Q3 FY23 Financial highlights — Net revenue of $7.0 billion is up 3.5% from the prior-year period, up 0.5% sequentially and above the midpoint our outlook range of $6.7 to $7.2 billion — ARR® of $1.3 billion, up 48% from the prior-year period and up 14% sequentially - Non-GAAP gross margin of 35.9% w
Slide 6: ARR expanded 48% to $1.3 billion
ARR expanded 48% to $1.3 billion . Annualized Revenue Run-Rate™ $ in millions © Software/Services © Infrastructure ™ Financial Services $1,400 ’ ~$1.3B $1,200 1.1B 1.0B $1,000 936 858 $800 796 798 829 705 649 Op $600 $400 $200 so r , r r r r r r , r Q121 Q2'21 Q3'21 Q4'21 Q122 Q2'22 Q3'22 Q4'22 Q1l2
Slide 7: Total Contract Value rose to nearly $12 billion
Total Contract Value™ rose to nearly $12 billion as-a-Service Orders™ (tr: $ in millions $4,000 $2,000 ... and aS-a-Service cumulative booked ing 12 months) $o qQ12i — a Q2'21 Q3'21 Q4'21 1. Total Contract Value (TCV) represents the total value of one-time and recurring revenue for the period define
Slide 8: Q3 FY23 Business segment performance
Q3 FY23 Business segment performance Net Revenue Year-over-Year Operating Profit $ Operating Profit VORROTES 7 y change in Cin millions) Revenue Growth” Cin millions) % revenue " OP % revenue Intelligent Edge $1,415 53% $420 29.7% 13.2 pts HPC & Al $836 3% ($7) (0.8%) (4.2) pts Storage $1,074 () $11
Slide 9: Intelligent Edge mix shift offsetting Compute cyclicality
Intelligent Edge mix shift offsetting Compute cyclicality $ in billions se" HPE Revenue Non-GAAP diluted net EPS $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 1. Areconclation of specific adjustments to GAAP results forthe current and prior periods i included in the non-GAAP slide section that appear
Slide 10: Intelligent Edge contribution to revenue and non-GAAP operating profit rising
Intelligent Edge contribution to revenue and non-GAAP operating profit rising Edge Revenue % of Total Segment Revenue Edge Operating Profit % of Total Segment Operating Profit 25% 60% 50% 20% 'o 40% 15% 30% 10% 20% 5% ~ 10% 0% 0% eco eo Oe eA tA Ht KN ANH coo oO Ke tA Ht HNN NK HM gs NS 9 NN NN ANN
Slide 11: Improving portfolio mix and pricing discipline driving higher gross margins
$ in billions $3.5 $3.0 $2.5 — a se gaz S23 $2.3 $24 $24 $04 $2.0 gay S28 $15 $1.0 $0.5 $0.0 . | | | | | Improving portfolio mix and pricing discipline driving higher gross margins == non-GAAP Gross Profit 1 non-GAAP Gross Margin 1) 33.7% 343% 34.7% 334% ay oy 305% 30.7% 33.9% 34.2% 33.0% Q1'20 = Q2
Slide 12: Sustained profitability enables future investments for growth
$ in millions $1,200 $1,000 $800 $600 $400 $200 $o Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 — a Sustained profitability enables future investments for growth === non-GAAP Operating Profit non-GAAP Operating Margin) non-GAAP R&D+FSC % revenue 1X2) 1L A reconciliation of specific ad
Slide 13: Non-GAAP H3C Equity Interest
$ in millions Non-GAAP H3C Equity Interest 300 250 200 150 100 50 Continued benefit of H3C dividend until anticipated completion of the put exercise 265 89 60 70 70 ve) Ry, 38 Q1'21)) Q2'21 § Q3'21 FQ4'21 = =FY21) =Q1'22) Q2'22 J Q3'22 | Q4'22) FY22) «=Q1'23)— Q2'23 J Q3'23 1L A reconciliation of sp
Slide 14: Reiterating FY23 free cash flow outlook of $1.9 to $2.1 billion
Reiterating FY23 free cash flow outlook of $1.9 to $2.1 billion ™ Cash flow from operations Free cash flow © $ in billions $3.5 $3.0 FY21 FCF $1.6B FY22 FCF $1.8B 3.0 FY23E FCF” sag $1.9 - $2.1B 20 ===> $2.0 15 $1.5 7" 11 13 $1.0 : 08 08 0.9 ae 0.6 05 06 - :| L . a °? - [ ~ $00 —e ($0.5) (sD) (0.2)
Slide 15: Raising full-year non-GAAP diluted net EPS outlook
Raising full-year non-GAAP diluted net EPS outlook Q4 FY23 outlook Full year FY23 outlook Revenues $7.2 a $7.5 billion Revenue growth? 4, — 6% (in constant currency) GAAP diluted net EPS $0.36 - $0.40 Non-GAAP operating profit growth? 6-7% Non-GAAP diluted net EPSP $0.48 - $0.52 GAAP diluted net EPS
Slide 16: Supplemental slides
Supplemental slides
Slide 17: HPE's differentiated portfolio is capitalizing on mega trends
HPE’s differentiated portfolio is capitalizing on mega trends in cloud, Al, data and connectivity HPE Q3’23 net revenue HPE Q3’23 non-GAAP operating profit | Q3’23 Net revenue by region $7.0 billion $0.7 billion Segment net revenue mix) Segment operating profit and mix2 <2 $ in millions Intelligent
Slide 18: Intelligent Edge
Intelligent Edge Q3 FY23 Revenue” Operating profit Americas 46% S 1,4 1 5 million $420 million Revenue m EMEA 39% A 50% yly, 8% a/q CC? 29.7% of revenue ™@ Asia Pacific 15% A 53% y/y CC? ° $ in billions Overview ms et « Revenue up 53% y/y CC and up 8% q/q CC, sae 28% ¢ Intelligent Edge ARR up 79% y/
Slide 19: High Performance Computing & Artificial Intelligence
High Performance Computing & Artificial Intelligence Q3 FY23 1) . 5 Revenue Operating profit $836 Americas 64% million ($7) million Revenue m EMEA 18% Al&yly, Flat q/q CC (0.8%) of revenue ™@ Asia Pacific 18% 4 3% yly CC . bill Overview Seb Fe « Revenue up 3% y/y CC and flat q/q CC S14 ae 12% ¢ Orde
Slide 20: Storage
Storage Q3 FY23 Revenue” Operating profit Americas 34% S 1,074 million S 1 1 5 million Revenue ™@ EMEA 4h% Vd%yly, 43% q/q CC 10.7% of revenue ™@ Asia Pacific 22% V 2% yly CC® : $ in billions Overview $4 28% « Revenue down 2% y/y CC”and up 3% q/q CC? $12 24% ¢ Operating margin of 10.7%, down 360 bps
Slide 21: Compute
Compute Q3 FY23 Operating profit $285 million 10.9% of revenue Revenue” $2,625 sition Y 13% yly, V5%q/q CC V 10% y/y CO Overview « Revenue down 10% y/y CC and down 5% q/q CC ¢ Units down mid-teens percentage y/y. AUPs approximately flat on falling commodity costs and higher revenue mix from current
Slide 22: Financial Services
Financial Services Q3 FY23 Revenue’? Operating profit Americas 53% $873 million oy million Revenue m™ EMEA 31% ATkyly &2%aqlq CC? 8.4% of revenue ® Asia Pacific 15% AT%yly CC? * $ in bill Overview ry of ¢ Financing volume rose 6% y/y CC and revenue rose 7% y/y CC? ~ - ¢ Write-off % of assets down q/
Slide 23: Key balance sheet metrics healthy
Key balance sheet metrics healthy Q3 FY23 Balance Sheet Operating Company © Financing Company © Net Cash $0.7B° $13.5B $11.9B Cash Debt Net Portfolio Assets” Capital Structure =FSGross Debt “ mFS Cash 1 Operating Company = Total HPE excluding Financial Services (FS); Financing Company = HPE Financia
Slide 24: GAAP to NON-GAAP bridges
GAAP to NON-GAAP bridges
Slide 25: Q3 FY23
Q3 FY23 GAAP to non-GAAP bridge” In millions, i 5 2S Stock-based Nonservicenet 5, inceinequity Taxindemnification Excess tax benefits ‘Transformation Disaste di ition, and 4 Amorti oct Ear ity ‘Structural rate grepttcrteandpergaap, Tomes hos “arines «SMD crac hee Same agdied "ment Womstcered | NomGA
Slide 26: Q2 FY23
Q2 FY23 GAAP to non-GAAP bridge” In millions, i 5 2S Stock-based Nonservicenet 5, inceinequity Taxindemnification Excess tax benefits ‘Transformation Disaste di ition, and 4 Amorti oct Ear ity ‘Structural rate grepttcrteandpergaap, Tomes hos “arines «SMD erect Samer agtied "ment Womans NomGAAP Reven
Slide 27: Q1 FY23
Q1 FY23 GAAP to non-GAAP bridge” Acquisition, 2. Represents the amortization of basis difference adjustments related to H3C and the Company's portion of intangible asset impairment charges from H3C of $8 million In millions, ie " sescairi ‘Stock-based Non-service net ans i s ‘Tax indemnification Exc
Slide 28: FY22
FY22 GAAP to non-GAAP bridge” In millions, son Russia/Ukraine Disaster ‘Amortization Tax Structural Excess tax excepttaxrateand GAAP —[yansformation Confit disaster charges ‘compensatio of ics indemnification rate benefits from Non-GAAP per share amounts charges nexpense assets cost interest adjustm
Slide 29: Q4 FY22
Q4 FY22 GAAP to non-GAAP bridge” In millions, jon Russia/Ukraine A@uisition, | Stock-based Amortization | — Nonservice net Tax pera ttarateand GAAP Transformation CuStvcrai0e disposition, and fen of targcaibhe’ Impairment Amortization of tee cay Earn cmnifcation Stucturalrate benefitsfrom — Noncaap
Slide 30: Q3 FY22
Q3 FY22 GAAP to non-GAAP bridge” In millions, jon Russia/Ukraine ACAuisition, | stock-hased 7 2 pera ttarateand GAAP Transformation CuStvcrai0e disposition, and fan Amortization of ion Structuralrate benefitsfrom Non caap Eakin este ine cierto’ ovement interest Shomer" sdhment sodebored Revenue $6,9
Slide 31: Q2 FY22
Q2 FY22 GAAP to non-GAAP bridge” In millions, " Russia/Ukraine ‘ " ‘Stock-based baat Non-service net cae fs Excess tax benefits ttanrateand GAAP Transformation Cortivtusace, Disaster _—_—isposition, and ee? ‘Amortization of Tenemt Eamingsinequity Structuralrate cess tan bene Non- eens tea omer Ghrge
Slide 32: Q1 FY22
Q1 FY22 GAAP to non-GAAP bridge” In millions, ‘Transformation Disaster daecifiomand _StoCke-based Non-service net Taxindemnification —ceucturalrate Excess tax benefits Capkienn and GAAP [rapstormation ene oir en iret costs Petiodic benefit BS acjustment’” fomsteckbased Non-GAAP Revenue $6,961 $6,961
Slide 33: FY21
FY21 GAAP to non-GAAP bridge” In millions, a ‘Acquisition, Stock-based Amor P Earlydebt T2X Structural Taxon Brees ton except tax rate and GAAP Transformation Disaster dipernar” compensation of Hasatot redemption néomnitction rate separations. Penefitsfrom Non-GAAP per share amounts felated charges
Slide 34: Q4 FY21
Q4 FY21 GAAP to non-GAAP bridge” Inmillions, a Acquisition, stock-based _— rr Earlydebt TX ctructural © Taxon Excess tax except taxrateand GAAP. Tretrmation Dsser sepontar ard conperstion geist of Nogaser fedempon ‘narrarcgo" rate Siamese Sense” NowGAAP per share amounts charges oA Stell adjustments
Slide 35: Q3 FY21
Q3 FY21 GAAP to non-GAAP bridge” Excess tax In millions, except a Acquisition, | Stock-based ‘Tax indemnification fatvaiv a parce Gap Transformation Disaster disposition, and # , ae Structuratrate benefitsfrom Non.caap ENED casts chores terrae” Gomerston tne set interest ndrelated sihsment stodcbere
Slide 36: Q2 FY21
Q2 FY21 GAAP to non-GAAP bridge” In millions, a parent Stock-based , Non-service net ° Taxon Excess tax benefits except taxrate and CON eaten Teoma compensation ene Benefit Sarre eat Separation & — Suucturalrate —fromstock-based Non-GAAP Per share amounts eons expense divestitures ‘compensation Reve
Slide 37: Q1 FY21
Q1 FY21 GAAP to non-GAAP bridge” Inmillions, a pomittion, Stock-based ‘Tax indemnification pert po i Gaap Transformation Disaster disposition, and Sfocpased Mercer Structuralrate benefitsfrom Non gaap per share amounts ep charges ether elated expense adjustments atest ee Revenue $6,833 $6,833 Cost o
Slide 38: FY20
FY20 GAAP to non-GAAP bridge” Inmiillions, a Acquisition, Stock-based Amor Merde tier Taxon Structural Excess tax ‘except tax rate and GAAP afore eer Sepernce” compensation indempification Tax _, separation& rate benefits from Non-GAAP per share amounts related charges ‘XPense adjustments divestitur
Slide 39: Q4 FY20
Q4 FY20 GAAP to non-GAAP bridge” In millions, ‘Acquisition, Stock-based - _ A a = nee Transformation Disaster a . ‘Amortizationof _Amortizationof —_—Non-servicenet periodic Earningsin Tax indemnificationand Structural rate except tax rate and GAAP disposition, and other . face can 4 Non-GAAP shige c
Slide 40: Q3 FY20
Q3 FY20 GAAP to non-GAAP bridge” Excess tax In millions, a ‘Acquisition, | | Stock-based except taxrate and P coats” Charges otherresred” SOMBER rat aaes dusiment—sodehased”_NOM-GAAP per share amounts charges expense adjustments ‘compensation Revenue $6,816 $6,816 Cost of sales 4,749 (8) @ 4,738 Gro
Slide 41: Q2 FY20
Q2 FY20 GAAP to non-GAAP bridge” Inmiillions, a pomttion, erecta base ‘Amortization , except taxrate and GAAP Cte ne” Gorges ofherraated” expense fntongbeseets Tavestiures "adjustment Non-GAAP per share amounts cherges, cantatas Revenue $6,009 $6,009 Cost of sales 4,095 D o ) 4,076 Gross profit 1,91
Slide 42: Q1 FY20
Q1 FY20 GAAP to non-GAAP bridge” In millions, 7 Acquisition, ‘Stock-based boat ‘Amortization —_Non-service Tax indemnification Excess tax benefits ‘Transformation 4. sti 7 Amortization of Ear ‘Structural rate exons tax raed GAAP costs erase other a intangible aseets Cie direct net per eq interest oe
Slide 43: Reconciliation of Segment Operating Profit to GAAP & Non-GAAP Operating Profit
Reconciliation of Segment Operating Profit to GAAP & Non-GAAP Operating Profit Q120 220320420 qv21 Q27'21 Q3'21 Qn21. 122 92°22 3°22 422 a123 0223 a3'23 Intelligent Edge $89 $85 $73 $99 $154 $126 $140 $89 $157 $109 $155. $128 $247 $351 $420 HPC & Al 62 45 46 129 43 18 28 142 a) (20) 28 30 1 @) M Com
Slide 44: Reconciliation of operating Cash Flow to Free Cash flow
Reconciliation of operating Cash Flow to Free Cash flow Q1'20 Q2'20 Q3'20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Net cash (used in) provided by operating activities $79) $100 $1,472 $747 $963 $822 $1,130 $2,956 $(76) $379 $1,254 $3,036 $(829) $889 $1,525 Litigation j
Slide 45: Reconciliation of GAAP Earnings from equity interests to Non-GAAP H3C equity earnings
Reconciliation of GAAP Earnings from equity interests to Non-GAAP H3C equity earnings Q1’21 Q2’21 Q3’21 = Q4’21 YTD’21 Q1’22 Q2’22 Q3’22 Q4’22 YTD’22 Q1’23 Q2’23 Q3’23 GAAP Earnings from equity interests $26 $4 $79 $71 $180 $31 $33 $68 $83 $215 $58 $49 $73 Basis and other adjustments 34 34 23 18 109
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Hewlett Packard Enterprise Company — Q3 FY2023 Earnings Presentation on 6ix