Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Q3 2020 Earnings Presentation
37 slides from Hewlett Packard Enterprise's earnings presentation, Aug 25, 2020
Slide 1: HPE Q3 FY20 Earnings Announcement
==! Hewlett Packard Enterprise HPE Q3 FY20 EARI ANNOUNCEMENT August 25, 2020 f
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 may differ materially from those expressed
Slide 3: Use of Non-GAAP Financial Information
USE OF NON-GAAP FINANCIAL INFORMATION Hewlett Packard Enterprise (HPE) has included non-GAAP financial measures in this presentation to supplement HPE's condensed consolidated financial statements presented on a GAAP basis. Definitions of these non- GAAP financial measures and reconciliations of the
Slide 4: Q3 FY20 Characterized by Strong Execution and Sequential Growth
Q3 FY20 CHARACTERIZED BY STRONG EXECUTION AND SEQUENTIAL GROWTH * Executed well in Q3 to enable strong sequential growth — Net revenues of $6.8 billion up 14% g/g, non-GAAP operating profit of $484 million up 33% q/q, and non-GAAP diluted net earnings per share of $0.32, up 45% q/q - Reduced our Q2
Slide 5: Q3 FY20 Financial Highlights
Q3 FY20 FINANCIAL HIGHLIGHTS — Net revenue of $6.8 billion, up 14% sequentially and down 4%” from the prior-year period — Non-GAAP Gross Margin of 30.4%, down 1.6 pts sequentially and 3.5 pts from the prior year period — Non-GAAP Operating Profit of $484 million, up 33% sequentially and down 32% fro
Slide 6: Q3 FY20 Non-GAAP Business Segment Results
Q3 FY20 NON-GAAP BUSINESS SEGMENT RESULTS Q3 FY20 NON-GAAP Results Quarter-over-Quarter Year-over-Year ‘ermams ons on™ | Rewms, ops” ops” | fren, ops” on" Intelligent Edge $684 $59 8.6% 3% ($14) (2.4 pts) (11%) $6 1.8 pts Compute $3,389 $288 8.5% 29% $163 3.8 pts 1% ($151) (4.4 pts) HPC & MCS $649 $
Slide 7: Continued Momentum in Our As-a-Service Pivot
CONTINUED MOMENTUM IN OUR AS-A-SERVICE PIVOT ANNUALIZED REVENUE RUN-RATE (ARR) ” $528M +11% Y/Y HPE GREENLAKE CLOUD SERVICES ORDERS +82% YY CC oir Actuals X 4———_ 1. Annualized Revenue Run-Rate C’ARR’? is a financial metric used to assess the growth of the Consumption Services ("CS") offerings. ARR
Slide 8: Strong Operational Execution Drove Sequential Improvement
STRONG OPERATIONAL EXECUTION DROVE SEQUENTIAL IMPROVEMENT ... in billions ™=Revenue Non-GAAP diluted net EPS from continuing operations” $12 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 { $0.00 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 1 A reconciliation of specific adjustments to GAA
Slide 9: Resulting in 8% Gross Profit Growth Quarter over Quarter
RESULTING IN 8% GROSS PROFIT GROWTH QUARTER OVER QUARTER... inbillions l==inon-GAAP Gross Profit —non-GAAP Gross Profit % revenue $3.5 ee 92% SA 33.3% 35H 31.1% - $3.0 $2.5 25% $2.1 $2.0 SL $1.5 $1.0 $0.5 $0.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 (]C* A esivinna seer afa
Slide 10: As We Take Action to Realign Our Cost Structure
AS WE TAKE ACTION TO REALIGN OUR COST STRUCTURE In millions $1,200 $1,100 $1,000 $900 $800 |i non-GAAP Operating Profit’ » non-GAAP OP % revenue » ——R&D+FSC % revenue 207% 2H 20% 18% 16% 14% 12% 10% 8% 6% b% 2% 0% Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 1. A reconciliation
Slide 11: Generated Solid Cash Flow Through Improved Operational Execution
GENERATED SOLID CASH FLOW THROUGH IMPROVED OPERATIONAL EXECUTION @ Cash flow from operations PO = Free cash flow O@ $2.5 $2.0 $1.5 12 1.3 1.0 of? $1.0 08 $0.5 i 0.1 0.2 0.1 $0.0 "Tl i a. t t i | (0.3) . 2) Do, 2) ($0.5) 0.4) (0.4) Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 1. Free c
Slide 12: Diversified Balance Sheet and Strong Liquidity Position
DIVERSIFIED BALANCE SHEET AND STRONG LIQUIDITY POSITION US WELL Q3 FY20 Balance Sheet Me) Ma FINANCING COMPANY HPE LIQUIDITY ” ~$13.3B OPERATING COMPANY ~$13.3B $11.88 Cash Debt Net Portfolio Assets” Capital Structure Cash & Reserves |= FS Gross Debt” FS Gross Cash Net Portfolio. rs tguresants the t
Slide 13: Q4 and FY20 EPS Outlook
Q4 AND FY20 EPS OUTLOOK Q4 FY20 outlook Full year FY20 outlook GAAP diluted net EPS $0.02 - $0.06 GAAP diluted net EPS ($0.35) - ($0.31) Non-GAAP diluted net EPSY $0.32 - $0.36 Non-GAAP diluted net EPSY $1.30 - $1.34 a | 1. Fiscal 2020 non-GAAP diluted net EPS estimates exclude after-tax impacts of
Slide 14: Quarter Marked by Strong Execution and Customer Validation
QUARTER MARKED BY STRONG EXECUTION AND CUSTOMER VALIDATION ¢ Delivered strong sequential improvement in top and bottom line * Significantly improved operational and supply chain execution * Accelerated our as-a-service pivot with strong momentum in ARR and record GreenLake Services orders growth * T
Slide 15: Supplemental Slides
SUPPLEMENTAL SLIDES 15
Slide 16: HPE Brings a Broad Differentiated Portfolio to Enable Digital Transformation
HPE BRINGS A BROAD DIFFERENTIATED PORTFOLIO TO ENABLE DIGITAL TRANSFORMATION HPE net revenue S 6.8 billion Segment net revenue mix? Intelligent Edge 10% Compute 48% HPC & MCS 9% Financial Services 12% Corporate Investments 2% =m, HPE non-GAAP operating profit S 0.5 billion Segment operating profit a
Slide 17: Intelligent Edge
INTELLIGENT EDGE Q3 FY20 — Revenue Operating profit | Americas he S 6 84 million S 5 9 million Revenue M EMEA 38% WV 12% yly, 4 3% a/q 8.6% of revenue ™@ Asia Pacific 18% V 11% y/y COO . In billions Overview S12 1s * Sequential growth of 3%CCY $1.0 10% a * OP% margin of 8.6%, down 2.4 pts q/q g $08
Slide 18: Compute
COMPUTE Q3 FY20 — Revenue Operating profit | Americas 39% S 3, 3 8 9 million S 2 8 8 million Revenue m EMEA 36% Flat y/y, 4.28% q/q 8.5% of revenue ™@ Asia Pacific 25% 41% yly CCP . In billions Overview 70 ux ¢ Sequential growth of 29% CC® driven by improved supply chain $60 ve ov execution and mean
Slide 19: High Performance Compute & Mission Critical Systems
HIGH PERFORMANCE COMPUTE & MISSION CRITICAL SYSTEMS Q3 FY20 — Revenue Operating profit Americas 52% S 649 million S 3 6 million Revenue m EMEA 27% A3%yly, 410% a/q 5.5% of revenue ®@ Asia Pacific 21% 43% yly CCP Overview inp: sox © Sequential growth of 10% CC driven by supply chain execution $14 14%
Slide 20: Storage
STORAGE Q3 FY20 Revenue Operating profit S 1,128 million S 145 million 10% y/y, 4 4% a/q 12.9% of revenue V 9% yly CC Overview * Sequential growth of 4% CC driven by operational execution and reduction of backlog * Big Data grew 9% q/q driven by increased customer focus on Al / ML‘ related applicati
Slide 21: Advisory & Professional Services
ADVISORY & PROFESSIONAL SERVICES Q3 FY20 — Revenue Operating profit Americas 19% S 2 2 6 million S 4) million Revenue m EMEA 36% wv 7%yly, V5% a/q (1.8%) of revenue ™@ Asia Pacific 45% 5% y/y COP . In millions Overview $300 10% ¢ Strategic consulting business that is critical to help customers navig
Slide 22: Financial Services
FINANCIAL SERVICES Q3 FY20 Revenue Operating profit $811 million S65 million WV 9% yly, 3% a/q 8.0% of revenue V 6% yly CC Overview ¢ Financing volume up 1% q/q CC ¢ Operating profit margin decreased 100 bps q/q to 8.0% ¢ Net portfolio assets“ of approximately $13.3B, up 4% q/q ¢ Return on Equity of
Slide 23: S
GAAP TO NON-GAAP BRIDGES
Slide 24: Q3 FY20
Q3 FY20 GAAP TO NON-GAAP BRIDGE In millions, except Acquisition, disposition, Amortization of Non-service Tax Excess 12x. tax rate and per share GAAP Transformation Disaster and other related purchased HPEFSIDC net periodic Earnings in indemnification ‘Tax reform ‘Structural rate benefits from Non-G
Slide 25: Q2 FY20
Q2 FY20 GAAP TO NON-GAAP BRIDGE — In millions, except Acquisition, disposition, Amortization of Impairment Norrservice net Tax Taxon Transformation Disaster HPEFS IDC Earnings in Structural rate faxrateand per share GAAP ‘costs, charges: and. other related intangrannased ‘amortization °F 900dwill pe
Slide 26: Q1 FY20
Q1 FY20 GAAP TO NON-GAAP BRIDGE — 7 Excess tax In millions, except Acquisition, amortization of Non-service net Tax benefits from tax rate and per sh: GAAP Transformation disposition, and chased, HPEFSIDC eriodichenefit. ._ E2mingsin indemnification Taxreform ‘Stucturalrate stociebased Non-GAAP mons
Slide 27: FY19
FY19 GAAP TO NON-GAAP BRIDGE —_ vein vat , , Excess tax Acquisition, Amortization Py Earnings Valuation Tax related Wamillions, except aap. Transformation Disaster disposition,and of purchased Nerservice 005S)iN indemnification Taxreform Stucturalrate allowances, net, tolegal Penefits from Non-GAAP
Slide 28: Q4 FY19
Q4 FY19 GAAP TO NON-GAAP BRIDGE — requisition, Excess tax Inmillions, except Transformation disposition, and A™@rtization of Nonservicenet Earnings doss)in Tax Indemnification Structuralrate __Denefits from tax rate and per share amounts ies "other rita T-pain cauityinterestadstments 73% "eform cchu
Slide 29: Q3 FY19
Q3 FY19 GAAP TO NON-GAAP BRIDGE — Inmillions, except Acquisition, Amortiztionof Nonservicenet Earnings loss) Valuation ‘Transformation disposition, and purchased ‘Tax Indemnification ‘Structural rate allowances, net, tax rate and per share GAAP ? r periodic benefit ‘in equity ‘Tax reform . ry Non-GA
Slide 30: Q2 FY19
Q2 FY19 GAAP TO NON-GAAP BRIDGE — In millions, except Acquisition, Amortization Of Norservicenet Earnings loss) Excess tax benefit ‘Transformation disposition, and purchased ‘Tax Indemnification ‘Structural rate ‘tax rate and per share GAAP. Disaster charges p periodic benefit inequity Tax reform fr
Slide 31: Q1 FY19
Q1 FY19 GAAP TO NON-GAAP BRIDGE — In millions, except Acquisition Amortization of Non-servicenet Earnings loss) Excesstax benefit, Tax related to Transformation disposition,and purchased Tax indemnification Structural rate tax rate and per share GAAP purchased periodic benefit in equity Tax reform i
Slide 32: FY18
FY18 GAAP TO NON-GAAP BRIDGE — asa, -_ a Valuation: Inmillions, except Acquisition, Amortization Nomservice Earnings t mt Excess tax toxratan per share cane Sern Recuy Tamwemates Semarioed “rable ""**scconat "Teeny “Seay ndegifntion ""nehand Toxrrm SSSI) Non-GAAP amounts charges assets pn interest a
Slide 33: Q4 FY18
Q4 FY18 GAAP TO NON-GAAP BRIDGE — isin inate ir Valuation Inmillions, except Acquisition, Amortization ice Earnings 1 ma Excess tax taxrate and per share aap Sevaration Restrcturing Transformation disposition and of purchased Impsirmentol Net perodie O55!” indemnification "net and Taxreform BREF FOM
Slide 34: Q3 FY18
Q3 FY18 GAAP TO NON-GAAP BRIDGE — Inmillions, ex Acquisition, Amortization Non-service Earnings (loss) Valuation Excess tax benefit ‘Separation Restructuring Transformation disposition, and —_of purchased ‘Tax Indemnification allowances, net, tax rate and per share GAAP + net periodic ‘inequity ry T
Slide 35: Q2 FY18
Q2 FY18 GAAP TO NON-GAAP BRIDGE ‘Acquisition, Amortization Valuation Inmillions, except se Non-service Earnings (loss) Excess tax benefit taxtate ond per ch Gaap _SeParation Restructuring Transformation disposition,and of purchased Nomservi ng5 1088) Tay indemnification allowances, net, 7, Excess ta
Slide 36: Q1 FY18
Q1 FY18 GAAP TO NON-GAAP BRIDGE — Inmillions, except se Acquisition, Amortization Won-service Earnings (loss) Valuation Excess tax benefit ti te and ‘shi GAAP paration Restructuring Transformation disposition, and of purchased 1t periodic ‘ i, Tax Indemnification allowances, net, 4, from stock-based
Slide 37: Reconciliation of Operating Cash Flow to Free Cash Flow
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW Q118 Q2'218_ =—Q3'18 418 —Q1'19_—-Q2'19_—-Q3'19_—Q4'19__—-Q1'20__Q2'20__Q3'20 Net cash provided by operating activities $ 142 $ 247 $1249 $1326 $ 382 $ 987 $1196 1432 $ (9) $ 100 $1,472 Investment in property, plant and equipment (669) (693) (7
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