Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Debt Investor Presentation (November 2016)
52 slides from Hewlett Packard Enterprise's debt investor presentation, Nov 18, 2016
Slide 1: Debt Investor Breakfast
Micro Focus International plcDebt Investor Breakfast Mike Phillips – Chief Financial OfficerRob Ebrey – Director of Tax, Treasury & Risk 18 November 2016
Slide 2: Agenda
Agenda Micro Focus Company OverviewAnnounced Transaction SummaryHPE Software Assets OverviewFinancial Impact & IntegrationAppendix 2
Slide 3: Company Overview
Micro Focus International plcCompany Overview
Slide 4: Micro Focus at a glance
Micro Focus $1.4bn Offices Worldwide 20,000+ Customers Annual Revenue 5,000+ Partners 80+ 4,500+ Employees 4
Slide 5: We Are a Software Company
We Are a Software CompanyWe make software, we sell software and we support software 5 Everything is organised to help us do this:Our systemsThe way we interact with customers and partnersHow we deliver consulting servicesWe aim to provide investors with a sustainable return of between 15% to 20% per
Slide 6: Micro Focus helps customers innovate faster with lower risk
Micro Focus helps its customers to innovate faster with lower riskWe enable them to embrace new technology while building on what already works. We call this bridging the old and the new 6
Slide 7: An Evolutionary Journey Resulting in Great Complexity
An Evolutionary Journey Resulting in Great Complexity- all in the last 35 years! Internet of Things (IoT) z / OSPL / I COBOL CICS IMS Public Cloud PrivateCloud 7
Slide 8: Portfolio Positioning and Approach in Context of the Software Industry
Portfolio Positioning and Approach in Context of the Software Industry Software company leading consolidation in the mature infrastructure software market to win through operational efficiency and scale Product lifecycle Introduction Growth Maturity Decline Area of primary focus New tech models “Me
Slide 9: Portfolio Positioning and Approach (cont'd)
Portfolio Positioning and Approach in Context of the Software Industry (cont’d) Micro Focus specialises in managing mature infrastructure software assets which have been delivering value to significant numbers of customers over long periods of time Product portfolio characteristics Micro Focus appro
Slide 10: Operating Model & Structure
Operating Model & Structure:One company with two product portfolios 10 North America International(EMEA, LATAM) APJ Corporate Operations Finance IT HR Product Development Legal Business Operations & PMO Field Marketing Product Management Go To Market Product Development NA, EMEA & APJ(LATAM from MF
Slide 11: Management team
Name Role Experience Kevin Loosemore Executive Chairman (11 years) Appointed non-executive Chairman of the Company in 2005 Executive Chairman in April 2011Previously non-executive Chairman of Morse plcPreviously, Kevin has acted as Chief Operating Officer of Cable & Wireless plc, President of Motoro
Slide 12: Acquisitions to Strengthen our Customer Proposition
CompuWareApplication Testing LiantCOBOL and PL/I development OrbixCORBA Novell, NetIQ, Attachmate, SUSEIdentity, Access, SecurityHost ConnectivityCollaborationPerformance MonitoringWorkload ManagementCloud ManagementEnterprise Linux BorlandApplication Lifecycle Management & Testing Acquisitions to S
Slide 13: Eight major acquisitions in last 10 years
10_84 Note: Does not include acquisitions smaller than $10M: Authasas (’15), Openfusion (’13), Soforte (’13), Relativity (’09) and Liant (’08).*Values for Borland, NetManage, Acucorp and Accurev are operating profit, not EBITDA. **Orbix acquisition value includes other assets acquired from Progress
Slide 14: Net operational improvement and EBITDA growth
Net operational improvement accounts for ~36% of Micro Focus’ EBITDA growth over last 10 years Micro Focus’ EBITDA evolution ($mm) Note: Does not include acquisitions smaller than $10M: Authasas (’15), Openfusion (’13), Soforte (’13), Relativity (’09) and Liant (’08).Values for Borland, NetManage, A
Slide 15: Product Portfolio
Product Portfolio 15 Linux and Open Source 18% COBOL Development and MainframeSolutions 18% COBOL Enterprise Identity, Access and Security Solutions 16% Identity Manager Sentinel Development and IT OperationsManagementTools 13% Development and IT Operations ManagementTools 23% Silk AccuRev PlateSpin
Slide 16: Product Portfolio Snapshot
Micro Focus – Product Portfolio Snapshot 16 Identity, Access and Security Solutions (IAS) COBOL Development and Mainframe solutions (CDMS) Host Connectivity Solutions Development and IT Operations Mgmt (Dev & ITOM1) Collaboration and Networking Solutions SUSE $217m(16% of total) Facilitate secure ac
Slide 17: Delivering on Attachmate Integration
Facility EBITDA and Margin (Pro Forma for Attachmate, $m) 17 Delivering on Attachmate Integration Revenue (Pro Forma for Attachmate, $m) Stock Performance since Attachmate merger announcement Net Debt / Facility EBITDA Aug-16 Source: Company information1 Does not account for impact of Serena acquisi
Slide 18: Micro Focus Overview and Outlook
Micro Focus Overview and Outlook 18 Source: Micro Focus FY16 preliminary results presentation OverviewFY16 Results at the high end of management expectations Total Shareholder Return strategy continuesFinal Dividend increased by 50.7% to 49.74 cents (2015: 33.00 cents)Full Year Dividend increased by
Slide 19: Announced Transaction Summary
Announced Transaction Summary
Slide 20: Announcement 'At A Glance' – Key Points
Announcement ‘At A Glance’ – Key Points 20 Industry Logic Aggregate Consideration Combination Shareholder Impact 1 Based upon the closing share price of Micro Focus as at 6 September 2016; Consideration comprises $6.3bn in Micro Focus equity to HPE shareholders and $2.5bn cash payment to HPE; 2 Acqu
Slide 21: Transaction Overview
Transaction Overview HPE Software revenues4 for the LTM 30 April 2016 of $3.2bn (LTM Q2 2016 y-o-y growth rate adjusted for divestitures, MOBU and currency of 1.5%) and Acquired EBITDA2 was $738mLargely complementary portfolio of assets in the infrastructure software space What Is Being Acquired? Pr
Slide 22: Sources & Uses
Sources & Uses 22 Sources $bn Uses $bn Issue of new shares 6.3 Equity to HPE shareholders 6.3 New debt 5.0 Cash payment to HPE 2.5 Acquisition purchase price 8.8 RoV 0.4 Acquiror existing debt, other 2.1 Total Sources 11.3 Total Uses 11.3 Capitalisation $bn X LTM EBITDA RCF ($500mm) - Debt committed
Slide 23: HPE Software Combination Offers a Unique Opportunity to Create an Industry Leader
HPE Software Combination Offers Micro Focus a Unique Opportunity to Create an Industry Leader that Can Consolidate at a Much Larger Scale 23 Sources: Capital IQ and HPE Software management financials; LTM as of 31-Jul-2016 23 #6 #23 Potential leaders/targets of mid-size consolidation to create scale
Slide 24: Merger Rationale
24 Merger Rationale Adds additional breadth and scale to Micro Focus’ existing portfolio of sticky products in core areas, with strong cash flowsIncreased exposure to fast growing segments through HPE Software’s security and big data products Integration of functions and rationalisation provide scop
Slide 25: Credit Highlights
Credit Highlights 25 Well positioned in both mature and growth sectors of the software market Leader in managing mature infrastructure software assetsSignificant presence in growth segments Highly cash generative with the potential for further operational efficiencies Strong track record for cash ge
Slide 26: HPE Software Assets Overview
HPE Software Assets Overview
Slide 27: Business Overview
Business Overview Hewlett Packard Enterprise’s Software Business SegmentGlobal footprint spanning the Americas, Asia Pacific & Japan and Europe, Middle East & Africa (“EMEA”) regionsProduct and service offeringsProvides enterprise software solutions for IT operations management, Applications deliver
Slide 28: HPE Software product areas
IT operations management Application delivery management (ADM) Enterprise security products (ESP) Information management & governance (IM&G) Big data analytics Description Facilitating management, automation and optimisation of data centers and cloud infrastructure Quality and lifecycle tools for tr
Slide 29: Financial Impact & Integration
Financial Impact & Integration
Slide 30: Micro Focus – Standalone Historical Financials
Micro Focus – Standalone Historical Financials 30 Historical financials (Pro Forma for Serena acquisition, $m) Source: Micro Focus company filingsNote: Financials pro forma for acquisition of Serena in May 2016; Underlying Adjusted EBITDA removes the impact of net capitalisation/amortisation of deve
Slide 31: Pro Forma Revenue: Micro Focus and HPE Software
Micro Focus Pro Forma Revenue (FYE April, IFRS) HPE Software Pro Forma Revenue(FYE October, US GAAP) ~$4.5bnCombined Revenue Note: Actual Currency, Pro Forma (i.e. adjusted for a number of divestments at various points during the last two fiscal years and the transfer of the Marketing Optimisation B
Slide 32: Pro Forma UAEBITDA: Micro Focus and HPE Software
Micro Focus Pro Forma UAEBITDA (FYE 30 April, IFRS) HPE Software Pro Forma UAEBITDA1(FYE 31 October, US GAAP) ~$1.35bnCombined UAEBITDA This represents the Micro Focus IFRS EBITDA added to the US GAAP EBITDA for the twelve months to April 30th 2016The IFRS treatment of the US GAAP financial statemen
Slide 33: Strong Cash Flow Profile
Strong Cash Flow Profile Micro Focus Cash Flow From Operations1 (FYE 30 April) HPE Software Cash Flow From Operations1 (FYE 31 October) Note: Cash flow information for HPE Software on an as-reported basis. Hence cash flows include contributions – both negative and positive – from disposals. To this
Slide 34: Commitment to Prudent Financial Policy
Micro Focus Will Maintain Its Commitment to Prudent Financial Policy 34 Commitment to low leverage Continued commitment to target a net reported leverage of 2.5x Facility EBITDAPro forma for this transaction, leverage to return below 2.5x within two years following completion of the transaction supp
Slide 35: Micro Focus Approach to Acquisition Integration
Micro Focus Approach to Acquisition Integration HPE and Micro Focus have formed a separation committee to monitor and oversee the separation of HPE Software in accordance with the Transaction documentsMicro Focus has integrated many business over the last five years and takes a structured approach t
Slide 36: A Phased Approach to Delivery and Setting Market Expectations
A Phased Approach to Delivery and Setting Market Expectations 36 Phase I: Assessment Deliver plans for FY17Detailed review of combined businessesInvigorate Product Management Actions Phase II: Integration Actions Standardise systemsRationalise PropertiesRationalise Legal entitiesNew Go to Market (GT
Slide 37: Credit Highlights
Credit Highlights 37 Well positioned in both mature and growth sectors of the software market Leader in managing mature infrastructure software assetsSignificant presence in growth segments Highly cash generative with the potential for further operational efficiencies Strong track record for cash ge
Slide 38: Appendix
Cl Appendix
Slide 39: Selected Financial Information on HPE Software
Selected Financial Information on HPE Software JPM – pls add financial schedules For the fiscal years ended 31 October LTM Q2 2016 2015 2014 US$m US$m US$m Net Revenues as reported under SEC US GAAP Carveout rules HPE Software Segment $3,412 $3,622 $3,933 Less: MOBU Transfer (56) (163) (232) Disposa
Slide 40: Micro Focus Strategy: Unchanged, Still Working
Micro Focus Strategy: Unchanged, Still WorkingReiterated in July preliminary results for the twelve months ended 30 April 2016 Micro Focus helps bridge the old and the new by enabling you to: Exploit advances in technology such as virtualisation, cloud and mobile without the cost and risk of startin
Slide 41: COBOL Development and Mainframe Solutions
Micro Focus COBOL Development and Mainframe solutions (CDMS) 41 COBOL development (CD) products primarily target the off-mainframe distributed development market The CD products enable programmers to develop and deploy applications written in COBOL across multiple platforms including Windows, UNIX a
Slide 42: Identity, Access and Security Solutions
Micro Focus Identity, Access and Security Solutions (IAS) 42 Description Benefits Protect sensitive data and intellectual propertyEnsure compliance with regulatory and audit requirementsManage the identity of everythingReduce the risk of a breach and rapidly respond to attacksProtect the connections
Slide 43: Host Connectivity Solutions
Micro Focus Host Connectivity Solutions 43 The Host Connectivity product set is the combination of the Attachmate products from TAG and the Micro Focus Rumba productsEnable IT organizations using centralized applications to provide business-critical information to the end-user of the system while mo
Slide 44: Development and IT Operations Management
Micro Focus Development and IT Operations Management (Dev & ITOM) 44 Includes tools (applications) that enable IT departments to better manage their data centers, software development and testing (Borland) as well as system monitor and support toolsThis product set is the combination of the Borland
Slide 45: Collaboration and Networking Solutions
Micro Focus Collaboration and Networking Solutions 45 Collaboration products enable organizations to be more productive in work environments that are more secure and easier to manage, regardless of how or where people workFully distributed networking services such as centralized server management; s
Slide 46: SUSE (Linux and Open Source)
Micro Focus SUSE (Linux and Open Source) 46 SUSE server products enable clients to reliably and securely run mission-critical applications anywhere: physical, virtual and cloudThe core of the product set is the SUSE Linux Enterprise Server (SLES) which is a highly reliable, scalable and secure Linux
Slide 47: Serena Acquisition
Serena Acquisition 47 What was acquired? Serena reported revenues¹ of $162mm in the year to 31st January 2016 and Underlying Adjusted EBITDA ("UAE") of $80mm, generated by ~426 employeesSerena develops and markets Change Management software, used by software engineers to manage developmentCombinatio
Slide 48: Serena Product Summary
Serena Product SummaryPortfolio of mature infrastructure software products 48 LTM Dec 15Revenue Makret Products Mainframe ALM/SCCM¹ Distributed ALM/SCCM Distributed BPM Mainframe Other and SaaS SerenaTotal 57 53 37 15 162 Governance of software development lifecycle Governance of software developmen
Slide 49: www.microfocus.com
www.microfocus.com
Slide 50: Disclaimer
Disclaimer NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION. This presentation does not constitute or form part of any offer or invitation to sell
Slide 51: Disclaimer (Cont'd)
Disclaimer (Cont’d) Neither this presentation nor the information contained herein constitutes or forms part of an offer to sell or the solicitation of an offer to buy securities in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from
Slide 52: Disclaimer (Cont'd)
Disclaimer (Cont’d) Subject to any requirement under applicable law, Miami undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors should not place undue reliance on forward-looking statements, which s
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