Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Q4 2020 Earnings Presentation
40 slides from Hewlett Packard Enterprise's earnings presentation, Dec 1, 2020
Slide 1: HPE Q4 FY20 Earnings Announcement
==! Hewlett Packard Enterprise HPE Q4 FY20 EARI ANNOUNCEMENT December 1, 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: Q4 FY20 Marked by Strong Rebound in Revenue
Q4 FY20 MARKED BY STRONG REBOUND IN REVENUE * Revenues returned to pre-pandemic levels of $7.2 billion, up 5% q/q™and flat y/y — Reduced FY20 backlog to normalized levels through strong supply chain execution — Order momentum grew sequentially across all business segments - Increased Pointnext OS se
Slide 5: Q4 FY20 Financial Highlights
Q4 FY20 FINANCIAL HIGHLIGHTS * Net revenue of $7.2 billion, up 5% sequentially and flat from the prior-year period * Non-GAAP Gross Margin of 30.6%, up 0.2 pts sequentially and down 2.7 pts from the prior year period * Non-GAAP Operating Profit of $557 million, up 15% sequentially and down 24% from
Slide 6: Q4 FY20 Business Segment Revenues
Q4 FY20 BUSINESS SEGMENT REVENUES Net Revenue Quarter-over-Quarter Year-over-Year Cin millions) Revenue Growth” Revenue Growth Intelligent Edge $786 14% 5% GROWTH HPC & MCS $975 50% 25% Compute $3,175 (7%) (4%) CORE Storage $1,217 7% (3%) A&PS 24. %o 10% AAS $245 6 (10%) ENABLERS HPEFS $849 2% (4%)
Slide 7: Q4 FY20 Business Segment Operating Profit
Q4 FY20 BUSINESS SEGMENT OPERATING PROFIT Operating Profit 5? Cin millions) Operating Profit” % revenue Quarter-over-Quarter OP % revenue” Year-over-Year D OP %revenué™ GROWTH CORE AAS ENABLERS Intelligent Edge $79 10.1% 1.5 pts 3.9 pts HPC & MCS $119 12.2% 6.7 pts 2.0 pts Compute $194 6.1% (2.4 pts
Slide 8: Accelerating Momentum in Our As-a-Service Pivot
ACCELERATING MOMENTUM IN OUR AS-A-SERVICE PIVOT ANNUALIZED REVENUE RUN-RATE (ARR) ” $585M +30% Y/Y oe ARK HPE AS-A-SERVICE ORDERS» +20% Y/Y oir Actuals X 4———_ 1L Annualized Revenue Rur-Rate (“ARR’) is a financial metric used to assess the growth of the Consumption Services (*CS") offerings. ARR rep
Slide 9: Strong Operational Execution Drove Sequential Revenue Growth
STRONG OPERATIONAL EXECUTION DROVE SEQUENTIAL REVENUE GROWTH... in billions ™=Revenue Non-GAAP diluted net EPS from continuing operations” $12 $0.60 $10 $0.50 $8 $0.40 $6 $0.30 $4 $0.20 $2 $0.10 $0 $0.00 Q118) =6Q2'18 —Q3'18S_ Q4'18—Q1'19) Q2'19 Q3'19) 419 Q1'20. Q2'20 Q3'20— Q4'20 1 A reconciliatio
Slide 10: Resulting in 15% Gross Profit Improvement from Q2'20 Trough
RESULTING IN 15% GROSS PROFIT IMPROVEMENT FROM Q2’20 TROUGH ... in billions $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 ; $23 $ $2.3 $2.3 $22 $2.1 I] | Hil '==non-GAAP Gross Profit “? —rnon-GAAP Gross Profit % revenue “? BIA 33.3% 3B 2% 35% — —. 32.0% ——__ 30.4% 30.6% ~ 30% 25% Q1'18 Q2'18 Q3'18 Q4'18 Q
Slide 11: And 53% Growth in Operating Profit from Q2'20 Trough
AND 53% GROWTH IN OPERATING PROFIT FROM Q2’20 TROUGH In millions $1,200 $1,100 $1,000 $900 $800 |i non-GAAP Operating Profit’ » non-GAAP OP % revenue » ——R&D+FSC % revenue 19.3% ~ 20% 18% 16% 14% 12% 10% 8% 6% b% 2% 0% Q1'18) = Q28 318 418119 219 3119 419 Q1'20. Q2'20. Q3'20.— 420 1 A reconciliation
Slide 12: Delivered FY20 Free Cash Flow of $0.6B
DELIVERED FY20 FREE CASH FLOW OF $0.6B IN-LINE WITH SAM 2020 OUTLOOK & Cash flow from operations = Free cash flow O@ 2) rw 1.5 $1.5 12 1.3 12 10 1.0 (2) 09 0.8 06 0.7 $0.5 0.4 0.4 0.1 0.2 04 0.2 $0.0 t t t t t t t t t t t oe =, I ($0.5) 0.4) (0.4) Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'2
Slide 13: Diversified Balance Sheet and Strong Liquidity Position
DIVERSIFIED BALANCE SHEET AND STRONG LIQUIDITY POSITION US WELL Q4 FY20 Balance Sheet Me) @) 6) OPERATING COMPANY FINANCING COMPANY HPE LIQUIDITY ($0.48 y ~$13.3B $9.0B $11.7B ~$3.7B ~$4.1B Cash Debt Net Portfolio Assets” Capital Structure Cash & Reserves i) "FS Gross Debt mFS Gross Cash lance sheet
Slide 14: Raising FY21 EPS Outlook
RAISING FY21 EPS OUTLOOK Q1 FY21 outlook Full year FY21 outlook GAAP diluted net EPS $0.02 - $0.06 GAAP diluted net EPS $0.38 - $0.56 Non-GAAP diluted net EPSY $0.40 - $0.44 Non-GAAP diluted net EPSY $1.60 - $1.78 1.Q121 non-GAAP diluted net EPS excludes after-tax costs of approximately $0.38 per sh
Slide 15: Supplemental Slides
SUPPLEMENTAL SLIDES 15
Slide 16: HPE Broad Portfolio to Enable Digital Transformation (Q4 FY20)
HPE BRINGS A BROAD DIFFERENTIATED PORTFOLIO TO ENABLE DIGITAL TRANSFORMATION (Q4 FY20 PERFORMANCE) HPE Q4’20 net revenue HPE Q4’20 non-GAAP operating profit Q4’20 Net revenue by region S7.2 billion $0.6 billion Segment net revenue mix? Segment operating profit and mix In millions Intelligent Edge In
Slide 17: HPE Broad Portfolio to Enable Digital Transformation (FY20)
HPE BRINGS A BROAD DIFFERENTIATED PORTFOLIO TO ENABLE DIGITAL TRANSFORMATION (FY20 PERFORMANCE) HPE FY20 net revenue HPE FY20 non-GAAP operating profit FY20 Net revenue by region $27.0 billion $2.0 billion Segment net revenue mix? Segment operating profit and mix In millions Intelligent Edge Intelli
Slide 18: Intelligent Edge
INTELLIGENT EDGE Q4 FY20 — Revenue Operating profit | Americas 43% S 78 6 million S 7 9 million Revenue M EMEA 40% ANO% yly, 414% ql? 10.1% of revenue Asia Pacific 17% 45% yly CCP O . In billions verview $12 15% * Sequential revenue growth of 14% CC? $1.0 10% 2 * Americas up 12%, EMEA up 17%, and AP
Slide 19: High Performance Compute & Mission Critical Systems
HIGH PERFORMANCE COMPUTE & MISSION CRITICAL SYSTEMS Q4 FY20 — Revenue Operating profit Americas 56% S 975 million S 119 million Revenue m EMEA 26% A 25% yly, 450% g/g? 12.2% of revenue Asia Pacific 18% 425% yy CC 1 In billions Overview a 168 * Sequential revenue growth of 50% CC driven by strong per
Slide 20: Compute
COMPUTE Q4 FY20 — Revenue Operating profit = Americas 40% S) 3, 17 5 million S 1 94 million Revenue m EMEA 35% y 5% yly, W7% alg? 6.1% of revenue Asia Pacific 25% V 4% y/y COD . In billions Overview 70 ux * Sequential revenue growth of -7% CC® driven by backlog impact $60 12% 2 ¢ Normalizing for Q3
Slide 21: Storage
STORAGE Q4 FY20 — Revenue Operating profit | Americas 36% S 1,2 1 7 million S 2 @) 3 million Revenue m EMEA 41% wv s%yly, A7% alg? 16.7% of revenue ™@ Asia Pacific 23% V 3% y/y CCP . In billions Overview 320 20x $18 18% * Sequential revenue growth of 7% CC driven by operational execution 516 16% $1.
Slide 22: Advisory & Professional Services
ADVISORY & PROFESSIONAL SERVICES Q4 FY20 — Revenue Operating profit | Americas 14% S 2 45 million S 1) million Revenue Mm EMEA 38% V %yly, KO% g/g? (0.4%) of revenue ™@ Asia Pacific 48% V 10% y/y CC - In millions Overview $300 10x ¢ Strategic consulting business that is critical to help customers na
Slide 23: Financial Services
FINANCIAL SERVICES Q4 FY20 Revenue Operating profit S849 million S65 million WV 3%yly, 42% alg? 7.7% of revenue V 4% yly COO Overview Financing volume up 6% q/q CC, Revenue up 2% q/q CCP © Operating profit margin decreased 30 bps q/q to 7.7% ¢ Net portfolio assets“ of approximately $13.38, flat q/q
Slide 24: S
GAAP TO NON-GAAP BRIDGES 24
Slide 25: FY20 GAAP to Non-GAAP
FY20 GAAP TO NON-GAAP BRIDGE” — i Acquistion, Amortization Nonservice Excess tax tvteandperchar coe Tomtom, aes Moma “te amarante ed inden gtk sarin "me eid Non AAP Revenue $26,982 $26,982 Cost of sales 18,513 Qn (10) 18,476 Gross profit 8,469 27 10 8,506 ere eperating 8,798 950) (26) 80) G79) (865)
Slide 26: Q4 FY20
Q4 FY20 GAAP TO NON-GAAP BRIDGE — Inmilions, except ‘Transformation Disaster Mctiition disposition, Amortizationof pers inc NOMSerViC® earings in Tox Strucuralrate benef from tax rate and per share GAAP and other related purchased riers net periodic Pras indemnification ‘Tax reform m4 Non-GAAP amoun
Slide 27: 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 aap Transformation Disaster and other related chased HPEFSIDC net periodic Earnings in indemnification Taxreform —-Stucturalrate benefitsfrom Non.caap faxr
Slide 28: Q2 FY20
Q2 FY20 GAAP TO NON-GAAP BRIDGE — In millions, except Transfor Disast Acquisition, disposition, Amortization of HPEFS IDC Impairment Non-service net Earnings i Tax Taxon ‘Structural rate trator aaap Tomtomaee Cages amothrcated "pureed gapzaigs ofooeil peoacbeelt quays demain spartan SMUG, NonGAAP Re
Slide 29: Q1 FY20
Q1 FY20 GAAP TO NON-GAAP BRIDGE — wit Excess tax In millions, except Acquisition, amortization of Non-service net Tax benefits from tax rate and per share GAAP ‘Transformation disposition, and irchased HPEFS IDC periodic benefit Earnings in indemnificatio Tax reform Structuralrate stock-based Non-GA
Slide 30: FY19
FY19 GAAP TO NON-GAAP BRIDGE — eink cat . . Excess tax Acquisition, Amortization Py Earnings Valuation Tax related taxrateand per share Gaap Tasslormation Disaster spain and of purchased TeTeTNGe s)IM—agempcaton Taxeefrm SMucurarate allowances net, tolegal “Sitkhaced Non-GAAP pe costs. charges other
Slide 31: 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 GAAP ear costs "other rita i a rived periodic bene ‘equityint
Slide 32: 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 33: Q2 FY19
Q2 FY19 GAAP TO NON-GAAP BRIDGE — In millions, except - Acquisition, Amortizationof Nonservicenet Earnings (loss) Excess tax benefit tt ite and ‘sh GAAP fransformation Disaster chat disposition, and purchased iodic benefit i ity ‘Tax Indemnification Ti ‘Structural rate “from ste Non-GAAP. tara ander
Slide 34: Q1 FY19
Q1 FY19 GAAP TO NON-GAAP BRIDGE — In millions, except Transfo ing auistion, Amortizationf Non-servicenet Earnings (oss) 1.2, indemnification Structuralrate EX<eSstax benefit Tax related to faxrateand per share Gaap Transformation dis ther sed Intangible Petiodic benefit ‘equity sxinedjustments Taxre
Slide 35: FY18
FY18 GAAP TO NON-GAAP BRIDGE — asa, ati a Valuation: inmillions, Acquisition, Amortization Non-service Earnings tex anemation Excess tax ‘Separation Restructuring Transformation disposition, and of purchased Impairment of _ net periodic oss) in 4 a benefit from taxrate and per share GAAP Cost charge
Slide 36: Q4 FY18
Q4 FY18 GAAP TO NON-GAAP BRIDGE od isin aati ‘i Valuation Inmilions, Acquisition, Amortization Nomservice _Fammings Tax allowances, Excess tax tax rate and per share Gaap Separation Restrucring Transtormayien Germodted Rersraite "omega net periodic — "0852" Indemnification net,and Taxreform — PEReli
Slide 37: Q3 FY18
Q3 FY18 GAAP TO NON-GAAP BRIDGE — In millions, 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 P net periodic inequity net,
Slide 38: Q2 FY18
Q2 FY18 GAAP TO NON-GAAP BRIDGE — In millions, Acquisition, Amortization oss) Valuation Excess tax benefit ‘Separation Restructuring Transformation disposition, and —_of purchased eit ‘py Taxindemnification allowances, net, tax rate and per share GAAP + t period lity hi ‘Taxreform from stock-based N
Slide 39: Q1 FY18
Q1 FY18 GAAP TO NON-GAAP BRIDGE — In millions, Acquisition, Amortization oss) Valuation Excess tax benefit Separation Restructuring Transformation _disposition,and of purchased vic =) Tax Indemnification allowances, net, tax rate and per share GAAP i t period ity meh Taxreform fromstock-based NoreGA
Slide 40: Reconciliation of Operating Cash Flow to Free Cash Flow
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW Q118 Q2'218_ 3118 418119219. Q3'19__-Q4'19_Q.1'20_Q2'20_Q3'20_Q4’20 Net cash provided by operating activities $ 142 $ 247 $1249 $1326 $ 382 $ 987 $1196 1432 $ (79) $ 100 $1472 $747 Investment in property, plant and equipment (669) (693) (767) (
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