Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Q1 2020 Earnings Presentation
33 slides from Hewlett Packard Enterprise's earnings presentation, Mar 3, 2020
Slide 1: HPE Q1 FY20 Earnings Announcement
a Hewlett Packard Enterprise HPE Q1 FY20 EARNINGS ANNOUNCEMENT March 3, 2020 ‘nN A re \ ? TEIN http://www.investors.hpe.com Al A\ u
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: Demonstrating Progress Against Strategic Priorities Despite Uneven and Dynamic Environment
DEMONSTRATING PROGRESS AGAINST STRATEGIC PRIORITIES DESPITE UNEVEN AND DYNAMIC ENVIRONMENT down 7 percent y/y in CC®, primarily driven by declines in Compute * Gained momentum in pivot to as-a-Service * Grew ARR®) 19% y/y to $511 million * HPE GreenLake Services orders up 48% y/y in CC? * Returned I
Slide 5: Q1 FY20 Financial Highlights
Q1 FY20 FINANCIAL HIGHLIGHTS - Net revenue of $6.9 billion, down 8% from the prior-year or 7% adjusting for currency? — Non-GAAP Gross Margin of 33.2%, up 210 bps y/y driven by portfolio mix, cost of sales efficiencies, and commodity tailwinds - Non-GAAP Operating Profit of $602 million, down 10% fr
Slide 6: Q1 FY20 Segment Results
Q1 FY20 SEGMENT RESULTS Growth Growth y/y%, adj. Non-GAAP“ — Non-GAAP“ Non-GAAP? Non-GAAP OP $ in millions Q1 Net Revenue yly% for currency ops OP % of rev OP $ y/y % of rev y/y Intelligent Edge $720 2% 4% $70 9.7% $46 6.3 pts Compute $3,011 (16%) (15%) $286 9.5% ($54) 0.0 pts HPC & MCS $823 6% 6% $
Slide 7: Our Pivot to As-a-Service Is Gaining Momentum
OUR PIVOT TO AS-A-SERVICE IS GAINING MOMENTUM ANNUALIZED REVENUE RUN-RATE (ARR) Lo Qtr Actuals X 4 -—— DRIVING SAAS-LIKE RETENTION METRICS & CUSTOMER SATISFACTION Q120 GROWTH ACTUALS Y/Y ARR® $511M +19% revenue (which includes rental income for operating leases and interest income for capital leases
Slide 8: Non-GAAP Diluted Net EPS Continues to Grow
NON-GAAP DILUTED NET EPS CONTINUES TO GROW... —_ in billions, 7 . _ @) sm Revenue Non-GAAP diluted net EPS from continuing operations $12 $0.60 $10 $0.49 $0.50 S045 . $0.42 $0.43 $0.42 $0.42 80.44 $8 $0.32 $0.32 $0.40 $6 $030 $4 $0.20 $2 $0.10 so | { { { { { + { { | $0.00 1018 2018 3018 4Q18 1Q19 2Q
Slide 9: Fueled by Gross Margin Expansion
FUELED BY GROSS MARGIN EXPANSION — cD oO == non-GAAP Gross Profit” non-GAAP GM % revenue In billions $35 5 32.2% 33.9% 33.3% 33.2% 35% 30.2% 30.5% 30.7% 31.1% . —$— _________ — $$ $3.0 30% $2.5 2.3 $2.4 25% $2.0 20% $15 15% $1.0 10% $0.5 5% $0.0 0% 1018 2018 3018 4Q18 1019 2019 3019 4019 1020 non-GA
Slide 10: Sustaining Profitability While Investing for Long-Term Profitable Growth
SUSTAINING PROFITABILITY WHILE INVESTING FOR LONG-TERM PROFITABLE GROWTH In millions $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 == non-GAAP Operating Profit’ +——non-GAAP OP % revenue’? —===RE&D+FSC % revenue 18.2% 18.6% 19.3% 5 17.4% 17.4% 16.1% 16.6% 16.2% 16.0% — a _— $733 $709 669 $71
Slide 11: Delivered Free Cash Flow In-Line with Normal Seasonality
DELIVERED FREE CASH FLOW™ IN-LINE WITH NORMAL SEASONALITY DESPITE REVENUE SHORTFALL — In billions ™ Cash flow from operations Free cash flow? $4.0 $3.0 $2.0 oD 14 12 13 12 1.0 1.0 y? $1.0 0.8 06 0.9 o1 0 04 | | 04 $00 -_ | |__| (0.1) (0.4) (0.3) (0.2) (oy) ($1.0) QLFY18 Q2 FY18 Q3 FY18 Q4 FY18 Qury1
Slide 12: Executing with Strong Return on Investment Capital Discipline
EXECUTING WITH STRONG RETURN ON INVESTMENT CAPITAL DISCIPLINE Q120 Balance Sheet Capital Allocation Highlights = ROJ-based framework with rigorous » investment evaluation process OPERATING COMPANY FINANCING COMPANY — Committed to maintai grade credit rating ing investment ~$13B $11.7B - Expect to re
Slide 13: Confirming FY20 EPS and Revising FCF Outlook
CONFIRMING FY20 EPS AND REVISING FCF OUTLOOK FY20 (outlook as of 11/25/201 9 FY20 (outlook as of 3/3/2020) GAAP diluted net EPS $1.01 - $1.17 $1.01 - $1.17 Non-GAAP diluted net EPSY $1.78 - $1.94 $1.78 - $1.94 Free cash flow” $1.9B - $2.1B $1.6B - $1.8B 5 5 High-end of Capital returns to shareholder
Slide 14: Supplemental Slides
SUPPLEMENTAL SLIDES
Slide 15: HPE Brings a Broad Differentiated Portfolio to Enable Digital Transformation
HPE BRINGS A BROAD DIFFERENTIATED PORTFOLIO TO ENABLE DIGITAL TRANSFORMATION HPE net revenue S ome billion Segment net revenue mix Intelligent Edge 10% Compute 44% HPC & MCS 12% am, Storage 18% In, A&PS T 4% Financial Services 12% 1 Segment net revenue mix calculated is based on total HPE non-GAAP o
Slide 16: Intelligent Edge
INTELLIGENT EDGE Q1 FY20 — Revenue Operating profit | Americas 39% S 7 2 6) million S 70 million Revenue M EMEA 42% 2eyly 9.7% of revenue Asia Pacific 19% 4% yly CCD . In billions Overview oi asx ¢ Double-digit growth in North America $1.0 10% a © WLAN up 13% y/y in CC® with growth in all regions g
Slide 17: Compute
COMPUTE Q1 FY20 — Revenue Operating profit = Americas 36% S 3,0 1 1 million S 2 8 6 million Revenue m EMEA 39% 16% y/y 9.5% of revenue ™@ Asia Pacific 25% V 15% y/y adj. for currency © . In billions Overview 70 ux ¢ Revenue challenged due to i) market uncertainty, ii) component supply $6.0 12% const
Slide 18: High Performance Compute & Mission Critical Systems
HIGH PERFORMANCE COMPUTE & MISSION CRITICAL SYSTEMS Q1 FY20 — Revenue Operating profit Americas 61% S 8 2 3 million S 49 million Revenue ™@ EMEA 20% HO% yly 6.0% of revenue ™@ Asia Pacific 19% 6% yy adj. for currency . In billions Overview ost 168 ¢ Solid revenue contribution from first full quarter
Slide 19: Storage
STORAGE Q1 FY20 — Revenue Operating profit = Americas 36% S 1,2 5 @) million S 2 2 6 million Revenue m EMEA 43% y 8% y/y 18.1% of revenue ™@ Asia Pacific 21% V 7% y/y adj. for currency © . In billions Overview wn 320 20% $18 18% ¢ Sequentially flat revenues against a competitive market backdrop g16
Slide 20: Advisory & Professional Services
ADVISORY & PROFESSIONAL SERVICES Q1 FY20 — Revenue Operating profit | Americas 16% S 2 435 million CS 2) million Revenue m EMEA 39% M1%yly (0.8%) of revenue ™ Asia Pacific 45% Flat y/y adj. for currency © . i ili Overview os00 10% ¢ Strategic consulting business that is critical to help customers na
Slide 21: Financial Services
FINANCIAL SERVICES Q1 FY20 Revenue Operating profit | Americas 53% S 8 5 9 million S 7 3 million Revenue M EMEA 31% Vv Teyly 8.5% of revenue ™@ Asia Pacific 16% Vv 6% y/y CCD . In billions Overview sis ux « Financing volume up 2% y/y CC’? $12 12% $1.0 10% g © Operating profit margin increased 10 bps
Slide 22: Bridges
GAAP TO NON-GAAP BRIDGES
Slide 23: Q1 FY20 Bridge
Q1 FY20 GAAP TO NON-GAAP BRIDGE — iis Excess tax In millions, except Acquisition, amortization of Non-service net Tax benefits from ‘Transformation disposition, and HPEFS IDC Earnings in ‘Structural rate taxrate and per share GAAP rion Sire itangearated amortization PEMA DeDet saryimarest demnieatio
Slide 24: FY19 Bridge
FY19 GAAP TO NON-GAAP BRIDGE — si scat , , excesstax Inmiliions, except Acquisition, Amortization Non servi Earnings tT Valuation Taxrelated benefits fror taxrate and per share Gaap Taesformation Disaster caporiion.and of purchased Serperodic 10!" ndemnfcation Taxcefarm SMucurarate allowances net, t
Slide 25: Q4 FY19 Bridge
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 costs eer related intangrolemers eos benety —_eaulty inte
Slide 26: Q3 FY19 Bridge
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 27: Q2 FY19 Bridge
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 28: Q1 FY19 Bridge
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 29: FY18 Bridge
FY18 GAAP TO NON-GAAP BRIDGE — wii inate ir Valuation In millions, except Acquisition, Amortization Non-service Earnings. t mt Excess tax taxrateand per share cane Svortion Retcerng Tamormencn Serena “oases Tee eet Indemication "eand Taxeeform SEATS Nom GAAP amounts charges assets credit, interest,
Slide 30: Q4 FY18 Bridge
Q4 FY18 GAAP TO NON-GAAP BRIDGE — at ati a Valuation Inmillions, except Acquisition, Amortization ‘ce Famings tox ant Excess tax taxrate and per share aap Sevaration Restrcturing Transformation disposition and of purchased Impairment ol Net perodie O55!” indemnification "net and Taxreform BREEN Non-
Slide 31: Q3 FY18 Bridge
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 32: Q2 FY18 Bridge
Q2 FY18 GAAP TO NON-GAAP BRIDGE ‘Acquisition, Amortization Valuation Inmillions, except se Norservice Earnings loss) Excess tax benefit faxrate and perehs Gaap _SeParation Restructuring Transformation disposition,and of purchased Nomservi ng5 1088) Tay indemnification allowances, net, 7, Excess tax
Slide 33: Q1 FY18 Bridge
Q1 FY18 GAAP TO NON-GAAP BRIDGE — Inmillions, except se Acquisition, Amortization Won-service Earnings (loss) Naluation 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
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