Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Q2 2021 Earnings Presentation
34 slides from Hewlett Packard Enterprise's earnings presentation, Jun 1, 2021
Slide 1: HPE Q2 FY21 Earnings Announcement
==! Hewlett Packard Enterprise HPE Q2 FY21 EARI ANNOUNCEMENT June 1, 2021 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 and its consolidated subsidiaries (‘Hewlet
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 thes
Slide 4: Q2 Marked by Revenue Growth, Strong Profitability and Free Cash Flow
Q2 MARKED BY REVENUE GROWTH, STRONG PROFITABILITY AND FREE CASH FLOW RAISING FY21 EPS AND FCF OUTLOOK * Revenue of $6.7 billion up 9% y/y with better than normal sequential seasonality driven by strong demand Growth businesses accelerate top-line momentum — Intelligent Edge revenues of $799 million
Slide 5: Q2 FY21 Financial Highlights
Q2 FY21 FINANCIAL HIGHLIGHTS — Net revenue of $6.7 billion, up 9% from the prior-year period and down 2% sequentially — Non-GAAP Gross Margin of 34.3%, up 2.1 pts from the prior-year period and up 0.6 pts sequentially - Non-GAAP Operating Profit of $685 million, up 59% from the prior-year period and
Slide 6: Q2 FY21 Business Segment Performance
Q2 FY21 BUSINESS SEGMENT PERFORMANCE Net Revenue Year-over-Year Operating Profit$ | Operating Profit Year-over-Year (in millions) Revenue Growth (in millions) % revenue OP % revenue Intelligent Edge $799 17% $124 15.5% 3.2 pts GROWTH HPC & MCS $685 11% $19 2.8% (4.8 pts) Compute $2,976 10% $335 11.3
Slide 7: Momentum in As-a-Service Pivot Accelerates Recurring Revenue
MOMENTUM IN OUR AS-A-SERVICE PIVOT ACCELERATES RECURRING REVENUE Software Subscription AaS Revenue Net Services Revenue Min. Capacity Above Min. Commit Usage ANNUALIZED REVENUE RUN-RATE (ARR) ” $678M +30% Y/Y ARR* = Infrastructure Rental Revenue (Op Lease) Interest Revenue (Cap Lease) Le Qtr Actuals
Slide 8: Revenue Growth and Cost Discipline Drive Strong EPS Expansion
REVENUE GROWTH AND COST DISCIPLINE DRIVE STRONG EPS EXPANSION ... in billions | Revenue —Non-GAAP diluted net EPS from operations $8 $0.80 $7 $0.70 $6 $0.60 $5 $0.50 $4 $0.40 $3 $0.30 $2 $0.20 $1 $0.10 $0 $0.00 1 A reconciliation of specific adjustments to GAAP results for the current and prior peri
Slide 9: With Record Gross Margins
WITH RECORD GROSS MARGINS... in billions $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 l= non-GAAP Gross Profit —non-GAAP Gross Margit 33.7%. 1 A reconciliation of specific adjustments to GAAP results for the current and prior periods is included in the non-GAAP slide section that appears as part of the s
Slide 10: Targeted Investments Resulting in 59% Y/Y OP Growth
«ee AND TARGETED INVESTMENTS RESULTING IN 59% Y/Y OP GROWTH In miions === non-GAAP Operating Profit —non-GAAP Operating Margin’ ——R&D+FSC % revenue $1,200 22% $1,100 20% $1,000 18% $900 16% $800 14% $700 x $600 $500 10% $400 8% $300 6% $200 4h $100 2% $o 0% 1 A reconciliation of specific adjustments
Slide 11: Delivered Record First Half Operating and Free Cash Flow
DELIVERED RECORD FIRST HALF OPERATING AND FREE CASH FLOW (1)@2) in billions $2.0 & Cash flow from operations = Free cash flow $1.5 $1.0 $0.5 $0.0 ($0.5) 1 Free cash flow = cash flow from operations less net capital expenditures; net capital expenditures = investments in property, plant and equipment
Slide 12: Improved Balance Sheet with Strong Liquidity
AND IMPROVED BALANCE SHEET WITH STRONG LIQUIDITY Q2 FY21 Balance Sheet OPERATING COMPANY * FINANCING COMPANY NET CASH 008 nee $11.68 Cash Debt Net Portfolio Assets” Capital Structure i) i) "FS Gross Debt mFS Gross Cash lance sheet, net of reserves ind borrowing and fur hose assets. marily interco an
Slide 13: Raising FY21 EPS and Free Cash Flow Outlook
RAISING FY21 EPS AND FREE CASH FLOW OUTLOOK Q3 FY21 outlook Full year FY21 outlook Prior Revised GAAP diluted net EPS $0.04 - $0.10 GAAP diluted net EPS $0.48 — $0.66 $0.60 - $0.72 Non-GAAP diluted net EPSY $0.38 - $0.44 Non-GAAP diluted net EPS $1.70 - $1.88 $1.82 - $1.94 Free Cash Flow $1.1- $14 b
Slide 14: Supplemental Slides
SUPPLEMENTAL SLIDES 41
Slide 15: HPE Brings a Broad Differentiated Portfolio to Enable Digital Transformation
HPE BRINGS A BROAD DIFFERENTIATED PORTFOLIO TO ENABLE DIGITAL TRANSFORMATION HPE Q2’21 net revenue S 6.7 billion Segment net revenue mix? HPE Q2’21 non-GAAP operating profit S 0.7 billion Segment operating profit and mix isis included in the non-GAAP slide section that appears as part of the supplem
Slide 16: Intelligent Edge
INTELLIGENT EDGE Q2 FY21 — Revenue Operating profit © Americas 42% S 7 9 9 million S 1 ? 4 million Revenue ™@ EMEA 40% 4 20% yly 15.5% of revenue Asia Pacific 18% A 17% yly CC . In billions Overview S12 20x ¢ Strong revenue growth of 17% y/y CC® with acceleration in organic $1.0 a 15% business and o
Slide 17: High Performance Computing & Mission Critical Solutions
HIGH PERFORMANCE COMPUTING & MISSION CRITICAL SOLUTIONS Q2 FY21 — Revenue Operating profit Americas 47% S 685 million S 19 million Revenue m EMEA 28% A 13% y/y 2.8% of revenue ™@ Asia Pacific 25% 411% yly CCP . In billions Overview ce sun ¢ Revenue up 11% y/y CC and remain on track for full-year FY2
Slide 18: Compute
COMPUTE Q2 FY21 — Revenue Operating profit © Americas 34% S 2,9 7 6 million S 3 3 5 million Revenue m EMEA 39% A 12% yly, 11.3% of revenue ™@ Asia Pacific 27% 4 10% yly CCP . In bill Overview wr 14% * Revenue up 10% y/y CC and down 1% q/q reflecting much stronger $60 12% $50 rox § than normal sequen
Slide 19: Storage
STORAGE Q2 FY21 — Revenue Operating profit © Americas 32% S) 1,13 7 million S 19 1 million Revenue m EMEA 45% AS%y/y 16.8% of revenue @ Asia Pacific 23% 43% y/ly CCP . In bill Overview ws 2% 20% ¢ Revenue up 3% y/y CC driven by growth in software-rich products $12 tex $1.0 16x Y ¢ Nimble up 17% y/y
Slide 20: Financial Services
FINANCIAL SERVICES Q2 FY21 Revenue Operating profit S 8 3 9 million S 9 1 million A l%yly 10.8% of revenue V3% y/y CCD Overview « Revenue down 3% y/y CC? ¢ Write-off % of assets continues improving q/q to 0.75% © Operating profit margin increased 160 bps y/y to 10.8% ¢ Net portfolio assets of approx
Slide 21: Bridges
GAAP TO NON-GAAP BRIDGES 18
Slide 22: Q2 FY21 Bridge
Q2 FY21 GAAP TO NON-GAAP BRIDGE — Inmillions, except Acquisition, Stock-based Amortization of Non-service net Taxon Excess 12x. ‘Transformation Disaster disposition, and HPEFS IDC Earnings in Structuralrate benefits from tax rate and per share GAAP compensation purchased EFSIDC periodic benefit ._ E
Slide 23: Q1 FY21 Bridge
Q1 FY21 GAAP TO NON-GAAP BRIDGE — Inmilllions, except - Acquisition, stock-based Amortization of Norservice net Tax Excess tax te ite and ‘shi GAAP fransformation Disaster disposition, and ition purchased HPEFS IDC periodic benefit Earnings in equity indemnification ‘Structural rate benefits from No
Slide 24: FY20 Bridge
FY20 GAAP TO NON-GAAP BRIDGE” — Inmillions, except ‘on bicsster <sevaition, ed aaa HPEFSIDC jn, Non-service ingti Tax Taxon Structural benefits rom fexrteandpershare GAR TOMS, Caaee Ta ee angl SMES pct "ent agen MERSIN erm Et ccgetaan NOTOAAP charges ©*Pense sect credit Revenue $26,982 $26,982 Cost
Slide 25: Q4 FY20 Bridge
Q4 FY20 GAAP TO NON-GAAP BRIDGE — In millions, except Acquisition, Stoclebased amortization of Norrservice net Tax Transformation Disaster compensation HPEFS IDC Earningsin Structural rate tax rate and per share GAAP disposition, and other purchased FSIDC periodic benefit Earnin indemnification Non-
Slide 26: Q3 FY20 Bridge
Q3 FY20 GAAP TO NON-GAAP BRIDGE — ‘Acquisitio Stack: Inmillions, except Oma Amortization of Non-service Tax pecese tax Transformation Disaster disposition compensat HPEFS IDC Earnings in Structuralrate benefits from tax rate and per share GAAP ‘ purchased EFSIDC net periodic Eatm indemnification Tax
Slide 27: Q2 FY20 Bridge
Q2 FY20 GAAP TO NON-GAAP BRIDGE — ‘Acquisitio ——_Stock- In millions, except transfor Disaster disposition compaant Amortizationof —peesine Impairment Nomservicenet earnings Tax Taxon crructuralrate toxrateand per share aap Tatsformation Disaster sr orn intone! amortization °* 990dwil periodic benefi
Slide 28: Q1 FY20 Bridge
Q1 FY20 GAAP TO NON-GAAP BRIDGE — 7 won, tae, kes tox Inmillions, except ion disposi Amortization of Non-service net ings Tax benefits from ‘Transformation compens HPEFS IDC Earningsin Structural rate tax rate and per share GAAP ‘on, and purchased periodic benefit indemnification Tax reform stock-ba
Slide 29: FY19 Bridge
FY19 GAAP TO NON-GAAP BRIDGE ——_ Acquistion, nati ; , , excess tox In millions, except ie i disposition, Stockbased Amortization Norrservice Earnings Te ‘Structural Valuation Taxrelated benefits from taxrate and per share aap Transformation Disaster “Shatner compensation of purchased net periodic C0
Slide 30: Q4 FY19 Bridge
Q4 FY19 GAAP TO NON-GAAP BRIDGE — Mitt oa _— ‘epee, __ based ati ie ion ispositi Amortization of Non-service i , ificat benefits from Inmillions, except ‘Transformation compens Earnings loss)in Tax Indemnification Structural rate ‘tax rate and per share amounts GAAP costs mand ation, a rived periodi
Slide 31: Q3 FY19 Bridge
Q3 FY19 GAAP TO NON-GAAP BRIDGE — Acauisit Stocte _ ; Inmillions, except ion disposit _ based Amortizationof Nonservicenet Earnings (loss) ificat Naluation tax rate and per share aap Transformation tonand “fon ae Periodic benefit inequity TO Indemnification Taxreform ene ueeweinen Non-GAAP amounts r
Slide 32: Q2 FY19 Bridge
Q2 FY19 GAAP TO NON-GAAP BRIDGE — Acauisit stock: In millions, except ie disposit _ based Amortizationof Non-service net Earnings (loss) ificate Excess tax benefit taxrate and per share aap Tarsformation pisstercharges lonand COMPEM — Purchased See Neneh neguiry Taxindemniiation ray reform SMUCTTAIT
Slide 33: Q1 FY19 Bridge
Q1 FY19 GAAP TO NON-GAAP BRIDGE —— Acai stoke li . nm based Amortization of + a nratennd pe care aap Trenstormation OS! compen "purchased Nensaricenes Eeminge doe) axindemication rycen Faces taxbeneit —Stracuatrate THEM costs ‘othe sation ‘intangible ‘credit interest adjustments from: stock-based ad
Slide 34: Reconciliation of Operating Cash Flow to Free Cash Flow
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW Q1'20 Net cash provided by operating activities $7 Investment in property, plant and equipment (568) Proceeds from sale of property, plant and equipment 462 Free cash flow $(185) Q2'20 $100 (891) 89 $402) Q3'20 $1,472 (620) 72 $924 Q4'20 S747 (
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