Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Q2 2023 Earnings Presentation
42 slides from Hewlett Packard Enterprise's earnings presentation, May 30, 2023
Slide 1: HPE Q2 FY23 Earnings Announcement
HPE Q2 FY23 Earnings Announcement , May 30, 2023
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 (Hewlett
Slide 3: Use of non-GAAP financial information
Use of non-GAAP financial information HPE’s management uses net revenue in constant currency, including at the business segment level as more than half of HPE’s revenue is generated outside of the US, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating profit, non-GAAP operating
Slide 4: Deliberate portfolio mix shift driving revenue growth and earnings expansion
Deliberate portfolio mix shift driving revenue growth and earnings expansion Net Revenue Non-GAAP operating margin Non-GAAP diluted Net EPS Free Cash Flow? $7.0 billion 11.5% $0.52 $288 million Up 9% y/y® Up 2.2 pts y/y Up 18% y/y Up $499 million y/y HPE GreenLake Highlights Select Business Group Hi
Slide 5: Q2 FY23 financial highlights
Q2 FY23 financial highlights — Demand improved sequentially in Q2’23 led by strength in HPC & Al and Intelligent Edge — Net revenue of $7.0 billion is up 9% from the prior-year period, down 11% sequentially and below our outlook range of $7.1 to $7.5 billion — ARR® of $1.1 billion, up 38% from the p
Slide 6: ARR increases 38% to over $1.1 billion
ARR increases 38% to over $1.1 billion. TCV exceeds $10 billion $in millions Annualized Revenue Run Rate $ in millions as-a-Service Orders“ Ctr: $4,000 Software/Services Infrastructure = Financial Services $1,200 >$1.1B $2,000 1.0 $1,000 936 858 796 798 829 $0 $800 aE Q1'21 Q2'21 3°21 Q4'21 Q1'22 02
Slide 7: Q2 FY23 business segment performance
Q2 FY23 business segment performance Net Revenue (in millions) Intelligent Edge $1,304 HPC & Al $840 Storage $1,043 Compute $2,761 HPEFS $858 Corp. Inv. and Other $296 Hewlett Packard Enterprise $6,973 1. Inconstant currency. A description of HPE’s use of non-GAAP financial information is provided o
Slide 8: Mix shift to higher growth, higher margin revenue
Mix shift to higher growth, higher margin revenue $ in billions $8.0 $7.0 $6.0 $6.9 $6.0 $0.50 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 Revenue $7.2 $68 $68 667 $0.52 driving earnings per share growth —Non-GAAP diluted net EPS $7.9 $78 $74 $6.9 $7.0 $0.63 $052 $0.53 Q120 Q2'20 — a 1 A reconciliation: non-GAAP
Slide 9: Improving portfolio mix and pricing discipline expanding gross margins
Improving portfolio mix and pricing discipline expanding gross margins $in billions /™ non-GAAP Gross Profit? non-GAAP Gross Margin 34.7% g30 334% 320% 337% 343% 34.7% 330% 33.9% |] 34.2% 331% 342% 35% . 30.5% 30.7% 5215 30% $23 22 $23 $23 $24 $24 $2.1 : $2.0 $1.9 $1.5 $1.0 $0.5 $0.0 Q1'20 «= Q2'20)
Slide 10: Strong gross margins and cost focus delivers sustainable profitability
Strong gross margins and cost focus delivers sustainable profitability for shareholders $in millions 1 non-GAAP Operating Profit® u non-GAAP Operating Margin? non-GAAP R&D+FSC % revenue VO $1,200 22% 18.6% 19.4% 195% 19 uy 20% $1,000 : = 18% 16% 800 9 $ $695 14% 12% $600 10% 10.0% - $400 Gh 6% $200
Slide 11: Non-GAAP H3C Equity Interest
$ in millions Non-GAAP H3C Equity Interest 300 250 200 150 100 50 Continued benefit of H3C dividend until anticipated completion of the put exercise 257 89 60 70 38 Q1'21 § Q2'21 § Q3'21) 896421 FY21 Q1'22 9 Q2'22 | Q3'22) = =Q4'22 FY22 Q1'23. § Q2'23 1L A reconciliation of specific adjustments to G
Slide 12: Reiterating outlook for $1.9 to $2.1 billion in FY23 free cash flow
$ in billions $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 ($0.5) ($1.0) ($1.5) Reiterating outlook for $1.9 to $2.1 billion in FY23 free cash flow ™ Cash flow from operations FY21 FCF $1.6B Fro 11 : 08 08 0.6 05 $0.5 Of o1 $0.0 Free cash flow % FY22 FCF $1.8B 3.0 FY23E $1.9 - $2.1B —— 20 13 [J 09 06 on q 03 _ | |
Slide 13: Q3 FY23 and full year outlook
Q3 FY23 and full year outlook Q3 FY23 outlook Full year FY23 outlook Revenues $6.7 - $7.2 billion Revenue growth? 4. — 6% Gin constant currency) GAAP diluted net EPS $0.34 - $0.38 Non-GAAP operating profit growth? 6-7% Non-GAAP diluted net EPS‘) $0.44 - $0.48 GAAP diluted net EPS $1.42 - $1.50 Non-G
Slide 14: Supplemental slides
Supplemental slides
Slide 15: HPE's differentiated portfolio is capitalizing on mega trends
HPE’s differentiated portfolio is capitalizing on mega trends in cloud, Al, data and connectivity HPE Q2’23 net revenue $7.0 billion Segment net revenue mix) Intelligent Edge 18% HPC & Al 12% Compute 39% Storage 15% oN Financial Services 12% Corporate Investments| 4% a — a HPE Q2’23 non-GAAP operati
Slide 16: Intelligent Edge
Intelligent Edge Q2 FY23 Revenue Operating profit Americas bhi S 1,304 million S 3 5 1 million Revenue ™@ EMEA 40% A 50% yy, 415% q/q CCH 26.9% of revenue Asia Pacific 16% A 56% y/y CC * $ in bill Overview ae a ¢ Revenue up 56% y/y CC® and up 15% q/q CC®, fourth consecutive $12 24% quarter of record
Slide 17: High Performance Computing & Artificial Intelligence
High Performance Computing & Artificial Intelligence Q2 FY23 Revenue Operating profit Americas 60% $840 million ($2) million Revenue M EMEA 18% 418% y/y, V 20% q/q CCH (0.2%) of revenue ® Asia Pacific 22% 422% yly CCH A Overview any fe « Revenue up 22% y/y CC and down 20% q/q CC? S14 ae 12% ¢ Order
Slide 18: Storage
Storage Q2 FY23 Revenue $1,043 million Vv 3%y/y, V12% q/q CCH 42% yly CCP Operating profit $82 million 7.9% of revenue Overview « Revenue up 2% y/y CCY and down 12% q/q CC? ¢ Operating profit margin of 7.9%, down 390 bps y/y and down 410 bps q/q = 1 Inconstant carteny.Adesrtoncf HP's use of non GAAP
Slide 19: Compute
Compute Q2 FY23 Revenue Operating profit Americas 35% $2,761 million $420 million Revenue @ EMEA 40% Vv 8% y/y, Y20% q/q CCP 15.2% of revenue ® Asia Pacific 25% V 3% yly CC? Sin bil Overview pho. 20% « Revenue down 3% y/y CCP and down 20% q/q CC? ¢ Units down high-teens percentage y/y. AUPs up high-
Slide 20: Financial Services
Financial Services Q2 FY23 Revenue Operating profit Americas 55% $ 85 8 million S84 million Revenue m™ EMEA 29% Aa%yly V3%q/q CC 9.8% of revenue ™@ Asia Pacific 16% AT%yly CCH * $ in bill Overview are Fe « Financing volume rose 17% y/y CC and revenue rose 7% y/y CCP a a3 © Write-off % of assets down
Slide 21: Key balance sheet metrics healthy
Key balance sheet metrics healthy Q2 FY23 Balance Sheet Operating Company.) Net Cash $0.3B° $13.3B $11.78 Financing Company “” $2.1B $1.8B Cash Debt Net Portfolio Assets” Capital Structure FS Gross Debt“ mFS Cash 1 Operating Company = Total HPE excluding Financial Services (FS); Financing Company =
Slide 22: GAAP to NON-GAAP bridges
GAAP to NON-GAAP bridges
Slide 23: Q2 FY23
Q2 FY23 GAAP to non-GAAP bridge” In millions, i 5 2S Stock-based Nonservicenet 5, inceinequity Taxindemnification Excess tax benefits ‘Transformation Disaste di ition, and 4 Amorti oct Ear ity ‘Structural rate grepttcrteandpergaap, Tomes hos “arines «SMD erect Samer agtied "ment Womans NomGAAP Reven
Slide 24: Q1 FY23
Q1 FY23 GAAP to non-GAAP bridge” Acquisition, 2. Represents the amortization of basis difference adjustments related to H3C and the Company's portion of intangible asset impairment charges from H3C of $8 million In millions, ie " sescairi ‘Stock-based Non-service net ans i s ‘Tax indemnification Exc
Slide 25: FY22
FY22 GAAP to non-GAAP bridge” In millions, son Russia/Ukraine Disaster ‘Amortization Tax Structural Excess tax excepttaxrateand GAAP —[yansformation Confit disaster charges ‘compensatio of ics indemnification rate benefits from Non-GAAP per share amounts charges nexpense assets cost interest adjustm
Slide 26: Q4 FY22
Q4 FY22 GAAP to non-GAAP bridge” In millions, jon Russia/Ukraine A@uisition, | Stock-based Amortization | — Nonservice net Tax pera ttarateand GAAP Transformation CuStvcrai0e disposition, and fen of targcaibhe’ Impairment Amortization of tee cay Earn cmnifcation Stucturalrate benefitsfrom — Noncaap
Slide 27: Q3 FY22
Q3 FY22 GAAP to non-GAAP bridge” In millions, jon Russia/Ukraine ACAuisition, | stock-hased 7 2 pera ttarateand GAAP Transformation CuStvcrai0e disposition, and fan Amortization of ion Structuralrate benefitsfrom Non caap Eakin este ine cierto’ ovement interest Shomer" sdhment sodebored Revenue $6,9
Slide 28: Q2 FY22
Q2 FY22 GAAP to non-GAAP bridge” In millions, " Russia/Ukraine ‘ " ‘Stock-based baat Non-service net cae fs Excess tax benefits ttanrateand GAAP Transformation Cortivtusace, Disaster _—_—isposition, and ee? ‘Amortization of Tenemt Eamingsinequity Structuralrate cess tan bene Non- eens tea omer Ghrge
Slide 29: Q1 FY22
Q1 FY22 GAAP to non-GAAP bridge” In millions, ‘Transformation Disaster daecifiomand _StoCke-based Non-service net Taxindemnification —ceucturalrate Excess tax benefits Capkienn and GAAP [rapstormation ene oir en iret costs Petiodic benefit BS acjustment’” fomsteckbased Non-GAAP Revenue $6,961 $6,961
Slide 30: FY21
FY21 GAAP to non-GAAP bridge” In millions, a ‘Acquisition, Stock-based Amor P Earlydebt T2X Structural Taxon Brees ton except tax rate and GAAP Transformation Disaster dipernar” compensation of Hasatot redemption néomnitction rate separations. Penefitsfrom Non-GAAP per share amounts felated charges
Slide 31: Q4 FY21
Q4 FY21 GAAP to non-GAAP bridge” Inmillions, a Acquisition, stock-based _— rr Earlydebt TX ctructural © Taxon Excess tax except taxrateand GAAP. Tretrmation Dsser sepontar ard conperstion geist of Nogaser fedempon ‘narrarcgo" rate Siamese Sense” NowGAAP per share amounts charges oA Stell adjustments
Slide 32: Q3 FY21
Q3 FY21 GAAP to non-GAAP bridge” Excess tax In millions, except a Acquisition, | Stock-based ‘Tax indemnification fatvaiv a parce Gap Transformation Disaster disposition, and # , ae Structuratrate benefitsfrom Non.caap ENED casts chores terrae” Gomerston tne set interest ndrelated sihsment stodcbere
Slide 33: Q2 FY21
Q2 FY21 GAAP to non-GAAP bridge” In millions, a parent Stock-based , Non-service net ° Taxon Excess tax benefits except taxrate and CON eaten Teoma compensation ene Benefit Sarre eat Separation & — Suucturalrate —fromstock-based Non-GAAP Per share amounts eons expense divestitures ‘compensation Reve
Slide 34: Q1 FY21
Q1 FY21 GAAP to non-GAAP bridge” Inmillions, a pomittion, Stock-based ‘Tax indemnification pert po i Gaap Transformation Disaster disposition, and Sfocpased Mercer Structuralrate benefitsfrom Non gaap per share amounts ep charges ether elated expense adjustments atest ee Revenue $6,833 $6,833 Cost o
Slide 35: FY20
FY20 GAAP to non-GAAP bridge” Inmiillions, a Acquisition, Stock-based Amor Merde tier Taxon Structural Excess tax ‘except tax rate and GAAP afore eer Sepernce” compensation indempification Tax _, separation& rate benefits from Non-GAAP per share amounts related charges ‘XPense adjustments divestitur
Slide 36: Q4 FY20
Q4 FY20 GAAP to non-GAAP bridge” In millions, ‘Acquisition, Stock-based - _ A a = nee Transformation Disaster a . ‘Amortizationof _Amortizationof —_—Non-servicenet periodic Earningsin Tax indemnificationand Structural rate except tax rate and GAAP disposition, and other . face can 4 Non-GAAP shige c
Slide 37: Q3 FY20
Q3 FY20 GAAP to non-GAAP bridge” Excess tax In millions, a ‘Acquisition, | | Stock-based except taxrate and P coats” Charges otherresred” SOMBER rat aaes dusiment—sodehased”_NOM-GAAP per share amounts charges expense adjustments ‘compensation Revenue $6,816 $6,816 Cost of sales 4,749 (8) @ 4,738 Gro
Slide 38: Q2 FY20
Q2 FY20 GAAP to non-GAAP bridge” Inmiillions, a pomttion, erecta base ‘Amortization , except taxrate and GAAP Cte ne” Gorges ofherraated” expense fntongbeseets Tavestiures "adjustment Non-GAAP per share amounts cherges, cantatas Revenue $6,009 $6,009 Cost of sales 4,095 D o ) 4,076 Gross profit 1,91
Slide 39: Q1 FY20
Q1 FY20 GAAP to non-GAAP bridge” In millions, 7 Acquisition, ‘Stock-based boat ‘Amortization —_Non-service Tax indemnification Excess tax benefits ‘Transformation 4. sti 7 Amortization of Ear ‘Structural rate exons tax raed GAAP costs erase other a intangible aseets Cie direct net per eq interest oe
Slide 40: Reconciliation of operating Cash Flow to Free Cash flow
Reconciliation of operating Cash Flow to Free Cash flow Q1'20 Q2'20 Q3'20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Net cash (used in) provided by operating activities $100 $1,472 $747 $963 $822 $1,130 $2,956 $(76) $379 $1,254 $3,036 $(829) $889 Litigation judgment, net of ta
Slide 41: Reconciliation of GAAP Earnings from equity interests to Non-GAAP H3C equity earnings
Reconciliation of GAAP Earnings from equity interests to Non-GAAP H3C equity earnings Q1’21) =Q2’21) = Q3’21) «=Q4’21 =~YTD’21 Q1’22 Q2’22 Q3’22 Q4’22 YTD’22 Q1’23 Q2’23 GAAP Earnings from equity interests $26 $4 $79 $71 $180 $31 $33 $68 $83 $215 $58 $49 Basis and other adjustments 34 34 23 18 109 i
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