Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Q1 2021 Earnings Presentation
35 slides from Hewlett Packard Enterprise's earnings presentation, Mar 2, 2021
Slide 1: HPE Q1 FY21 Earnings Announcement
==! Hewlett Packard Enterprise HPE Q1 FY21 EARI ANNOUNCEMENT March 2, 2021 yi
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: Q1 Marked by Strong Profitability and Cash Flow
Q1 MARKED BY STRONG PROFITABILITY AND CASH FLOW RAISING FY21 EPS AND FCF OUTLOOK * Revenue of $6.8 billion exceeded Q1 outlook and represents stronger than normal sequential seasonality Growth businesses continue to gain traction - Intelligent Edge revenues of $806 million up 11% y/y? — HPC & MCS on
Slide 5: Q1 FY21 Financial Highlights
Q1 FY21 FINANCIAL HIGHLIGHTS — Net revenue of $6.8 billion, down 6% sequentially and 3% from the prior-year period — Non-GAAP Gross Margin of 33.7%, up 3.0 pts sequentially and 0.3 pts from the prior year period — Non-GAAP Operating Profit of $773 million, up 25% sequentially and 11% from the prior-
Slide 6: Q1 FY21 Business Segment Performance
Q1 FY21 BUSINESS SEGMENT PERFORMANCE Net Revenue Year-over-Year (in millions) Revenue Growth” Intelligent Edge $806 11% GROWTH HPC & MCS $762 (9%) Compute $2,986 (2%) CORE Storage $1,193 (6%) AAS HPEFS $860 (1%) ENABLERS Corp. Inv. and Other $321 (4%) TOTA c Hewlett Packard $6,833 (3%) Enterprisé” 1
Slide 7: Accelerating Momentum in Our As-a-Service Pivot
ACCELERATING MOMENTUM IN OUR AS-A-SERVICE PIVOT ANNUALIZED REVENUE RUN-RATE (ARR) ” $649M +27%Y/Y oe ARK HPE AS-A-SERVICE ORDERS» +26% 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 repr
Slide 8: Earnings Ahead of Pre-Pandemic Levels
EARNINGS AHEAD OF PRE-PANDEMIC LEVELS... in billions ‘=m Revenue —Non-GAAP diluted net EPS from operations? $8 $7 $6 $5 $4 $3 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 1. Areconclationof specific adjustments 1o GAAP results forthe current and prior periods is included in the non-GAAP slide section that appears
Slide 9: Driven by Gross Margin Expansion
DRIVEN BY GROSS MARGIN EXPANSION ... in billions '==non-GAAP Gross Profit “? —rnon-GAAP Gross Profit % revenue “? $3.5 33.4% 32.2% 35% 30.5% 30.7% $3.0 ~ — ~ 30% $2.1 $2.0 $19 20% $1.5 15% $1.0 10% $0.5 5% $0.0 0% Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 1 A reconciliation of specific adjustments to GAAP resul
Slide 10: Continued Cost Efficiencies Resulting in 11% Y/Y OP Growth
AND CONTINUED COST EFFICIENCIES RESULTING IN 11% Y/Y OP GROWTH tnmniions "==inon-GAAP Operating Profit” —non-GAAP OP % revenue” —R&D+FSC% revenue $1,100 —— ~ 20% $1,000 18% $900 16% $800 14% $700 - $600 $500 10% $400 _ 8% $300 6% $200 _ 4% $100 2% $o 0% Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 1 A reconciliati
Slide 11: Delivered Record Q1 Operating and Free Cash Flow
DELIVERED RECORD Q1 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) ($1.0) 1 Free cash flow = cash flow from operations less net capital expenditures; net capital expenditures = investments in property, plant and equipment
Slide 12: Diversified Balance Sheet and Strong Liquidity Position
DIVERSIFIED BALANCE SHEET AND STRONG LIQUIDITY POSITION US WELL Q1 FY21 Balance Sheet Me) @) 6) OPERATING COMPANY FINANCING COMPANY HPE LIQUIDITY ($0.2B) ~$13.3B $9.0B $11.8B ~$3.58 —-~$3.7B Cash Debt Net Portfolio Assets” Capital Structure Cash & Reserves i) "FS Gross Debt mFS Gross Cash lance shee
Slide 13: Raising FY21 EPS and Free Cash Flow Outlook
RAISING FY21 EPS AND FREE CASH FLOW OUTLOOK Q2 FY21 outlook Full year FY21 outlook Prior Revised GAAP diluted net EPS $0.02 — $0.08 GAAP diluted net EPS $0.38 - $0.56 $0.48 — $0.66 Non-GAAP diluted net EPSY $0.38 - SO.44 Non-GAAP diluted net EPS $1.60 - $1.78 $1.70 - $1.88 Free Cash Flow $0.9- $1.1
Slide 14: Supplemental Slides
SUPPLEMENTAL SLIDES 41
Slide 15: HPE Brings a Broad Differentiated Portfolio
HPE BRINGS A BROAD DIFFERENTIATED PORTFOLIO TO ENABLE DIGITAL TRANSFORMATION (Q1 FY21 PERFORMANCE) HPE Q1’21 net revenue HPE Q1’21 non-GAAP operating profit Q1’21 Net revenue by region $6.8 billion $0.8 billion Segment net revenue mix? Segment operating profit and mix In millions Intelligent Edge In
Slide 16: Intelligent Edge
INTELLIGENT EDGE Q1 FY21 Revenue Operating profit $806 million S 152 million A 12% yly 18.9% of revenue A 11% y/y CCH Overview Strong revenue growth of 11% y/y CC® as momentum continues with 3'4 consecutive quarter of sequential growth © Switching up 5% y/y CC“ driven by double-digit growth in NA ¢
Slide 17: High Performance Computing & Mission Critical Solutions
HIGH PERFORMANCE COMPUTING & MISSION CRITICAL SOLUTIONS Q1 FY21 Revenue Operating profit $762 million S43 million vO% yly 5.6% of revenue V9% yly CO Overview « Revenue down 9% y/y CC due to timing of deals but remain on track for full-year FY21 growth aligned to long-term 8-12% outlook ¢ Strong book
Slide 18: Compute
COMPUTE Q1 FY21 — Revenue Operating profit | Americas 36% S 2,986 million S 342 million Revenue m EMEA 39% Vv l%y/y, 11.5% of revenue ™ Asia Pacific 25% V 2% y/ly CCH . In billions Overview $70 tx * Revenue down 2% y/y CC® and up low single-digits q/q normalizing for $60 12% 2 Q4 backlog impacts . $
Slide 19: Storage
STORAGE QI FY21 — Revenue Operating profit | Americas 32% S 1, 1 9 3 million S 2 3 5 million Revenue m EMEA 4% 5% y/y 19.7% of revenue ™ Asia Pacific 24% V 6% yly CC . In billions Overview 320 nx $18 20% « Revenue down 6% y/y CC driven by difficult prior year compare but 516 eae 18% ov with strong g
Slide 20: Financial Services
FINANCIAL SERVICES Q1 FY21 Revenue Operating profit $860 million S84 million Flat y/y 9.8% of revenue V1% yy CO Overview ¢ Revenue stabilizing down 1% y/y CC Write-off % of assets improving q/q to 0.9% Operating profit margin increased 110 bps y/y to 9.8% Net portfolio assets of approximately $13.3B
Slide 21: FY20 Realignments (Aligned to New FY21 Reporting Structure)
FY20 REALIGNMENTS (ALIGNED TO NEW FY21 REPORTING STRUCTURE) —_ $ in millions REVISED AMOUNT PREVIOUSLY REPORTED CHANGE Net R Non-GAAP Non-GAAP Net R Non-GAAP Non-GAAP Net R Non-GAAP Non-GAAP let Revenue opt OP margin? let Revenue opt OP margin? jet Revenue opt OP margin? tse $2,855 $337 118% $2,855
Slide 22: FY19 Realignments (Aligned to New FY21 Reporting Structure)
FY19 REALIGNMENTS (ALIGNED TO NEW FY21 REPORTING STRUCTURE) —_ $ in millions REVISED AMOUNT PREVIOUSLY REPORTED CHANGE Non-GAAP Non-GAAP Non-GAAP Non-GAAP Non-GAAP Non-GAAP Net Revenue opt OP margin? Net Revenue opt OP margin? Net Revenue opt OP margin? tee $2,913 $216 TA% $2,913 $159 55% $ $57 19 P
Slide 23: GAAP to Non-GAAP Bridges
GAAP TO NON-GAAP BRIDGES 20
Slide 24: Q1 FY21 GAAP to Non-GAAP Bridge
Q1 FY21 GAAP TO NON-GAAP BRIDGE — In millions, except Acquisition, Stock-based Amortization of Nonservice net Tax Excess 12x ‘Transformation Disaster _ disposition, and HPEFS IDC Earnings in equity ‘Structuralrate benefits from tax rate and per share GAAP compensation purchased atic periodic benefit
Slide 25: FY20 GAAP to Non-GAAP 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 26: Q4 FY20 GAAP to Non-GAAP 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 27: Q3 FY20 GAAP to Non-GAAP Bridge
Q3 FY20 GAAP TO NON-GAAP BRIDGE — ‘Acquisitio Stack: In millions, except - Tomita Amortization of Non-service Tax Excess 12x. tt ite and ‘sh GAAP fransformation Disaster disposition compensat chased HPEFSIDC het periodic Earnings in ing tion 1: ‘Structural rate benefits from Non-GAAP. tara ander sar
Slide 28: Q2 FY20 GAAP to Non-GAAP 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 29: Q1 FY20 GAAP to Non-GAAP Bridge
Q1 FY20 GAAP TO NON-GAAP BRIDGE — Acquisiti In millions, except ‘i won of tne In millions, ex ion sispositi Amortization Non-service net ings Tax nefits tax rate and per shi aap Transformation i compens chased HPEFSIDC iodic benefit. Eamingsin indemnification Taxreform Stucturalrate —stock-based Non
Slide 30: FY19 GAAP to Non-GAAP Bridge
FY19 GAAP TO NON-GAAP BRIDGE ——_ Acquistion, nati ; , , excess tox In millions, except ton Dk disposition, _Stock-based Amortization Nonservice Earnings T Structural Valuation Taxrelated benefits fro taxrate and per share aap Transformation Disaster “Sigmar compensation ofpurchased netparodic (055)I
Slide 31: Q4 FY19 GAAP to Non-GAAP 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 32: Q3 FY19 GAAP to Non-GAAP 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 33: Q2 FY19 GAAP to Non-GAAP 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 34: Q1 FY19 GAAP to Non-GAAP 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 35: Reconciliation of Operating Cash Flow to Free Cash Flow
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW Q1'19 Q2'19, Q3'19, 419 Q1'20—-Q2'20,—Q3'20 Q4’20 Q1'21 Net cash provided by operating activities $ 382 $987 $1196 1432 $ 79) $ 100 $1472 $747 $963 Investment in property, plant and equipment (729) 799) (625) (703) (568) (891) (620) (604) (513)
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