Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Q2 2020 Earnings Presentation
35 slides from Hewlett Packard Enterprise's earnings presentation, May 21, 2020
Slide 1: HPE Q2 FY20 Earnings Announcement
a Hewlett Packard Enterprise HPE Q2 FY20 EARNINGS ANNOUNCEMENT May 21, 2020 ‘nN A 8 \ 7 TEIN to ft Jy
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: Adapting to Address COVID-19 Impacts with Agile Organization
ADAPTING TO ADDRESS COVID-19 IMPACTS WITH AGILE ORGANIZATION AND RESOURCES ALIGNED TO KEY GROWTH AREAS Fiscal Q2 results impacted by first full quarter of COVID-19, as pandemic intensified, closing most markets across the globe The economic disruption caused by the pandemic had a significant impact
Slide 5: Q2 FY20 Financial Highlights
Q2 FY20 FINANCIAL HIGHLIGHTS - Net revenue of $6.0 billion, down 16% from the prior-year period or 15% adjusted for currency’? — Non-GAAP Gross Margin of 32.0%, relatively flat year over year -— Non-GAAP Operating Profit of $365 million, down 42% from the prior-year period — GAAP diluted net earning
Slide 6: Plan to Align Investments and Team to Strategic Areas
PLAN TO ALIGN INVESTMENTS AND TEAM TO STRATEGIC AREAS WILL ADDRESS NEW MARKET REALITY AND PROTECT OUR FINANCIAL PROFILE = Right-size cost structure to “new-normal” Expected Annualized a) At least $1.0B Gross Savings by FY22-end = Allocate resources in alignment with new Expected Annualized At least
Slide 7: Q2 FY20 Segment Results
Q2 FY20 SEGMENT RESULTS — cantteane Cth Soh id, NomciA? none? Hoa on ua or Intelligent Edge $665 (3%) (2%) $73 11.0% $37 5.7 pts Compute $2,640 (20%) (19%) $125 4.7% ($182) (4.6 pts) HPC & MCS $589 (18%) (18%) $33 5.6% ($59) = (7.2 pts) Storage $1,086 (18%) (16%) $145 13.4% ($99) = (5.1 pts) A&PS $2
Slide 8: Continued Momentum in Our As-a-Service Business
CONTINUED MOMENTUM IN OUR AS-A-SERVICE BUSINESS ANNUALIZED REVENUE RUN-RATE (ARR) Lo Qtr Actuals X 4 -—— DRIVING SAAS-LIKE RETENTION METRICS & CUSTOMER SATISFACTION Q220 GROWTH ACTUALS Y/Y ARR® $520M +17% revenue (which includes rental income for operating leases and interest income for capital leas
Slide 9: Full Quarter of COVID-19 Impacted Profitability
FULL QUARTER OF COVID-19 IMPACTED PROFITABILITY... in billions lm Revenue Non-GAAP diluted net EPS from continuing operations”? $12 sso $0.49 $0.45 $042 $043 = g042,— $0.42 a _ $8 $0.32 $0.32 se $0.22 $4 $2 So | t + 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 non-GAAP yly @&) 1 A reconciliatio
Slide 10: Even as Gross Margins Were Relatively Stable
EVEN AS GROSS MARGINS WERE RELATIVELY STABLE — lm non-GAAP Gross Profit —=non-GAAP Gross Profit % revenue In billions $35 y 32.2% 339% 33.3% 33.2% soy 30.2% 30.5% 30.7% 31.1% : — “ve $30 2 - 24 $25 $2.2 $2.3 $2.4 $2.4 $2.3 $23 $ $2.4 $2.3 $2.0 $1.9 $15 $1.0 $0.5 $0.0 1018 2018 3018 4Q18 1019 2019 3Q
Slide 11: Need to Re-Align Our Cost Structure and Drive Efficiencies
ee WHICH UNDERSCORES THE NEED TO RE-ALIGN OUR COST STRUCTURE AND DRIVE EFFICIENCIES THROUGH DIGITIZATION AND AUTOMATION — 'n millions == non-GAAP Operating Profit’ +——non-GAAP OP % revenue’? —===RE&D+FSC % revenue $1,200 20.7% — 22% y $1,100 ; 18.2% 18.6% - 19.3% 20% $1,000 16.6% 5 17.4% : —_ 17.4%
Slide 12: Free Cash Flow Lower Due to Higher Financing Volumes
FREE CASH FLOW LOWER DUE TO HIGHER FINANCING VOLUMES AND INVENTORY BUILD-UP In billions ™Cash flow from operations = Free cash flow” $25 $2.0 $15 12 QD 14 13 to 12 5 1.0 2) $1.0 09 0.8 06 $05 04 04 01 0.2 | O01 —_— “a (0.2) OD 02 0. (0.4) (0.4) QLFY18 Q2 FY18 Q3 FY18 Q4 FY18 QLFY19 Q2 FY19 Q3 FY19 Q
Slide 13: Robust Balance Sheet and ~$10B of Liquidity
ROBUST BALANCE SHEET AND ~$10B OF LIQUIDITY POSITION US WELL IN THE CURRENT ENVIRONMENT Q220 Balance Sheet OPERATING COMPANY” FINANCING COMPANY HPE LIQUIDITY ~$10.0B ~$13.0B $11.5B (SO.4B) 2s" $4.68 $5.08 Cash Debt Net Portfolio Assets Capital Structure Cash & Reserves FS Gross Debt” mFS Gross Cash
Slide 14: Q2 FY20 Key Takeaways
Q2 FY20 KEY TAKEAWAYS — Our fiscal Q2 results represent a full quarter of operating during the COVID-19 crisis and were heavily impacted by the crisis both on the demand and supply side — Asaresult we have enacted short-term actions and long-term cost optimization and prioritization plans to reflect
Slide 15: Supplemental Slides
SUPPLEMENTAL SLIDES
Slide 16: HPE Brings a Broad Differentiated Portfolio
HPE BRINGS A BROAD DIFFERENTIATED PORTFOLIO TO ENABLE DIGITAL TRANSFORMATION HPE net revenue S 6.0 billion Segment net revenue mix Intelligent Edge 11% Compute 43% c <a HPC & MCS 9% Storage 18% A&PS 4% Financial Services 13% Corporate Investments 2% 1. Segment net revenue mix calculated is based on
Slide 17: Intelligent Edge
INTELLIGENT EDGE Q2 FY20 Revenue Operating profit | Americas he S 6 6 5 million S 7 3 million Revenue M EMEA 40% WV 3% y/y 11.0% of revenue Asia Pacific 16% V 2% yly CCH . In bill Overview ns 15% * North America geo grew 12% y/y in CCP $10 10% WLAN up 7% y/y in CCD $08 $0. High demand for Aruba’s Re
Slide 18: Compute
COMPUTE Q2 FY20 — Revenue Operating profit | Americas 34% S 2,640 million S 12 5 million Revenue M EMEA 39% 20% y/y 4.7% of revenue ™ Asia Pacific 27% V 19% y/y adj. for currency © . In billions Overview 70 ux ¢ Revenue challenged due to i) market uncertainty related to COVID-19, $6.0 12% and ii) co
Slide 19: High Performance Compute & Mission Critical Systems
HIGH PERFORMANCE COMPUTE & MISSION CRITICAL SYSTEMS Q2 FY20 — Revenue Operating profit Americas 50% S 589 million S 3 3 million Revenue m EMEA 24% 18% y/y 5.6% of revenue ™ Asia Pacific 26% V 18% y/y adj. for currency © 1 In billions Overview a 168 e Revenue recognition impacted due to delayed insta
Slide 20: Storage
STORAGE Q2 FY20 Revenue Operating profit S 1,086 million S 145 million 18% y/y 13.4% of revenue V 16% y/y adj. for currency © Overview * Big Data revenue up 61% y/y CC? « Nimble Services revenues grew 20% y/y CC with overall Storage services intensity at record high as customers add high-margin valu
Slide 21: Advisory & Professional Services
ADVISORY & PROFESSIONAL SERVICES Q2 FY20 — Revenue Operating profit = Americas 19% S 2 3 7 million S 2 million Revenue m EMEA 35% wv o%y/y 0.8% of revenue ™ Asia Pacific 46% V 8% y/y adj. for currency © . In millions Overview 300 10x * Strategic consulting business that is critical to help customers
Slide 22: Financial Services
FINANCIAL SERVICES Q2 FY20 Revenue Operating profit $833 million S75 million Vv 7% yly 9.0% of revenue V5%y/y CC® Overview ¢ Financing volume up 10% y/y CCH ¢ Offered $2B in financing and new programs to help customers and partners weather COVID-19 © Operating profit margin increased 40 bps y/y to 9
Slide 23: Bridges
GAAP TO NON-GAAP BRIDGES
Slide 24: Q2 FY20 Bridge
Q2 FY20 GAAP TO NON-GAAP BRIDGE — In millions, except Acquisition, disposition, Amortization of Impairment Non-service net Tax Taxon Transformation Disaster HPEFS IDC Earnings in ‘Structural rate faxrate and per share GAAP costs charges and. one nee intanphieamorts a zation of goodwill periodic | be
Slide 25: 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 faxrateand per share GAAP pa other wae sang nase amortization Periodic benefit equity interest i
Slide 26: 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 Teesformation Disaster daporiion.and of purchased Nerperodc 108!" ndemmtcation Taxcefarm SMucurarate allowances net, f
Slide 27: 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 28: 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 29: 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 30: 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 31: FY18 Bridge
FY18 GAAP TO NON-GAAP BRIDGE — wii inate ir Valuation In millions, except Acquisition, Amortization Non-service Earnings. t nai Excess tax toxratan per share cane Sern Recuy Tamwemates Semarioed “rable ""**scconat "Teeny “Seay ndegifntion ""nehand Toxrrm SSSI) Non-GAAP amounts charges assets pn inte
Slide 32: Q4 FY18 Bridge
Q4 FY18 GAAP TO NON-GAAP BRIDGE — isin inate ir Valuation Inmillions, except Acquisition, Amortization ice Earnings 1 ma Excess tax taxrate and per share aap Sevaration Restrcturing Transformation disposition and of purchased Impsirmentol Net perodie O55!” indemnification "net and Taxreform BREF FOM
Slide 33: 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 34: 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 35: Q1 FY18 Bridge
Q1 FY18 GAAP TO NON-GAAP BRIDGE ‘Acquisition, Amortization Valuation In millions, except se Nom-service Earnings (loss) Excess tax benefit tax rate and per sh: GAAP paration Restructuring Transformation _disposition,and of purchased reer we tom, Tax Indemnification allowances, net, 7, frsaaioceteed
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