- Estimates FY21 non-GAAP diluted net earnings per share outlook
of $1.56-$1.76, up 10% year-over-year at the mid-point when
adjusted for stock-based compensation expense
- Estimates FY21 GAAP diluted net earnings per share outlook of
$0.34-$0.54, up $0.77 year-over-year at the mid-point
- Expects free cash flow to grow at a 3-year CAGR of over 50%
between FY20 and FY23
Hewlett Packard Enterprise (NYSE: HPE) today held its virtual
Securities Analyst Meeting and provided strategy and financial
updates from Antonio Neri, president and CEO, Tarek Robbiati,
executive vice president and chief financial officer, and members
of the leadership team. The webcast and presentations can be found
on the HPE Investor Relations Website:
hpe.com/investor/SAM2020.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20201015006003/en/
HPE is accelerating its pivot as edge-to-cloud platform
as-a-service company
Last year at its Securities Analyst Meeting, HPE unveiled its
edge-to-cloud platform as-a-service vision and strategy to drive
long-term sustainable, profitable growth. Neri affirmed the
strategy is more relevant than ever, and discussed the company’s
plans to accelerate its ability to meet evolving customer
needs.
“While the global pandemic is unlike any crisis we have ever
faced, it has served as a catalyst, making digital transformation a
strategic imperative for enterprises,” said Neri. “Enterprises need
to deliver secure connectivity, remote work solutions, data
analytics capabilities and mobile-first, cloud-like experiences to
their employees and customers. And they need to do it with speed
and flexibility, preserving liquidity to navigate the macro
economic uncertainty and adapt to the new world. This is a
significant opportunity for Hewlett Packard Enterprise.”
Neri continued, “We already have a distinctive and industry
leading portfolio of edge-to-cloud solutions and unique
capabilities that are resonating with customers. To capitalize on
this opportunity, we have outlined a set of strategic priorities to
stabilize our core businesses, double down on growth areas and
accelerate our pivot to as-a-service, while also taking a
deliberate set of actions to strengthen our financial foundation
and invest in our future.”
Advancing HPE’s strategy to drive long-term sustainable,
profitable growth
Across all HPE businesses, the company is aligning resources,
unlocking operating leverage and investing in growth.
- Transform and stabilize core compute and storage
businesses: Compute and storage are essential resources for
enterprises to process and store data. HPE has leadership positions
in these businesses and is focused on growing market share in
profitable segments. The company is also focused on driving
operational services attach and recurring revenue by pivoting to
as-a-service offerings. By driving increased performance in these
core businesses, HPE can further align resources to new growth
segments.
- Double down in growth businesses: HPE is focused on
making strategic investments to fuel future growth and has taken
very deliberate steps to pivot its portfolio and expand into new
customer segments and markets. HPE’s Intelligent Edge and High
Performance Compute businesses are examples of investing for
growth. For example, HPE recently closed its acquisition of Silver
Peak that provides HPE Aruba with an immediate and leading position
in the fast-growing SD-WAN market.
- Accelerate our pivot to as a service: Last year, HPE
committed to delivering its entire portfolio as a service by the
end of 2022. HPE’s pivot to offering everything as a service is a
significant long-term value driver and has momentum. HPE GreenLake,
HPE’s consumption-based offering, is one of HPE’s fastest-growing
businesses. In Q3, HPE GreenLake services orders grew a record 80%
from the prior-year period or 82% when adjusted for currency. The
company plans to continue to invest in its capabilities to deliver
a differentiated experience for its customers.
- Allocate resources and invest for the future: HPE
committed to taking a deliberate set of actions to strengthen its
financial foundation and allocate resources to areas of growth when
it announced a cost optimization and prioritization plan in May.
The company remains on track with its guidance to generate a net
annualized run-rate savings of $800 million by the end of FY22,
with most of the savings achieved by the end of FY21.
“Across all of our businesses, we are making bold moves to drive
our agility, strengthen our capabilities, simplify our processes,
and enhance our execution,” said Neri. “Our ability to continue to
innovate for our customers is made possible by strong fiscal
management and execution, which in turn drives value for all
stakeholders,” said Neri.
Financial Update
Tarek Robbiati, executive vice president and CFO, provided a
financial update, including an outlook for FY21.
“We have the right portfolio of assets and the financial
strength to invest in the areas where we see the strongest
opportunity for growth and high returns,” said Robbiati. “Execution
on our strategic priorities combined with a robust financial
architecture geared toward reigniting top line growth and boosting
free cash flow generation will result in long-term value
creation.”
FY20 Expectations
As previously disclosed in HPE’s third quarter earnings call,
non-GAAP diluted net EPS is expected to be approximately $1.30 to
$1.34. GAAP diluted net loss per share is expected to be
approximately of $0.35 to $0.31.
FY21 Outlook
HPE expects its non-GAAP operating profit growth to be
approximately 15-20% year-over-year, excluding costs of
approximately $2.0 billion primarily related to transformation
costs, stock compensation expense and amortization of intangible
assets. The company expects non-GAAP Other Income & Expense of
approximately $150 million of an expense, excluding approximately
$35 million net expense impact from the amortization of the basis
difference in relation to the H3C divestiture, tax indemnification
adjustments, and non-service net periodic benefit credits. The
company expects a non-GAAP tax rate of 14%.
HPE expects non-GAAP diluted net EPS of $1.56 to $1.76, up 10%
year-over-year at the mid-point when adjusted for stock-based
compensation expense. The company expects GAAP diluted net EPS to
be approximately $0.34 to $0.54, up $0.77 year-over-year at the
mid-point and includes after-tax costs of approximately $1.22 per
share related primarily to transformation costs, stock-based
compensation expense and amortization of intangible assets.
Free cash flow is expected to be $0.9 billion to $1.1 billion,
up 65% year-over-year at the mid-point.
Long-Term Financial Profile
HPE provided its long-term financial model for FY20-FY23. The
company expects compounded annual revenue growth rate of 1-3%
adjusted for currency driven by Edge, High Performance Compute
& Mission Critical Systems and as-a-Service business.
The company expects strategic priorities will translate into a
stronger financial architecture with sustainable, profitable growth
and increasing recurring revenues at higher gross margins over
time. The company expects compounded annual non-GAAP operating
profit growth rate of 10-12% driven by investments in key growth
areas and optimized operating model.
Non-GAAP diluted net EPS is expected to grow at a higher
compounded annual growth rate of 7-9% and as-a-Service ARR will
nearly triple to over $1.4 billion with free cash flow of over $2.0
billion by FY23.
The company will prioritize balanced dividend distributions and
investments to help fuel future growth through a dynamic capital
allocation framework.
Webcast details
A webcast of today’s event, along with management presentations
and other materials, are available on the Investor Relations
website at investors.hpe.com.
This press release contains only a summary of some of the
information presented at today’s event and should be read in
conjunction with the management presentations and other materials
made available on that website.
About Hewlett Packard Enterprise
Hewlett Packard Enterprise is the global edge-to-cloud
platform-as-a-service company that helps organizations accelerate
outcomes by unlocking value from all of their data, everywhere.
Built on decades of reimagining the future and innovating to
advance the way we live and work, HPE delivers unique, open and
intelligent technology solutions, with a consistent experience
across all clouds and edges, to help customers develop new business
models, engage in new ways, and increase operational performance.
For more information, visit: www.hpe.com.
Use of non-GAAP financial information
To supplement Hewlett Packard Enterprise’s financial information
presented on a generally accepted accounting principles (GAAP)
basis, Hewlett Packard Enterprise provides forecasts of revenue
adjusted for currency, as well as non-GAAP operating profit growth,
non-GAAP measure of other income and expenses, non-GAAP income tax
rate, non-GAAP diluted net earnings per share, free cash flow
financial measures. Reconciliations of these non-GAAP financial
measures to the most directly comparable GAAP financial measures,
where available, are included in the slides presented at the 2020
Securities Analyst Meeting, which will be available for a period of
one year thereafter at http://hpe.com/investor/sam2020. Hewlett
Packard Enterprise provides certain guidance on a non-GAAP basis,
as the company cannot predict some elements that are included in
reported GAAP results. Refer to the discussion of non-GAAP
financial measures below for more information. In addition, an
explanation of the ways in which Hewlett Packard Enterprise’s
management uses these non-GAAP measures to evaluate its business,
the substance behind Hewlett Packard Enterprise’s decision to use
these non-GAAP measures, the material limitations associated with
the use of these non-GAAP measures, the manner in which Hewlett
Packard Enterprise’s management compensates for those limitations,
and the substantive reasons why Hewlett Packard Enterprise’s
management believes that these non-GAAP measures provide useful
information to investors is included under “Use and economic
substance of non-GAAP financial measures used by Hewlett Packard
Enterprise” below. This additional non-GAAP financial information
is not meant to be considered in isolation or as a substitute for
revenue, operating profit growth, diluted net earnings per share,
other income and expenses, and cash flow from operations in
accordance with GAAP.
Use and economic substance of non-GAAP financial measures
used by Hewlett Packard Enterprise
Hewlett Packard Enterprise’s management uses these non-GAAP
financial measures for purposes of evaluating Hewlett Packard
Enterprise’s historical and prospective financial performance, as
well as Hewlett Packard Enterprise’s performance relative to its
competitors. Hewlett Packard Enterprise’s management also uses
these non-GAAP measures to further its own understanding of Hewlett
Packard Enterprise’s segment operating performance. Hewlett Packard
Enterprise believes that excluding the items mentioned above from
these non-GAAP financial measures allows Hewlett Packard
Enterprise’s management to better understand Hewlett Packard
Enterprise’s consolidated financial performance in relation to the
operating results of Hewlett Packard Enterprise’s segments, as
Hewlett Packard Enterprise’s management does not believe that the
excluded items are reflective of ongoing operating results.
Material limitations associated with use of non-GAAP
financial measures
These non-GAAP financial measures have limitations as analytical
tools, and these measures should not be considered in isolation or
as a substitute for analysis of Hewlett Packard Enterprise’s
results as reported under GAAP.
Compensation for limitations associated with use of non-GAAP
financial measures
Hewlett Packard Enterprise compensates for the limitations on
its use of non-GAAP financial measures by relying primarily on its
GAAP results and using non-GAAP financial measures only as
supplement. Hewlett Packard Enterprise also provides a
reconciliation of certain non-GAAP financial measures to its most
directly comparable GAAP measure in other written materials that
include these non-GAAP financial measures accompanying this news
release, and Hewlett Packard Enterprise encourages investors to
review carefully those reconciliations.
Usefulness of non-GAAP financial measures to
investors
Hewlett Packard Enterprise believes that providing forecasts of
revenue adjusted for currency, non-GAAP operating profit, non-GAAP
operating profit growth, non-GAAP measure of other income and
expenses, non-GAAP income tax rate, non-GAAP diluted net earnings
per share, free cash flow financial measures to investors in
addition to certain related GAAP measures provides investors with
greater transparency to the information used by Hewlett Packard
Enterprise’s management in its financial and operational decision
making and allows investors to see Hewlett Packard Enterprise’s
results “through the eyes” of management. Hewlett Packard
Enterprise further believes that providing this information better
enables Hewlett Packard Enterprise’s investors to understand
Hewlett Packard Enterprise’s operating performance and to evaluate
the efficacy of the methodology and information used by Hewlett
Packard Enterprise’s management to evaluate and measure such
performance. Disclosure of these non-GAAP financial measures also
facilitates comparisons of Hewlett Packard Enterprise’s operating
performance with the performance of other companies in Hewlett
Packard Enterprise’s industry that supplement their GAAP results
with non-GAAP financial measures that may be calculated in a
similar manner.
Forward-looking statements
This press release 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 or implied by such forward-looking statements
and assumptions. All statements other than statements of historical
fact are statements that could be deemed forward-looking
statements, including but not limited to the scope and duration of
the novel coronavirus (“COVID-19”) pandemic and its impact on our
business operations, liquidity and capital resources, employees,
customers, supply chain, financial results and the world economy,
any projections of revenue, margins, expenses, effective tax rates,
the impact of the U.S. Tax Cuts and Jobs Act of 2017, net earnings,
net earnings per share, cash flows, backlog, benefit plan funding,
deferred tax assets, share repurchases, currency exchange rates or
other financial items; any projections of the amount, timing or
impact of cost savings, restructuring charges, or other
transformation actions; any statements of the plans, strategies and
objectives of management for future operations, as well as the
execution of corporate transactions or contemplated acquisitions,
transformation and restructuring plans and any resulting benefit,
cost savings or restructuring charges, revenue or profitability
improvements; any statements concerning the expected development,
performance, market share or competitive performance relating to
products or services; any statements regarding current or future
macroeconomic trends or events and the impact of those trends and
events on Hewlett Packard Enterprise and its financial performance;
any statements regarding pending investigations, claims or
disputes; any statements of expectation or belief; and any
statements or assumptions underlying any of the foregoing.
Risks, uncertainties and assumptions include the need to address
the many challenges facing Hewlett Packard Enterprise’s businesses;
the competitive pressures faced by Hewlett Packard Enterprise’s
businesses; risks associated with executing Hewlett Packard
Enterprise’s strategy; the impact of macroeconomic and geopolitical
trends and events; the need to manage third-party suppliers and the
distribution of Hewlett Packard Enterprise’s products and the
delivery of Hewlett Packard Enterprise’s services effectively; the
protection of Hewlett Packard Enterprise’s intellectual property
assets, including intellectual property licensed from third parties
and intellectual property shared with its former Parent; risks
associated with Hewlett Packard Enterprise’s international
operations (including pandemics and public health problems, such as
the outbreak of COVID-19); the development and transition of new
products and services and the enhancement of existing products and
services to meet customer needs and respond to emerging
technological trends; the execution and performance of contracts by
Hewlett Packard Enterprise and its suppliers, customers, clients
and partners, including any impact thereon resulting from events
such as the COVID-19 pandemic; the hiring and retention of key
employees; execution, integration and other risks associated with
business combination and investment transactions; and the
execution, timing and results of any transformation or
restructuring plans, including estimates and assumptions related to
the cost (including any possible disruption of Hewlett Packard
Enterprise's business) and the anticipated benefits of the
transformation and restructuring plans; the effects of the U.S. Tax
Cuts and Jobs Act and related guidance and regulations; the
resolution of pending investigations, claims and disputes; and
other risks that are described in Hewlett Packard Enterprise’s
Annual Report on Form 10-K for the fiscal year ended October 31,
2019, subsequent Quarterly Reports on Form 10-Q, and Current
Reports on Form 8-K, as applicable.
As in prior periods, the financial information set forth in this
press release, including tax-related items, reflects estimates
based on information available at this time. While Hewlett Packard
Enterprise believes these estimates to be reasonable, these amounts
could differ materially from reported amounts in the Hewlett
Packard Enterprise Annual Report on Form 10-K for the fiscal year
ended October 31, 2020. Hewlett Packard Enterprise assumes no
obligation and does not intend to update these forward-looking
statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201015006003/en/
Editorial contact: Stefanie Notaney, HPE stefanie.notaney@hpe.com
Investor relations contact: Andrew Simanek, HPE
investor.relations@hpe.com
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