HPE Reports Q3 Results

Quarter marked by strong execution and sequential growth

Company declares Q4 dividend

Q3 2020 Financial Highlights:

  • Revenue: $6.8 billion, up 13% sequentially or 14% when adjusted for currency
  • Gross Profit: $2.1 billion, up 8% sequentially
  • Operating Profit: GAAP of $12 million, up 101% sequentially and Non-GAAP of $484 million, up 33% sequentially
  • Annualized revenue run-rate (ARR): $528 million, up 11% from the prior-year period
  • Diluted net earnings per share:
  • GAAP of $0.01 due to the acceleration of transformation program, compared to ($0.02) from the prior-year period
  • Non-GAAP of $0.32, compared to $0.45 from the prior-year period
  • Cash flow from Operations of $1.5 billion, up 23% from the prior-year period
  • Free Cash Flow of $924 million, up 43% from the prior-year period
  • Q4 FY20 dividend of $0.12 a share, payable on October 7, 2020

Q3 2020 Key Highlights:

  • Reduced our Q2 FY20 backlog by more than $500 million through improved supply chain execution
  • Gained momentum in key investment areas: HPE GreenLake services orders grew a record 80% from the prior-year period or 82% when adjusted for currency
  • Announced intent to acquire SD-WAN leader Silver Peak
  • Launched next-generation HPE GreenLake cloud services, HPE Ezmeral software portfolio and the Aruba Edge Services Platform

FY 2020 Outlook:

  • Earnings per Share: Q4 2020 GAAP diluted net earnings per share of $0.02 to $0.06 and non-GAAP diluted net earnings per share of $0.32 to $0.36. FY 2020 GAAP diluted net loss per share of $0.35 to $0.31. FY 2020 non-GAAP diluted net earnings per share of $1.30 to $1.34.

SAN JOSE, Calif. — (BUSINESS WIRE) — August 25, 2020 — Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for its fiscal 2020 third quarter, ended July 31, 2020.

“Our Q3 results are marked by strong execution and sequential growth,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “We significantly improved operational and supply chain execution and advanced our innovation agenda with the introduction of HPE GreenLake cloud services solutions, our new HPE Ezmeral software portfolio, and our planned acquisition of SD-WAN leader Silver Peak.”

“We gained momentum in key areas of differentiation and accelerated our as-a-service pivot with strong ARR growth and a record number of HPE GreenLake services orders,” he continued. “Navigating through the pandemic and planning for a post-COVID world have increased customers’ needs for as-a-service offerings, secure connectivity, remote work capabilities and analytics to unlock insights from data that are aligned to our strategy. We see a tremendous opportunity to help our customers drive digital transformations as they continue to adapt to operate in a new world.”

Third Quarter Fiscal Year 2020 Results

Net revenue of $6.8 billion, down 6% from the prior-year period or 4% when adjusted for currency. Revenue grew 13% sequentially or 14% when adjusted for currency driven by solid execution in clearing historic backlog by approximately $500 million during the quarter.

Annualized revenue run-rate (ARR) of $528 million, up 11% from the prior-year period. We are reiterating our 2019 Securities Analyst Meeting ARR guidance of 30-40% Compounded Annual Growth Rate from fiscal year 2019 to fiscal year 2022.

Gross Profit of $2.1 billion, up 8% sequentially due to strong operation execution.

GAAP gross profit margin of 30.3%, compared to 33.9% from the prior-year period and Non-GAAP gross profit margin of 30.4%, compared to 33.9% from the prior-year period.

GAAP Operating Profit of $12 million, up 101% sequentially and Non-GAAP operating profit of $484 million, up 33% sequentially.

GAAP operating profit margin of 0.2%, compared to (1.1%) from the prior-year period and Non-GAAP operating profit margin of 7.1%, compared to 9.9% from the prior-year period.

GAAP diluted net earnings per share (“EPS”) was $0.01 due to the acceleration of transformation program, compared to ($0.02) in the prior-year period.

Non-GAAP diluted net EPS was $0.32, compared to $0.45 in the prior-year period. Third quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $410 million and $0.31 per diluted earnings per share, respectively, primarily related to transformation costs and amortization of purchased intangible assets.

Cash flow from operations of $1.5 billion, compared to $1.2 billion in the prior-year period.

Free cash flow of $924 million, compared to $648 million in the prior-year period.

Segment Results

Intelligent Edge revenue was $684 million, down 12% year over year or 11% when adjusted for currency, with 8.6% operating profit margin, compared to 6.8% from the prior-year period. Revenue grew 3% sequentially demonstrating continued momentum.

Compute revenue was $3.4 billion, flat year over year or up 1% when adjusted for currency, with 8.5% operating profit margin, compared to 12.9% from the prior-year period. Revenue grew 28% sequentially or 29% when adjusted for currency as we executed against the backlog and improved our supply chain execution.

High Performance Compute & Mission Critical Systems (HPC & MCS) revenue was $649 million, up 3% year over year, with 5.5% operating profit margin, compared to 8.1% from the prior-year period. Revenue grew 10% sequentially as installations and customer acceptance of systems improved.

Storage revenue was $1.1 billion, down 10% year over year or 9% when adjusted for currency, with 12.9% operating profit margin, compared to 16.5% from the prior-year period. Revenue grew 4% sequentially driven by improved operational execution and reduction of backlog.

Advisory & Professional Services (A&PS) revenue was $226 million, down 7% year over year or 5% when adjusted for currency, with (1.8%) operating profit margin, compared to (3.7%) from the prior-year period. Revenue was down 5% sequentially or 4% when adjusted for currency as COVID-19 impacted consulting activities of our team members. A&PS is a strategic business that pulls through significant infrastructure and operational services sales.

Financial Services revenue was $811 million, down 9% year over year or 6% when adjusted for currency and down 3% sequentially or 2% when adjusted for currency, with 8.0% operating profit margin, compared to 8.7% from the prior-year period. Net portfolio assets were up 3% year over year and up 4% sequentially or 1% when adjusted for currency, and financing volume was down 12% year over year or 9% when adjusted for currency and flat sequentially or up 1% when adjusted for currency despite the impact of COVID-19. The business delivered return on equity of 12.8%, down 3.0 points from the prior-year period.

Q4 2020 Dividend

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