- HPE highlights successful pivot to higher-growth, higher-margin
markets that has enhanced shareholder value
- HPE anticipates greater growth prospects at the edge, in hybrid
cloud, and with AI, and is investing to further increase recurring
revenue and long-term profit
- HPE intends to increase shareholder capital return over the
next three years
Hewlett Packard Enterprise (NYSE: HPE) today hosted its
Securities Analyst Meeting (“SAM”) at the New York Stock Exchange,
where Antonio Neri, HPE president and CEO, and Jeremy Cox, senior
vice president and interim CFO, provided the financial outlook for
fiscal year 2024. Together with other members of the management
team, they illustrated how the expansion of the software- and
services-rich portions of HPE’s portfolio will continue to
accelerate value for shareholders over the next three years.
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Antonio Neri, president and CEO of
Hewlett Packard Enterprise, speaks at the company’s HPE Securities
Analyst Day 2023. (Photo: Business Wire)
Neri detailed the company’s winning strategy and financial
progress, which has established HPE as the leading edge-to-cloud
company.
“With a growing addressable market, a proven strategy, and a
differentiated portfolio, HPE is in a strong competitive position,”
said Antonio Neri, president and CEO. “HPE’s strategy is aligned to
significant market trends around edge, hybrid cloud and AI – all of
which create profitable market expansion opportunities that we
expect will fuel our growth. As we unlock greater growth from these
markets, our investors are poised to share in higher returns.”
HPE is successfully shifting its portfolio to higher-growth,
higher-margin businesses, increasing its long-term profitability
potential. When combined, HPE’s largest growth businesses –
Intelligent Edge, HPC & AI, and the company’s future Hybrid
Cloud segment – are expected to exceed 50% of the company’s total
segment revenue by fiscal year 2026. The company is continuing to
invest in these areas to increase recurring revenue and further
expand margins. HPE expects to increase its total addressable
market1 by nearly $100 billion over a four-year period to more than
$340 billion, led by a larger market in AI.
Sustaining HPE’s Momentum at the Edge and in
Networking
HPE’s Intelligent Edge segment is a critical part of the
company’s portfolio. Nearly $6 billion has been invested in the HPE
Aruba Networking business since Neri became CEO in 2018. The
company continues to grow its offerings in security, private 5G,
and data-center networking.
On track to be a $5 billion annual business in HPE’s fiscal year
2023, Intelligent Edge is primed to have the highest profitability
of any HPE business segment. HPE seeks to sustain growth in this
segment by gaining market share in key high-growth, margin-rich
areas, ultimately accelerating shareholder value.
Scaling Leading Hybrid Cloud Offering to Become Large,
Enduring Growth Engine
HPE elaborated on its forthcoming Hybrid Cloud segment, which
was previously announced in September and will become operative
starting on November 1, 2023. The new segment will enable greater
focus, faster execution, and more efficiencies when it combines all
Storage and Compute aaS offerings, inclusive of HPE GreenLake
Private Cloud and Software solutions. The simplified operating
model will also deliver a superior, cloud-native experience for
HPE’s customers and partners.
Customers are adopting HPE’s market-leading offerings as the
company’s portfolio continues to grow, expanding beyond
infrastructure into new, higher-growth markets such as
infrastructure software. HPE offers one of the most differentiated
customer value propositions among its competitors, including cloud
providers.
This year, the company added new cloud-native offerings and
capabilities to its HPE GreenLake platform. HPE GreenLake is
helping to expand gross margins, with software and services
comprising nearly 70% of the ARR2 mix as of the end of fiscal year
2023's third quarter. Proving a viable alternative to public cloud,
HPE plans to be the world’s top provider of hybrid cloud as HPE
GreenLake accelerates its growth momentum.
Capturing AI Market Growth Opportunity with Differentiated,
Margin-Rich Solutions
HPE is seeing a huge demand shift in AI as customers realize the
fundamental potential of the technology to deliver business
transformation. The company recognizes the AI market will be driven
by compute, data-intensive workloads, and the need for specialized
architecture, and thus, is targeting three areas: supercomputing,
AI infrastructure, and AI platform software.
HPE believes it is differentiated from its competition in the
ability to capture significant value from the growing AI market
through its IP, trusted expertise, and long-term sustained market
leadership in supercomputing.
With strategic investments in AI, including HPE’s full-stack
AI-native architecture, the company anticipates profitable growth
in the next fiscal year as its AI business scales.
Bringing value across HPE portfolio to customers and
shareholders through Compute
HPE’s strong competitive position in the Compute market produces
cash flow to invest in the business and deliver capital return to
shareholders. Demand for Compute includes cloud repatriation, new
edge workloads, telco sector and service provider needs, and the
emerging and growing call for AI-inferencing.
Gaining competitive advantage with HPE Financial
Services
HPE Financial Services creates smarter IT lifecycle solutions
through offerings that combine insights, financial expertise, and a
deep-rooted focus on sustainable IT. The company expects higher
demand from customers as they put more emphasis on finding ways to
accelerate sustainability goals through HPE services and circular
economy solutions.
Long-Term Financial Profile
HPE provided its long-term financial model for fiscal year 2024
through fiscal year 2026. HPE projects revenue growth of 2% to 4%
in constant currency and a compounded annual growth rate for
annualized revenue run-rate of 35% to 45%.
The company will continue to follow a disciplined, returns-based
capital allocation framework, which balances capital returns to
shareholders and share repurchases with balanced investments for
growth while retaining its investment-grade credit rating.
The company also expressed its intent to target returning 65% to
75% of free cash flow to shareholders over the next three years.
HPE’s recent historical target return rate has been between 50% and
60%.
FY24 Outlook
HPE expects fiscal year 2024 financial results to continue the
momentum from fiscal year 2023 and deliver sustainable, profitable
growth. The company forecasts its revenue growth to be 2% to 4%, in
constant currency, with the effects of foreign exchange expected to
be a 50-to-100-basis-point headwind. GAAP operating profit growth
is forecasted to be 15% to 21%, and non-GAAP operating profit
growth is forecasted to be approximately 3% to 5% year-over-year.
This excludes costs of approximately $0.8 billion primarily related
to stock-based compensation expense, transformation costs,
amortization of intangible assets, and acquisition, disposition,
and other related charges.
The company expects non-GAAP other income & expense of
approximately $300 million to be a net expense for the full year,
excluding any contributions from H3C. The company expects a
structural non-GAAP tax rate of 15% based on current tax laws.
HPE is expecting fiscal year 2024 GAAP diluted net earnings per
share (“EPS”) of $1.83 to $2.03 and non-GAAP diluted net EPS of
between $1.82 and $2.02. The non-GAAP diluted net EPS outlook
excludes after-tax costs of approximately one cent per share
related primarily to stock-based compensation, amortization of
intangible assets, acquisition, disposition and other related
charges, structural tax rate adjustment, transformation costs, and
adjustments for the sale of H3C. HPE expects fiscal year 2024 free
cash flow to be $1.9 billion to $2.1 billion.3
The company is targeting an 8% increase in its dividend per
share for fiscal 2024.4
FY23 Expectations
HPE forecasts revenue to grow 4% to 6%, in constant currency,
with the effects of foreign exchange expected to be approximately a
300-basis-point headwind for the year. Fiscal 2023 GAAP operating
profit growth is to be approximately 163% and non-GAAP operating
profit growth is to be approximately 4%. This excludes costs of
approximately $1.1 billion primarily related to stock-based
compensation, transformation costs, amortization of intangible
assets, and acquisition, disposition, and other related charges.
Both operating profit growth forecasts are below earlier
expectations.
Fiscal year 2023 GAAP diluted net EPS is forecasted to be in the
range of $1.35 to $1.39, and non-GAAP diluted net EPS is forecasted
to be in the range of $2.11 and $2.15. Fiscal 2023 non-GAAP diluted
net EPS excludes after-tax costs of approximately $0.76 per share
primarily related to stock-based compensation expense,
transformation costs, amortization of intangible assets,
acquisition, disposition and other related charges, and structural
tax rate adjustments. Fiscal year 2023 free cash flow is expected
to be between $1.9 billion and $2.1 billion.3
Webcast Details
A recording of today’s SAM webcast event, along with executives’
presentations and related materials, will be available on the HPE
Investor Relations website at
https://www.hpe.com/investor/SAM2023.
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 related materials
made available on that website.
1 HPE’s total addressable market (“TAM”) opportunity spans the
impacts of the mega-trends we believe are shaping the IT industry,
including at the edge, hybrid cloud, and artificial intelligence.
For more information, please refer to the 2023 Securities Analyst
Meeting presentation.
2 Annualized Revenue Run-Rate (“ARR”) is a financial metric used
to assess the growth of the Consumption Services offerings. ARR
represents the annualized revenue of all net HPE GreenLake
edge-to-cloud platform services revenue, related financial services
revenue (which includes rental income from operating leases and
interest income from finance leases), and software-as-a-Service,
software consumption revenue, and other as-a-Service offerings,
recognized during a quarter and multiplied by four. We use ARR as a
performance metric. ARR should be viewed independently of net
revenue and is not intended to be combined with it.
3 Hewlett Packard Enterprise provides certain guidance on a
non-GAAP basis. Hewlett Packard Enterprise is unable to provide a
reconciliation to the most directly comparable GAAP financial
measure without unreasonable efforts, as the Company cannot predict
some elements that are included in such directly comparable GAAP
financial measure. These elements could have a material impact on
the Company’s reported GAAP results for the guidance period.
4 Subject to HPE Board of Directors approval.
About Hewlett Packard Enterprise
Hewlett Packard Enterprise (NYSE: HPE) is the global
edge-to-cloud 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
people live and work, HPE delivers unique, open and intelligent
technology solutions as a service. With offerings spanning Cloud
Services, Compute, High Performance Computing & AI, Intelligent
Edge, Software, and Storage, HPE provides a consistent experience
across all clouds and edges, helping 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 and key performance
metrics
To supplement Hewlett Packard Enterprise’s condensed
consolidated financial statement information presented on a
generally accepted accounting principles (“GAAP”) basis, Hewlett
Packard Enterprise provides forecasts of certain financial
measures, including net revenue on a constant currency basis,
including at the business segment level, non-GAAP gross profit,
non-GAAP gross profit margin, 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 and free cash flow. Reconciliations of these non-GAAP
financial measures to the most directly comparable GAAP financial
measures, where available, are included in this release or the
slides presented at the 2023 Securities Analyst Meeting, which will
be available for a period of one year thereafter at
www.hpe.com/investor/SAM2023. Hewlett Packard Enterprise provides
certain guidance on a non-GAAP basis only, as the company cannot
reasonably 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, gross profit, gross
profit margin, operating profit (earnings from operations),
operating profit growth, operating profit margin (earnings from
operations as a percentage of net revenue), net earnings, diluted
net earnings per share, other income and expenses, and cash flow
from operations prepared 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 certain items - 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 may 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 each non-GAAP financial measures to its most
directly comparable GAAP measure in this release or in other
written materials that include these non-GAAP financial measures,
and Hewlett Packard Enterprise encourages investors to review those
reconciliations carefully.
Usefulness of non-GAAP financial measures to
investors
Hewlett Packard Enterprise believes that providing forecasts of
revenue on a constant currency basis, non-GAAP gross profit,
non-GAAP gross profit margin, 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, and 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 financial
condition and to evaluate the efficacy of the methodology and
information used by Hewlett Packard Enterprise’s management to
evaluate and measure such performance and financial condition.
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 and its consolidated
subsidiaries (“Hewlett Packard Enterprise”) may differ materially
from those expressed or implied by such forward-looking statements
and assumptions. The words “believe”, “expect”, “anticipate”,
"guide", “optimistic”, “intend”, “aim”, “will”, "estimates", “may”,
“could”, “should” and similar expressions are intended to identify
such forward-looking statements. All statements other than
statements of historical fact are statements that could be deemed
forward-looking statements, including but not limited to any
anticipated financial or operational benefits associated with the
forthcoming segment realignment, any projections, estimations, or
expectations of addressable markets and their sizes, revenue
(including annualized revenue run rate), margins, expenses
(including stock-based compensation expenses), investments, net
earnings, net earnings per share, cash flows, liquidity and capital
resources, inventory, goodwill, impairment charges, order book,
share repurchases, currency exchange rates, or other financial
items; any projections or estimations of future orders, including
as-a-service orders; any projections of the amount, execution,
timing, and results of any transformation or impact of cost savings
or restructuring plans, including estimates and assumptions related
to the anticipated benefits, cost savings, or charges of
implementing such transformation and restructuring plans; any
statements of the plans, strategies, and objectives of management
for future operations, as well as the execution and consummation of
corporate transactions or contemplated acquisitions and
dispositions (including disposition of our H3C shares and the
receipt of proceeds therefrom), research and development
expenditures, and any resulting benefit, cost savings, charges, or
revenue or profitability improvements; any statements concerning
the expected development, performance, market share or competitive
performance relating to products or services; any statements
concerning technological and market trends, the pace of
technological innovation, and adoption of new technologies,
including artificial intelligence and products and services offered
by Hewlett Packard Enterprise; any statements regarding current or
future macroeconomic trends or events and the impact of those
trends and events on Hewlett Packard Enterprise and our financial
performance, including but not limited to demand for our products
and services and financial sector volatility, and our actions to
mitigate such impacts on our business; any statements of
expectation or belief, including those relating to future guidance
and the financial performance of Hewlett Packard Enterprise; and
any statements of 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, including but not limited to
financial sector volatility, supply chain constraints, the
inflationary environment, the use and development of artificial
intelligence, the ongoing conflict between Russia and Ukraine, and
tensions between China and the U.S.; the need to effectively manage
third-party suppliers and distribute Hewlett Packard Enterprise’s
products and services; 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 from
public health problems, such as pandemics or epidemics, and
geopolitical events, such as those mentioned above); 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 (including the
desirability of a unified hybrid-cloud offering); the execution of
Hewlett Packard Enterprise's ongoing transformation and mix shift
of its portfolio of offerings, the execution and performance of
contracts by Hewlett Packard Enterprise and its suppliers,
customers, clients, and partners, including any impact thereon
resulting from macroeconomic or geopolitical events such as those
mentioned above; the hiring and retention of key employees; the
execution, integration, consummation, and other risks associated
with business combination, disposition, and investment
transactions; the impact of changes to privacy, cybersecurity,
environmental, global trade, and other governmental regulations;
changes in our product, lease, intellectual property, or real
estate portfolio; the payment or non-payment of a dividend for any
period; the efficacy of using non-GAAP, rather than GAAP, financial
measures in business projections and planning; the judgments
required in connection with determining revenue recognition; impact
of company policies and related compliance; utility of segment
realignments; allowances for recovery of receivables and warranty
obligations; provisions for, and resolution of pending
investigations, claims, and disputes; the impacts of the Inflation
Reduction Act of 2022 and related guidance or regulations; and
other risks that are described in Hewlett Packard Enterprise’s
Annual Report on Form 10-K for the fiscal year ended October 31,
2022, subsequent Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and in other filings made by Hewlett Packard Enterprise
from time to time with the Securities and Exchange Commission.
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, 2023. Hewlett Packard Enterprise assumes no
obligation and does not intend to update these forward-looking
statements, except as required by applicable law.
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version on businesswire.com: https://www.businesswire.com/news/home/20231019642763/en/
Media Contact: Laura Keller laura.keller@hpe.com
Investor Contact: Jeff Kvaal
investor.relations@hpe.com
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