October 29th, 2019

Hewlett Packard Enterprise outlines as-a-Service strategy and announces FY20 outlook

IN THIS ARTICLE

  • Estimates FY20 non-GAAP diluted net earnings per share outlook of $1.78-$1.94, up 7% year-over-year at the mid-point
  • Estimates FY20 GAAP diluted net earnings per share outlook of $1.01-$1.17, up 63% year-over-year at the mid-point
  • Expects FY20 free cash flow of $1.9 billion to $2.1 billion as announced at the 2018 Securities Analyst Meeting, an increase of approximately 82% from FY18 at the mid-point
  • Increases quarterly dividend to $0.12 per share

 

HPE CEO and CFO provided strategy and financial updates at annual Securities Analyst Meeting

NEW YORK, Oct. 23, 2019 – Hewlett Packard Enterprise (NYSE: HPE) today held its annual Securities Analyst Meeting and provided strategy and financial updates from president and CEO Antonio Neri and executive vice president and chief financial officer Tarek Robbiati.  The webcast and presentations can be found on the HPE Investor Relations Website: hpe.com/investor/SAM2019.

HPE Strategy & Market Opportunity

Neri discussed HPE’s performance, as well as the company’s vision, strategy and outlook.

“Over the past year, HPE has improved profitability across the company and generated record levels of free cash flow by sharpening our focus and strategically investing in higher value, software-defined solutions,” said Neri.  “This hard work has laid the foundation for the next phase of our journey, which will be marked by a strategic pivot to offering everything as-a-Service to drive sustainable, profitable growth.”

The opportunity is edge to cloud as-a-Service

Today, apps and data live everywhere – in the cloud, on- and off-premises, and increasingly at the edge. In this environment, companies are accelerating digital transformation to create new and compelling experiences for their customers and employees, but they also face challenges including: an inconsistent experience between the data center, private and public clouds; inflexible, expensive, and proprietary stacks that prohibit choice; and limited in-house IT skills, budgets, and options for financing.

Anticipating customer needs, HPE has taken very deliberate steps to pivot its portfolio to innovative software-defined solutions and services and is uniquely positioned to address the full scope of customers’ needs from edge to cloud.  Moreover, building on over a decade of leadership in delivering IT as-a-Service through HPE GreenLake, HPE committed at its annual Discover 2019 conference to offer its entire HPE portfolio as-a-Service by fiscal year 2022, giving customers full flexibility and choice in how they consume IT.

“HPE is a focused company with incredible talent and great momentum. I am more confident than ever in our ability to deliver a very differentiated experience for our customers, which we believe will drive long-term profitable growth over the next three years and provide strong returns for our shareholders,” concluded Neri.

Financial Update

Tarek Robbiati, executive vice president and CFO, provided a financial update, including an outlook for FY20.

“HPE has a unique portfolio of assets and is well-positioned to redefine the edge-to-cloud experience and industry model,” said Robbiati. “We are capitalizing on customer demand for consumption-based IT solutions by committing to offer our entire portfolio as-a-Service by fiscal year 2022, which will help us drive sustainable profitable growth.”

FY19 Expectations

As previously disclosed in HPE’s third quarter earnings call, non-GAAP diluted net EPS is expected to be approximately $1.72 to $1.76, and GAAP diluted net EPS is expected to be approximately $0.65 to $0.69.

FY20 Outlook

HPE provided its outlook for FY20.  The company expects net revenue growth when adjusted for currency fluctuations.

HPE expects its non-GAAP operating profit growth to be approximately 4-6% year-over-year, Other Income & Expense of approximately $100 million of an expense, a non-GAAP tax rate of 12% and a share count of approximately 1.3 billion shares outstanding.

HPE expects non-GAAP diluted net EPS of $1.78 to $1.94, up 7% year-over-year at the mid-point and GAAP diluted net EPS to be approximately $1.01 to $1.17, up 63% year-over-year at the mid-point.

Free cash flow is expected to be $1.9 billion to $2.1 billion as announced at the 2018 Securities Analyst Meeting, an increase of approximately 82% from FY18 at the mid-point.

Given HPE’s strong balance sheet today and the underlying strength of its free cash flow engine, HPE is committed to returning 50-75% of free cash flow to shareholders in FY20, consisting of share repurchases and dividends.

Dividend Increase

HPE announced it is increasing its quarterly dividend to $0.12 per share.

Long-Term Financial Profile

HPE provided its long-term financial model for FY19-FY22. The company expects compounded annual revenue growth rate of 1-3% adjusted for currency driven by Edge, Storage, High Performance Compute & Mission Critical Systems and related services.

The company expects continued improvements in gross margins through structural efficiencies and favorable product mix. The company expects compounded annual non-GAAP operating profit growth rate of 5-7% 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% with long-term free cash flow to track earnings.

The company expects capital distributions to shareholders to be between 50-75% of free cash flow over the long-term, with valuation-based share repurchases and balanced annual dividend distributions.

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