- 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
NEW YORK — (BUSINESS WIRE) — October 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.
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HPE Securities Analyst Meeting Infographic (Graphic: Business Wire)
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.
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.”
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.
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.
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.
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 a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze, and act upon data seamlessly from edge to cloud. HPE enables customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future.
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, non-GAAP operating margin, non-GAAP measure of earnings/loss from equity interests, 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 2019 Securities Analyst Meeting, which will be available for a period of one year thereafter at http://hpe.com/investor/sam2019. 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 margin, diluted net earnings per share, 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.