Hewlett Packard Enterprise Demonstrates Strong Momentum of Edge-to-Cloud Strategy and Presents FY23 Outlook at HPE Securities Analyst Meeting 2022

Hewlett Packard Enterprise hosted its annual Securities Analyst Meeting (“SAM”) at HPE’s headquarters in Houston, where Antonio Neri, president and chief executive officer, and Tarek Robbiati, executive vice president and chief financial officer, provided the financial outlook for fiscal year 2023 as well as details on the company’s strategy, customer trends, accelerating market opportunity, and long-term growth initiatives.

Neri emphasized in his SAM remarks how HPE’s edge-to-cloud strategy directly addresses IT industry megatrends that have emerged over the last several years. He noted that HPE has delivered strong results for shareholders and is in solid position to add even greater value.

“We have taken decisive and important actions to transform HPE. Our evolution to a platform-based model, fueled by a software- and services-rich portfolio, is already delivering very strong results that translate to value for our shareholders,” Neri said. “Our distinct innovation and strong execution continue to drive customer demand across our portfolio, which we expect to result in higher recurring revenues, expanded gross and operating margins, and increased free cash flow in future years.”

Neri illustrated additional market drivers that can accelerate greater success of HPE’s strategy, including the opportunity embedded in customers’ growing preference for hybrid multi-cloud models. “Hybrid multi-cloud adoption for the most demanding workloads is accelerating across industry verticals,” Neri said during the SAM webcast. “And while the world is already hybrid and getting more so, we know the cloud experience is not yet everywhere. Customers are looking for a way to unify their multi-generation IT strategy with a consistent cloud experience across all their applications and data.”

Neri pointed to HPE’s leadership in hybrid multi-cloud, as the company that offers the broadest set of workloads of any hybrid cloud vendor in the market. “From the time we first predicted the future would be hybrid, we made sure we were first to bring to market differentiated services and solutions for our customers,” Neri said.

Neri also provided updates on the maturity of the unique HPE GreenLake platform. HPE has distinguished the HPE GreenLake platform by providing a unified, automated, and secure cloud experience that is integrated across the edge, data centers, co-locations, and public clouds.

With more than 120,000 users across two million connected devices and $7.7 billion in total contract value, HPE GreenLake has driven traction across HPE’s overall portfolio. Total HPE orders, including as-a service bookings, are at their highest ever in the fiscal year 2022.

“We are relentlessly focused on delivering customer-centric technology breakthroughs,” said Neri. “With the competitive advantages that our leadership position brings, HPE is poised to deliver on the commitments we have made.”

Financial Update

Tarek Robbiati provided more insight into how HPE’s vision is expected to translate into an attractive long-term financial profile.

“We have the right edge-to-cloud strategy, aligned with dominant market trends and supported by a sound financial architecture to win customers, drive sustainable, profitable growth, and create shareholder value,” Robbiati said. “Our transition to as a service has helped us create resilient recurring revenue, higher gross margin, and sustainable free cash flow, enabling consistently strong top and bottom-line results, even in light of a complex macro environment.”

Robbiati also provided a financial update including the company’s outlook for fiscal year 2023, highlighting how HPE expects to capitalize on enduring market demand and detailing how various macroeconomic aspects factor into the outlook.

FY22 Expectations

HPE confirmed its previous fiscal year 2022 outlook. Revenue is expected to grow 3% to 4%, now adjusted 300 bps for currency versus 50 bps at the beginning of the fiscal year. Fiscal year 2022 GAAP diluted net earnings per share (EPS) to be in the range of $1.20 to $1.28 and non-GAAP diluted net EPS to be in the range of $1.96 and $2.04. Fiscal 2022 non-GAAP diluted net EPS excludes after-tax costs of approximately $0.76 per share reflecting changes related to exiting Russia and Belarus, transformation costs, stock-based compensation, and amortization of intangible assets. Fiscal year 2022 free cash flow is expected to be between $1.7 billion and $1.9 billion.

FY23 Outlook

HPE expects fiscal year 2023 financial results to continue the momentum from fiscal year 2022. The company expects its revenue growth to be 2% to 4%, when adjusted for currency, and non-GAAP operating profit growth of approximately 4% to 5% year-over-year. This excludes costs of approximately $0.86 billion primarily related to stock-based compensation expense, amortization of intangible assets and transformation costs. The company expects non-GAAP other income & expense of approximately $20 million to $40 million to be a net expense for the full year, excluding adjustments of approximately $40 million primarily related to non-service net periodic benefits. The company expects a non-GAAP tax rate of 14% based on current tax laws.

HPE expects GAAP diluted net EPS of $1.38 to $1.46 and non-GAAP diluted net EPS of between $1.96 and $2.04. The non-GAAP diluted net EPS outlook excludes after-tax costs of approximately $0.58 per share related primarily to stock-based compensation expense, amortization of intangible assets and transformation costs. HPE expects fiscal year 2023 free cash flow to be $1.9 billion to $2.1 billion.

Long-Term Financial Profile

HPE provided its long-term financial model for fiscal year 2022 through fiscal year 2025. The company expects its unique HPE GreenLake edge-to-cloud platform will drive robust growth. HPE projects revenue growth of 2% to 4% adjusted for currency, led by healthy growth in Aruba and High Performance Computing & AI, and a compounded annual growth rate for annualized revenue run-rate of 35% to 45%.

Additionally, it expects greater than $6.5 billion of cumulative free cash flow between fiscal year 2022 and fiscal year 2024, powered by sustained revenue growth, rising operating profits, and underpinned by strategic investments.

The company will also prioritize a disciplined, returns-based capital allocation framework, which balances capital returns to shareholders and share repurchases with balanced investments for growth.

Annualized Revenue Run-Rate (ARR) is a financial metric used to assess the growth of the Consumption Services (CS) offerings. ARR represents the annualized revenue of all net HPE GreenLake services revenue, related financial services revenue (which includes rental income from operating leases and interest income for capital 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.