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HPC & AI Wall StreetQ3 2022 Financial Highlights:
• Revenue: $7.0 billion, up 1% and 4% adjusted for currency(1)from the prior-year period, above Q3 guidance
• Gross margins remain resilient despite ongoing supply chain constraints and inflationary environment
• GAAP of 34.5%, flat from the prior-year period and up 210 basis points sequentially
• Non-GAAP of 34.7%, flat from the prior-year period and up 50 basis points sequentially
• Diluted net earnings per share (“EPS”):
• GAAP of $0.31, up 7% from the prior-year period and up 63% sequentially
• Non-GAAP of $0.48, up 2% from the prior-year period and up 9% sequentially
• Cash flow from operations of $1.3 billion and free cash flow of $587 million, in line with normal seasonality
Capital Returns:
• Returned $353 million to shareholders in the form of dividends and share repurchases
• Declared a regular cash dividend of $0.12 per share, payable on October 7, 2022
Outlook:
• Reiterates fiscal 2022 revenue growth of 3-4% adjusted for currency
• Fourth quarter fiscal 2022 GAAP diluted net EPS to be in the range of $0.32 to $0.40 and non-GAAP diluted net EPS to be in the range of $0.52 to $0.60
• Fiscal 2022 GAAP diluted net 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 to $2.04, reflecting the unfavorable currency movements and constrained supply environment
• Fiscal 2022 free cash flow(2) guidance to be in the range of $1.7 to $1.9 billion
HOUSTON, Texas, Aug. 30, 2022 – Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for the third quarter, ended July 31, 2022.
“Our continued innovation and focus on execution resulted in revenue and profit growth, which are particularly noteworthy in such a dynamic market. Our growth in recurring revenue this fiscal year is evidence of customers’ strong response to our HPE GreenLake platform,” said Antonio Neri, president, and CEO of Hewlett Packard Enterprise. “Customers continue to prioritize investments in IT and are finding HPE’s industry-leading edge-tocloud portfolio to be particularly relevant in today’s complex macroeconomic environment, where technology innovation is critical to accelerate business transformation and deliver important business outcomes.”
“We executed well in Q3, delivering revenue above our guidance while growing backlog sequentially to another record level,” said Tarek Robbiati, EVP and CFO of Hewlett Packard Enterprise. “We are also pleased with the expansion of our gross margins despite the inflationary headwinds and challenged supply environment. We are driving operating leverage expansion through strong pricing discipline and shifting our mix towards higher-margin, software-rich offerings through the HPE GreenLake platform.”
Third Quarter Fiscal Year 2022 Results
Net revenue of $7.0 billion, up 1% and 4% adjusted for currency(1) from the prior-year period, above Q3 guidance.
Annualized revenue run-rate (“ARR”) (3) of $858 million, up 22% and 28% adjusted for currency(1) from the prioryear period and total as-a-Service orders(4) were up 39% from the prior-year period, and up 86% year-to-date. We remain confident in delivering our 2021 Securities Analyst Meeting ARR guidance of 35%-45% Compounded Annual Growth Rate from fiscal year 2021 to fiscal year 2024.
GAAP gross margin of 34.5%, flat from the prior-year period and up 210 basis points sequentially, and non-GAAP gross margin of 34.7%, flat from the prior-year period and up 50 basis points sequentially, driven by favorable mix shift and strategic pricing actions.
GAAP diluted net EPS was $0.31, up 7% from the prior-year period and up 63% sequentially.
Hewlett Packard Enterprise announced in June that the company would proceed with an orderly, managed exit of its remaining business in Russia and Belarus. During the third quarter of 2022, we recorded an additional pre-tax charge of $36 million related to our exit.
Non-GAAP diluted net EPS was $0.48, up 2% from the prior-year period and up 9% sequentially. Third quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $220 million and $0.17 per diluted share, respectively, primarily for transformation costs, stock-based compensation expense, and the amortization of intangible assets.
Cash flow from operations of $1.3 billion, up $124 million from the prior-year period.
Free cash flow of $587 million, up $61 million from the prior-year period.
Capital returns to shareholders of $353 million in the form of share repurchases and dividends.
Segment Results
• Intelligent Edge revenue was $941 million, up 8% from the prior-year period in actual dollars and 12% when adjusted for currency, with 16.5% operating profit margin, compared to 16.1% in the prior-year period. Aruba Services revenue was up double-digits from the prior-year period and Intelligent Edge as-a-Service ARR(3) was up more than 60% from the prior-year period.
• High Performance Computing & Artificial Intelligence (“HPC & AI”) revenue was $830 million, up 12% from the prior-year period in actual dollars and 15% when adjusted for currency, with 3.4% operating profit margin, compared to 3.8% from the prior-year period. HPC market share expanded to 39% and includes four of the global top 10 supercomputers.
• Compute revenue was $3.0 billion, down 3% from the prior-year period in actual dollars and down 1% when adjusted for currency, with 13.3% operating profit margin, compared to 11.2% from the prior-year period. Margin expansion was driven by strategic pricing actions, more than offsetting input cost increases.
• Storage revenue was $1.2 billion, down 2% from the prior-year period in actual dollars and up 1% when adjusted for currency, with 14.7% operating profit margin, compared to 15.1% from the prior-year period, and up 210 basis points sequentially, with favorable mix shift.
• Financial Services revenue was $817 million, down 3% from the prior-year period in actual dollars and up 1% when adjusted for currency, with 11.8% operating profit margin, compared to 11.1% from the prior-year period. Net portfolio assets of approximately $12.6 billion, down 4% from the prior-year period or up 2% when adjusted for currency. Return on equity was 19.5%, up 1.3 points from the prior-year period, and well above the target set at SAM 2021.
Dividend
Board of Directors has declared a regular cash dividend of $0.12 per share on the company’s common stock, payable on October 7, 2022, to stockholders of record as of the close of business on September 12, 2022.
Fiscal 2022 fourth quarter outlook:
Hewlett Packard Enterprise GAAP diluted net EPS to be in the range of $0.32 to $0.40 and non-GAAP diluted net EPS to be in the range of $0.52 to $0.60. Fiscal 2022 fourth quarter non-GAAP diluted net EPS excludes after-tax adjustments of $0.20 per diluted share, primarily related to transformation costs, stock-based compensation expense and the amortization of intangible assets.
Fiscal 2022 outlook:
Hewlett Packard Enterprise GAAP diluted net EPS outlook of $1.20 – $1.28 and FY22 non-GAAP diluted net EPS outlook of $1.96 to $2.04. Fiscal 2022 non-GAAP diluted net EPS excludes after-tax adjustments of $0.76 per diluted share, primarily related to transformation costs, stock-based compensation expense, the amortization of intangible assets, and exiting from Russia and Belarus.
Free cash flow(2) guidance of $1.7 to $1.9 billion, due to exiting our Russia and Belarus business, and unfavorable currency movements.
1 Adjusted to eliminate the effects of currency. A description of HPE’s use of non-GAAP financial information is provided below under “Use of non-GAAP financial information”.
2 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.
3 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.
4 As-a-Service (“AAS”) orders are an overlay across all business segments contributing to HPE’s consumption-based services (both recurring and non-recurring), and includes hardware, as well as GreenLake as-a-Service, Aruba SaaS, CMS SaaS, and other Software assets.
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.
Source: HPE
