Third Quarter Fiscal Year 2019

HPE fiscal 2019 third quarter continuing operations financial performance
		Q3 FY19		Q3 FY18		Y/Y
GAAP net revenue ($B)		$7.2		$7.8		(7.0%)
GAAP operating margin		(1.1%)		6.3%		(7.4 pts.)
GAAP net earnings ($B)		($0.0)		$0.5		(106%)
GAAP diluted net earnings per share		($0.02)		$0.29		(107%)
Non-GAAP operating margin		9.9%		9.1%		0.8 pts.
Non-GAAP net earnings ($B)		$0.6		$0.6		(5.6%)
Non-GAAP diluted net earnings per share		$0.45		$0.42		7.1%
Cash flow from operations ($B)		$1.2		$1.2		(4.2%)

Information about HPE’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.

Financial Summary

Third quarter net revenue of $7.2 billion, down 7% from the prior-year period, and down 3% from the prior-year period, excluding Tier 1 server sales and adjusted for currency.

Third quarter gross margins of 33.9%, up 340 basis points from the prior-year period.

Third quarter GAAP diluted net earnings per share (“EPS”) from continuing operations was ($0.02), includes ($0.42) adjustment for a one-time arbitration award to DXC, compared to GAAP diluted net EPS from continuing operations of $0.29 in the prior-year period.

Third quarter non-GAAP diluted net EPS $0.45, up from non-GAAP diluted net EPS of $0.42 in the prior-year period. Third quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $630 million and $0.47 per diluted share, respectively, primarily related to the impact of acquisition, disposition and other related charges, transformation costs, tax indemnification adjustments, and adjustments for taxes.

Third quarter cash flow from operations of $1.2 billion, and $2.6 billion year-to-date, up $927 million from the prior-year-to-date period.

Free cash flow of $648 million, and $860 million year-to-date, up $790 million from the prior-year-to-date period.

Segment Results

• Intelligent Edge revenue was $762 million, with 4.9% operating margin. HPE Aruba product revenue was down 4% year over year when adjusted for currency and HPE Aruba Services revenue was up 16% year over year when adjusted for currency.
• Hybrid IT revenue was $5.5 billion, with 12.7% operating margin, up 250 bps year over year. Mix-shift continues towards HPE’s higher-margin value products with revenue from High-Performance Compute up 2% year over year when adjusted for currency, Composable Cloud up 28% year over year when adjusted for currency, and Hyperconverged Infrastructure showing continued momentum, up 4% year over year when adjusted for currency. HPE Nimble Storage was up 21% year over year when adjusted for currency. HPE Pointnext operational services orders and Nimble services orders were up 3% year over year when adjusted for currency.
• Financial Services revenue was $888 million, with 8.7% operating margin, up 90 bps year over year. Net portfolio assets were up 2% year over year when adjusted for currency, and financing volume was up 5% year over year when adjusted for currency. The business delivered return on equity of 15.8%, up 350 bps from the prior-year period.

FY2019 GAAP Outlook

For the fiscal 2019 fourth quarter, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.24 to $0.28. For fiscal 2019 full-year Hewlett Packard Enterprise now estimates GAAP diluted net EPS to be in the range of $0.65 to $0.69 due to a one-time arbitration award to DXC.

Raised FY2019 Non-GAAP Outlook

For the fiscal 2019 fourth quarter, Hewlett Packard Enterprise estimates non-GAAP diluted net EPS to be in the range of $0.43 to $0.47. Fiscal 2019 fourth quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.19 per diluted share, primarily related to transformation costs and the amortization of intangible assets.

For fiscal 2019 full-year, Hewlett Packard Enterprise now estimates non-GAAP diluted net EPS to be in the range of $1.72 to $1.76. Fiscal 2019 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.07 per diluted share, primarily related to acquisition, disposition, and other related charges, transformation costs, an adjustment to earnings from equity interest, and the amortization of intangible assets.

FY2019 Free Cash Flow Outlook

For fiscal 2019 full-year, Hewlett Packard Enterprise reiterates free cash flow guidance range of $1.4 to $1.6 billion, up over 35% at the mid-point from the prior year.

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.

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.

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Source: Hewlett Packard Enterprise