HPE Reports Fiscal 2019 Fourth Quarter and Full-Year Results

Delivers strong profitability and free cash flow

Q4 2019 Financial Highlights:

  • Revenue: $7.2 billion, stable for the last three quarters
  • Gross margins: GAAP of 33.2%, up 250 basis points from the prior-year period and Non-GAAP of 33.3%, up 260 basis points from the prior-year period
  • Diluted net earnings per share from continuing operations:
    • GAAP of $0.36, compared to ($0.53) from the prior-year period and above the previously provided outlook of $0.24 to $0.28 per share
    • Non-GAAP of $0.49, up 14% from the prior-year period EPS and above the previously provided outlook of $0.43 to $0.47 per share

Fiscal 2019 Full-Year Financial Highlights

  • Revenue: $29.1 billion
  • Gross margins: GAAP and Non-GAAP of 32.6%, up 270 basis points from the prior-year period
  • Diluted net earnings per share from continuing operations:
    • GAAP of $0.77, down 41% from the prior-year period due primarily to a one-time arbitration award payment of $668 million to DXC, but in-line with the 2018 Securities Analyst Meeting outlook of $0.73 to $0.83 per share
    • Non-GAAP $1.77, up 20% from the prior-year period and above the 2018 Securities Analyst Meeting outlook of $1.51 to $1.61 per share
  • Cash flow from operations: $4.0 billion, up 35% from the prior-year period
  • Free cash flow: $1.7 billion, up 58% from the prior-year period
  • Capital return to shareholders: $2.9 billion in the form of share repurchases and dividends

Outlook:

  • Fiscal 2020 First quarter: Estimates GAAP diluted net earnings per share to be in the range of $0.20 to $0.24 and non-GAAP diluted net EPS to be in the range of $0.42 to $0.46
  • Fiscal 2020 earnings per share: Maintains GAAP diluted net earnings per share outlook of $1.01 to $1.17 and non-GAAP diluted net earnings per share outlook of $1.78 to $1.94
  • Fiscal 2020 free cash flow1: Reiterates free cash flow guidance of $1.9 to $2.1 billion

SAN JOSE, Calif. — (BUSINESS WIRE) — November 25, 2019 — Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for its fiscal 2019 and the fourth quarter, ended October 31, 2019.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20191125005783/en/

“We had a very successful fiscal year, marked by strong and consistent performance,” said Antonio Neri, president and CEO of HPE. “Through our disciplined execution, we improved profitability across the company and significantly exceeded our original non-GAAP earnings and cash flow outlook, while sharpening our focus, transforming our culture and delivering differentiated innovation to our customers as they accelerate their digital transformations.

“I am confident in our ability to drive sustainable, profitable growth as we continue to shift our portfolio to higher-value, software-defined solutions and execute our pivot to offering everything as a service by 2022,” Neri continued. “Our strategy to deliver an edge-to-cloud platform-as-a-service is unmatched in the industry.”

Fourth Quarter Fiscal Year 2019 Results

Net revenue of $7.2 billion, stable for the last three quarters and down 9% from the prior-year period and 7% from the prior-year period, excluding Tier 1 server sales and adjusted for currency.

GAAP gross margins of 33.2%, up 250 basis points from the prior-year period and Non-GAAP of 33.3%, up 260 basis points from the prior-year period.

GAAP diluted net earnings per share (“EPS”) from continuing operations was $0.36, compared to ($0.53) in the prior-year period and above the previously provided outlook of $0.24 to $0.28 per share.

Non-GAAP diluted net EPS from continuing operations was $0.49, compared to $0.43 in the prior-year period and above the previously provided outlook of $0.43 to $0.47 per share. Fourth quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $164 million and $0.13 per diluted share, respectively, primarily related to the impact tax indemnification adjustments, transformation costs, tax reform, amortization of intangible assets, acquisition, disposition and other related charges, adjustments for taxes, and an adjustment to earnings from equity interest.

Cash flow from operations of $1.4 billion, up $106 million from the prior-year period.

Free cash flow of $878 million, down $154 million from the prior-year period after a one-time arbitration award payment of $668 million to DXC.

Segment Results

  • Intelligent Edge revenue was $723 million, with 4.0% operating margin. HPE Aruba product revenue was down 7% year over year when adjusted for currency and HPE Aruba Services revenue was up 17% year over year when adjusted for currency.
  • Hybrid IT revenue was $5.7 billion, with 13.8% operating margin, up 250 bps year over year. Mix-shift continues towards HPE’s higher-margin value products with revenue from Apollo up 10% year over year when adjusted for currency, Composable Cloud up 21% year over year when adjusted for currency, and Hyperconverged Infrastructure showing continued momentum, up 14% year over year when adjusted for currency. HPE Nimble Storage was up 2% year over year when adjusted for currency. HPE Pointnext operational services orders and Nimble services orders were flat year over year when adjusted for currency.
  • Financial Services revenue was $878 million, with 8.4% operating margin, up 80 bps year over year. Net portfolio assets were up 1% year over year when adjusted for currency, and financing volume was down 7% year over year when adjusted for currency. The business delivered return on equity of 15.3%, up 310 bps from the prior-year period.

Fiscal 2019 Full-Year Results

Net revenue of $29.1 billion, down 6% from the prior-year period, and down 2% from the prior-year period, excluding Tier 1 server sales and adjusted for currency.

GAAP and Non-GAAP gross margins of 32.6%, up 270 basis points from the prior-year period.

GAAP diluted net EPS from continuing operations was $0.77, down 41% from the prior-year period due primarily to a one-time arbitration award payment of $668 million to DXC, but in-line with the 2018 Securities Analyst Meeting outlook of $0.73 to $0.83 per share.

Non-GAAP diluted net EPS from continuing operations was $1.77, up 20% from the prior-year period and above 2018 Securities Analyst Meeting outlook of $1.51 to $1.61 per share. Full-year non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $1.4 billion and $1.00 per diluted share, respectively, primarily related to the impact of acquisition, disposition and other related charges, tax reform, tax indemnification adjustments and transformation costs.

Cash flow from operations of $4.0 billion, up 35% and $1.0 billion from the prior-year period.

Free cash flow of $1.7 billion, up 58% or $636 million from the prior-year period.

Fiscal 2020 first quarter outlook:

Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.20 to $0.24 and non-GAAP diluted net EPS to be in the range of $0.42 to $0.46. Fiscal 2020 first quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.22 per diluted share, primarily related to transformation costs and the amortization of intangible assets.

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