Home Business Wire Hewlett Packard Enterprise Reports Q4 Results to Close Impressive Fiscal 2023; Raises...

Hewlett Packard Enterprise Reports Q4 Results to Close Impressive Fiscal 2023; Raises Dividend in Fiscal 2024

  • Driven by strong revenue performance due to momentum in addressing market trends in Edge, Hybrid Cloud, and AI
  • Delivered strong full-year cash flow from operations, record-breaking gross margin and free cash flow

Fiscal 2023 Full-Year Financial Results




  • Revenue: $29.1 billion, up 2% and 5.5% in constant currency(1) from the prior-year period
  • Gross margins:
    • GAAP of 35.1%, up 170 basis points from the prior-year period
    • Non-GAAP(1) of 35.3%, up 140 basis points from the prior-year period
  • Diluted net earnings per share (“EPS”):
    • GAAP of $1.54, up 133% from the prior-year period, which included a non-cash goodwill impairment charge of $905 million
    • Non-GAAP(1) of $2.15, up 6% from the prior-year period, and at the high-end of the guidance provided at our 2023 Securities Analyst Meeting
  • Cash flow from operations: $4.4 billion, down $165 million from the prior-year period
  • Free cash flow(1)(3): $2.2 billion, up $444 million from the prior-year period
  • Capital returns to shareholders: $1.0 billion in the form of dividends and share repurchases

Fourth Quarter Fiscal 2023 Financial Results

  • Revenue: $7.4 billion, down 7% from the prior-year period and 6% in constant currency(1)
  • Annualized revenue run-rate (“ARR”)(2): $1.3 billion, up 39% from the prior-year period and 37% in constant currency(1)
  • Gross margins:
    • GAAP of 34.8%, up 190 basis points from the prior-year period and down 100 basis points sequentially
    • Non-GAAP(1) of 34.8%, up 170 basis points from the prior-year period and down 110 basis points sequentially
  • Diluted net EPS:
    • GAAP of $0.49, up 313% from the prior-year period, which included a non-cash goodwill impairment charge of $905 million, and up 40% sequentially, exceeding the high-end of our guidance range of $0.30 to $0.34
    • Non-GAAP(1) of $0.52, down 9% from the prior-year period and up 6% sequentially, at the high-end of our guidance range of $0.48 to $0.52
  • Cash flow from operations: $2.8 billion, a decrease of $193 million from the prior-year period
  • Free cash flow(1)(3): $2.3 billion, up $326 million from the prior-year period
  • Capital returns to shareholders: $209 million in the form of dividends and share repurchases

HOUSTON–(BUSINESS WIRE)–Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for the fourth quarter and full year ended October 31, 2023.

In fiscal year 2023, HPE clearly demonstrated that our strategic investments and extraordinary innovation across the growth areas of Edge, Hybrid Cloud, and AI are resonating with customers,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “We delivered record performance against key financial metrics this year. Our steady execution resulted in higher revenue, further margin expansion, larger operating profit, and record-breaking non-GAAP diluted net earnings per share and free cash flow. As we continue to capitalize on growing market opportunities – particularly as customer interest in AI continues to explode – I am confident in our ability to deliver substantial returns to our shareholders, hence why we are raising the dividend in FY 2024.”

The progress we’re making aligned to our edge-to-cloud strategy is evident in our top and bottom-line results,” said Jeremy Cox, senior vice president and interim CFO of Hewlett Packard Enterprise. “Given our disciplined execution and focus, we closed Q4 and fiscal year 2023 strong within an uneven IT market. We see promising indicators of continued demand in the areas of the market we are prioritizing, especially in AI.”

Fourth Quarter Fiscal 2023 Segment Results

  • Intelligent Edge revenue was $1.4 billion, up 41% from the prior-year period in actual dollars and 40% in constant currency(1), with 29.5% operating profit margin, compared to 13.3% in the prior-year period.
  • High Performance Computing & Artificial Intelligence (“HPC & AI”) revenue was $1.2 billion, up 37% from the prior-year period in actual dollars and 38% in constant currency(1), with 4.7% operating profit margin, compared to 3.5% from the prior-year period.
  • Compute revenue was $2.6 billion, down 31% from the prior-year period in actual dollars and 30% in constant currency(1), with 9.8% operating profit margin, compared to 14.9% from the prior-year period.
  • Storage revenue was $1.1 billion, down 13% from the prior-year period in actual dollars and 12% in constant currency(1), with 8.1% operating profit margin, compared to 15.4% from the prior-year period.
  • Financial Services revenue was $876 million, up 2% from the prior-year period in actual dollars and flat in constant currency(1), with 8.9% operating profit margin, compared to 11.1% from the prior-year period. Net portfolio assets of $13.1 billion, up 4.3% from the prior-year period in actual dollars and up 2.2% in constant currency(1). The business delivered return on equity of 15.3%, down 2.7 points from the prior-year period.

Dividend

The HPE Board of Directors declared a regular cash dividend of $0.13 per share on the company’s common stock, payable on January 11, 2024, to stockholders of record as of the close of business on December 13, 2023.

Outlook

  • Revenue: Estimates first quarter fiscal 2024 revenue to be in the range of $6.9 billion to $7.3 billion, and reiterates fiscal 2024 revenue growth to be in the range of 2% to 4% in constant currency(1)
  • ARR(2): Reiterates our 2023 HPE Securities Analyst Meeting ARR guidance of 35% to 45% Compounded Annual Growth Rate from fiscal 2022 to fiscal 2026
  • Diluted net EPS:
    • Estimates first quarter fiscal 2024 GAAP diluted net EPS to be in the range of $0.24 to $0.32 and non-GAAP diluted net EPS to be in the range of $0.42 to $0.50. First quarter fiscal 2024 non-GAAP diluted net EPS estimates exclude after-tax adjustments of $0.18 per share, primarily related to stock-based compensation expense, amortization of intangible assets, H3C income, transformation costs and acquisition, disposition and other related charges.
    • Estimates fiscal 2024 GAAP diluted net EPS to be in the range of $1.81 to $2.01 and reiterates non-GAAP diluted net EPS to be in the range of $1.82 to $2.02. Fiscal 2024 non-GAAP diluted net EPS estimates exclude after-tax adjustments of $0.01 per share, primarily related to stock-based compensation expense, amortization of intangible assets, transformation costs, acquisition, disposition and other related charges, structural tax rate adjustments, H3C income, and adjustments related to the sale of H3C.
  • GAAP operating profit growth: Estimates fiscal 2024 GAAP operating profit growth to be in the range of 15% to 21%
  • Non-GAAP operating profit(4) growth: Estimates fiscal 2024 non-GAAP operating profit growth to be in the range of 3% to 5%
  • Fiscal 2024 free cash flow (1)(3)(5): Reiterates guidance to be in the range of $1.9 billion to $2.1 billion
  • Fiscal 2024 capital returns to shareholders: Returning approximately 65% – 75% of free cash flow to shareholders in dividends and share repurchases

1

A description of HPE’s use of non-GAAP financial information is provided below under “Use of non-GAAP financial information and key performance metrics.”

 

2

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

 

3

Free cash flow represents cash flow from operations, less net capital expenditures (investments in property, plant & equipment (“PP&E”) less proceeds from the sale of PP&E) and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.

 

4

Non-GAAP operating profit excludes costs of approximately $0.9 billion primarily related to stock-based compensation expense, amortization of intangible assets, transformation costs, and acquisition, disposition and other related charges.

 

5

Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, Hewlett Packard Enterprise is unable to provide a reconciliation to the most directly comparable GAAP financial measure without unreasonable efforts, as the Company cannot predict some elements that are included in such directly comparable GAAP financial measure. These elements could have a material impact on the Company’s reported GAAP results for the guidance period. Refer to the discussion of non-GAAP financial measures below for more information.

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.

Use of non-GAAP financial information and key performance metrics

To supplement Hewlett Packard Enterprise’s condensed consolidated financial statement information presented on a generally accepted accounting principles (“GAAP”) basis, Hewlett Packard Enterprise provides financial measures, including revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating profit (non-GAAP earnings from operations), non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share and free cash flow. Hewlett Packard Enterprise also provides forecasts of revenue growth on a constant currency basis, non-GAAP diluted net earnings per share, non-GAAP operating profit growth, and free cash flow. Reconciliations of each of these non-GAAP financial measures to their most directly comparable GAAP measures for this quarter and prior periods are included in the tables below or elsewhere in the materials accompanying this news release. 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 supplemental useful information to investors is included further below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for revenue, gross profit, gross profit margin, operating profit (earnings from operations), operating profit margin (earnings from operations as a percentage of net revenue), net earnings, diluted net earnings per share, and cash flow from operations prepared in accordance with GAAP.

In addition to the supplemental non-GAAP financial information, Hewlett Packard Enterprise also presents annualized revenue run-rate (“ARR”) and as-a-Service (“AAS”) orders as performance metrics. ARR is a financial metric used to assess the growth of the Consumption Services offerings. ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income for operating leases and interest income from finance leases), and Software-as-a-Service (“SaaS”), software consumption revenue, and other as-a-Service offerings recognized during a quarter and multiplied by four. AAS orders are an overlay across all business segments contributing to HPE’s consumption-based services (both recurring and non-recurring revenues), and includes hardware, as well as HPE GreenLake as-a-Service, Aruba SaaS, Storage SaaS, and other Software assets. ARR & AAS orders should be viewed independently of net revenue and deferred revenue and are not intended to be combined with any of these items.

Forward-looking statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties, and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise Company and its consolidated subsidiaries (“Hewlett Packard Enterprise”) may differ materially from those expressed or implied by such forward-looking statements and assumptions. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”, “guides”, “will”, “estimates”, “may”, “could”, “should”, and similar expressions are intended to identify such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any anticipated financial or operational benefits associated with the recent segment realignment; any projections or expectations of revenue, margins, expenses (including stock-based compensation expenses), investments, net earnings, net earnings per share, cash flows, liquidity and capital resources, inventory, order book, share repurchases, dividends, currency exchange rates, amortization of intangible assets, or other financial items; any projections or estimations of orders, including as-a-service orders; any projections of the amount, execution, timing, and results of any transformation or impact of cost savings or restructuring plans, including estimates and assumptions related to the anticipated benefits, cost savings, or charges of implementing such transformation and restructuring plans; any statements of the plans, strategies, and objectives of management for future operations, as well as the execution and consummation of corporate transactions or contemplated acquisitions and dispositions (including but not limited to the disposition of H3C shares and the receipt of proceeds therefrom), research and development expenditures, and any resulting benefit, cost savings, charges, or revenue or profitability improvements; any statements concerning the expected development, performance, market share, or competitive performance relating to products or services; any statements concerning technological and market trends, the pace of technological innovation, and adoption of new technologies, including artificial intelligence and other products and services offered by Hewlett Packard Enterprise; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and our financial performance, including but not limited to demand for our products and services; any statements of expectation or belief, including those relating to future guidance and the financial performance of Hewlett Packard Enterprise; and any statements of assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise’s businesses; the competitive pressures faced by Hewlett Packard Enterprise’s businesses; risks associated with executing Hewlett Packard Enterprise’s strategy; the impact of macroeconomic and geopolitical trends and events, including but not limited to financial sector volatility, supply chain constraints, the inflationary environment, the ongoing conflicts between Russia and Ukraine and between Israel and Hamas, and the relationship between China and the U.S.; the need to effectively manage third-party suppliers and distribute Hewlett Packard Enterprise’s products and services; the protection of Hewlett Packard Enterprise’s intellectual property assets, including intellectual property licensed from third parties and intellectual property shared with its former parent; risks associated with Hewlett Packard Enterprise’s international operations (including public health crises, such as pandemics or epidemics, and geopolitical events, such as, but not limited to, those mentioned above); the development of and transition to new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends (including the desirability of a unified hybrid cloud offering); the execution of Hewlett Packard Enterprise’s ongoing transformation and mix shift of its portfolio of offerings; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers, clients, and partners, including any impact thereon resulting from macroeconomic or geopolitical events, such as, but not limited to, those mentioned above; the prospect of a shutdown of the U.S. federal government; the hiring and retention of key employees; the execution, integration, consummation, and other risks associated with business combination, disposition, and investment transactions; the impact of changes to privacy, cybersecurity, environmental, global trade, and other governmental regulations; changes in our product, lease, intellectual property, or real estate portfolio; the payment or non-payment of a dividend for any period; the efficacy of using non-GAAP, rather than GAAP, financial measures in business projections and planning; the judgments required in connection with determining revenue recognition; impact of company policies and related compliance; utility of segment realignments; allowances for recovery of receivables and warranty obligations; provisions for, and resolution of, pending investigations, claims, and disputes; the impacts of the Inflation Reduction Act of 2022 and related guidance or regulations; and other risks that are described herein, including but not limited to the risks described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2022, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and in other filings made by Hewlett Packard Enterprise from time to time with the Securities and Exchange Commission.

As in prior periods, the financial information set forth in this press release, including tax-related items, reflects estimates based on information available at this time. While Hewlett Packard Enterprise believes these estimates to be reasonable, these amounts could differ materially from reported amounts in the Hewlett Packard Enterprise Annual Report on Form 10-K for the fiscal year ended October 31, 2023. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements, except as required by applicable law.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Unaudited)

 

 

 

 

 

For the three months ended

 

 

October 31, 2023

 

July 31, 2023

 

October 31, 2022

 

 

In millions, except per share amounts

Net revenue

$

7,351

 

$

7,002

 

$

7,871

 

Costs and Expenses:

 

 

 

Cost of sales

 

4,792

 

 

4,492

 

 

5,278

 

Research and development

 

578

 

 

578

 

 

515

 

Selling, general and administrative

 

1,332

 

 

1,302

 

 

1,262

 

Amortization of intangible assets

 

72

 

 

72

 

 

73

 

Impairment of goodwill(1)

 

 

 

 

 

905

 

Transformation costs

 

56

 

 

65

 

 

184

 

Disaster (recovery) charges

 

(4

)

 

1

 

 

(1

)

Acquisition, disposition and other related charges

 

18

 

 

21

 

 

(6

)

Total costs and expenses

 

6,844

 

 

6,531

 

 

8,210

 

Earnings (loss) from operations

 

507

 

 

471

 

 

(339

)

Interest and other, net

 

(27

)

 

(50

)

 

(109

)

Tax indemnification and other adjustments

 

5

 

 

45

 

 

(20

)

Non-service net periodic benefit (cost) credit

 

(1

)

 

(3

)

 

28

 

Earnings from equity interests

 

65

 

 

73

 

 

83

 

Earnings (loss) before provision for taxes

 

549

 

 

536

 

 

(357

)

(Provision) benefit for taxes

 

93

 

 

(72

)

 

53

 

Net earnings (loss)

$

642

 

$

464

 

$

(304

)

Net Earnings (Loss) Per Share:

 

 

 

Basic

$

0.50

 

$

0.36

 

$

(0.23

)

Diluted

$

0.49

 

$

0.35

 

$

(0.23

)

Cash dividends declared per share

$

0.12

 

$

0.12

 

$

0.12

 

Weighted-average Shares Used to Compute Net Earnings (Loss) Per Share:

 

 

 

Basic

 

1,295

 

 

1,299

 

 

1,296

 

Diluted

 

1,315

 

 

1,316

 

 

1,296

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Unaudited)

 

 

 

 

 

Year Ended

 

 

October 31, 2023

 

October 31, 2022

 

In millions, except per share amounts

Net revenue

$

29,135

 

$

28,496

 

Costs and Expenses:

 

 

Cost of sales

 

18,896

 

 

18,990

 

Research and development

 

2,349

 

 

2,045

 

Selling, general and administrative

 

5,160

 

 

4,941

 

Amortization of intangible assets

 

288

 

 

293

 

Impairment of goodwill(1)

 

 

 

905

 

Transformation costs

 

283

 

 

473

 

Disaster charges

 

1

 

 

48

 

Acquisition, disposition and other related charges

 

69

 

 

19

 

Total costs and expenses

 

27,046

 

 

27,714

 

Earnings from operations

 

2,089

 

 

782

 

Interest and other, net

 

(156

)

 

(188

)

Tax indemnification and other adjustments

 

55

 

 

(67

)

Non-service net periodic benefit (cost) credit

 

(3

)

 

134

 

Earnings from equity interests

 

245

 

 

215

 

Earnings before provision for taxes

 

2,230

 

 

876

 

Provision for taxes

 

(205

)

 

(8

)

Net earnings

$

2,025

 

$

868

 

Net Earnings Per Share:

 

 

Basic

$

1.56

 

$

0.67

 

Diluted

$

1.54

 

$

0.66

 

Cash dividends declared per share

$

0.48

 

$

0.48

 

Weighted-average Shares Used to Compute Net Earnings Per Share:

 

 

Basic

 

1,299

 

 

1,303

 

Diluted

 

1,316

 

 

1,322

 

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP measures

(Unaudited)

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

October 31, 2023

 

July 31, 2023

 

October 31, 2022

 

 

Dollars in millions

GAAP net revenue

$

7,351

 

 

$

7,002

 

 

$

7,871

 

GAAP cost of sales

 

4,792

 

 

 

4,492

 

 

 

5,278

 

GAAP gross profit

 

2,559

 

 

 

2,510

 

 

 

2,593

 

Non-GAAP Adjustments

 

 

 

 

 

Amortization of initial direct costs

 

 

 

 

 

 

 

1

 

Stock-based compensation expense

 

9

 

 

 

9

 

 

 

8

 

Disaster recovery

 

(10

)

 

 

(3

)

 

 

 

Non-GAAP gross profit

$

2,558

 

 

$

2,516

 

 

$

2,602

 

 

 

 

 

 

 

GAAP gross profit margin

 

34.8

%

 

 

35.8

%

 

 

32.9

%

Non-GAAP adjustments

 

%

 

 

0.1

%

 

 

0.2

%

Non-GAAP gross profit margin

 

34.8

%

 

 

35.9

%

 

 

33.1

%

 

Year Ended

 

October 31, 2023

 

October 31, 2022

 

Dollars in millions

GAAP net revenue

$

29,135

 

 

$

28,496

 

GAAP cost of sales

 

18,896

 

 

 

18,990

 

GAAP gross profit

$

10,239

 

 

$

9,506

 

Non-GAAP Adjustments

 

 

 

Amortization of initial direct costs

$

 

 

$

4

 

Stock-based compensation expense

 

47

 

 

 

46

 

Disaster (recovery) charges

 

(13

)

 

 

111

 

Non-GAAP gross profit

$

10,273

 

 

$

9,667

 

 

 

 

 

GAAP gross profit margin

 

35.1

%

 

 

33.4

%

Non-GAAP adjustments

 

0.2

%

 

 

0.5

%

Non-GAAP gross profit margin

 

35.3

%

 

 

33.9

%

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP measures

(Unaudited)

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

October 31, 2023

 

July 31, 2023

 

October 31, 2022

 

 

Dollars in millions

GAAP earnings (loss) from operations

$

507

 

$

471

 

$

(339

)

Non-GAAP Adjustments

 

 

 

Amortization of initial direct costs

 

 

 

 

 

1

 

Amortization of intangible assets

 

72

 

 

72

 

 

73

 

Impairment of goodwill(1)

 

 

 

 

 

905

 

Transformation costs

 

56

 

 

65

 

 

184

 

Disaster recovery

 

(14

)

 

(2

)

 

(1

)

Stock-based compensation expense

 

71

 

 

91

 

 

85

 

Acquisition, disposition and other related charges

 

18

 

 

21

 

 

(6

)

Non-GAAP earnings from operations

$

710

 

$

718

 

$

902

 

 

 

 

 

GAAP operating profit margin

 

6.9

%

 

6.7

%

 

(4.3

)%

Non-GAAP adjustments

 

2.8

%

 

3.6

%

 

15.8

%

Non-GAAP operating profit margin

 

9.7

%

 

10.3

%

 

11.5

%

Contacts

Media Contact:
Laura Keller

Laura.Keller@hpe.com

Investor Contact:
Jeff Kvaal

investor.relations@hpe.com

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