Home Business Wire HPE Reports Fiscal 2021 Fourth Quarter and Full-Year Results

HPE Reports Fiscal 2021 Fourth Quarter and Full-Year Results

Exceeds FY21 commitments; Edge-to-cloud strategy driving strong momentum across all businesses entering FY22


Fiscal 2021 Full-Year Financial Highlights:

  • Orders: Strengthening demand through the year drives growth up 16% from the prior-year period
  • Revenue: $27.8 billion, up 3% from the prior-year period
  • Diluted net earnings per share (“EPS”):
    • GAAP of $2.58, up $2.83 from prior-year period
    • Non-GAAP of $1.96, up 27% from the prior-year period
  • Cash flow from operations: $5.9 billion including $2.2 billion of cash after-tax impact from Oracle’s satisfaction of the judgment in the Itanium litigation, up $3.6 billion from the prior-year period
  • Free cash flow2, 3: $1.6 billion, up $1.0 billion from the prior-year period
  • Capital returns to shareholders: $838 million in the form of dividends and share repurchases

Outlook:

  • First quarter Fiscal 2022: Estimates GAAP diluted net EPS to be in the range of $0.19 to $0.27 and non-GAAP diluted net EPS to be in the range of $0.42 to $0.50
    • Declaring Q1 dividend of $0.12 per share payable on January 7, 2022
  • Fiscal 2022: Reiterates GAAP diluted net EPS to be in the range of $1.24 to $1.38 and non-GAAP diluted net EPS to be in the range of $1.96 to $2.10
  • Fiscal 2022 free cash flow3: Reiterates free cash flow guidance to be in the range of $1.8 to $2.0 billion
  • Committed to returning at least $500 million in share buybacks in Fiscal 2022

HOUSTON–(BUSINESS WIRE)–Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for fiscal year 2021 and the fourth quarter, ended October 31, 2021.

HPE ended fiscal year 2021 with record demand for our edge-to-cloud portfolio, and we are well positioned to capitalize on the significant opportunity in front of us,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “In 2021, we accelerated our pivot to as a service, strengthened our core capabilities, and invested in bold innovation in high-growth segments. As our customers continue to demand greater connectivity, access to solutions that allow them to extract value from their data no matter where it lives, and a cloud-everywhere experience, HPE is poised to accelerate our market leadership and provide strong shareholder returns.”

HPE executed with discipline and exceeded all of our key financial targets in FY21,” said Tarek Robbiati, EVP and CFO of Hewlett Packard Enterprise. “The demand environment has been incredibly strong and accelerated in the second half of the year, which gives us important momentum headed into next year. We are operating with greater focus and more agility and are well positioned to deliver against our FY22 outlook.”

Fourth Quarter Fiscal Year 2021 Results

Net revenue of $7.4 billion, up 7% sequentially and above normal sequential seasonality; up 2% from the prior-year period or flat when adjusted for currency.

Annualized revenue run-rate (ARR)1 of $796 million, up 36% from the prior-year period and total as-a-Service orders were up 114% from the prior-year period. Based on strong customer demand and growth in orders, we reiterate our 2021 Securities Analyst Meeting ARR guidance of 35-45% Compounded Annual Growth Rate from fiscal year 2021 to fiscal year 2024.

GAAP gross margins of 32.9%, up 230 basis points from the prior-year period and Non-GAAP gross margins of 33.0%, up 230 basis points from the prior-year period.

GAAP diluted net EPS was $1.91, compared to $0.12 in the prior-year period and above the previously provided outlook of $0.14 to $0.22 per share, primarily due to the judgment in the Itanium litigation with Oracle.

Non-GAAP diluted net EPS was $0.52, compared to $0.41 in the prior-year period and at the high end of the previously provided outlook of $0.44 to $0.52 per share. Fourth quarter non-GAAP diluted net EPS excludes after-tax adjustments of $1.39 per diluted share primarily related to the judgment in the Itanium litigation with Oracle partially offset by transformation costs, early debt redemption costs, stock-based compensation expense and the amortization of intangible assets.

Cash flow from operations of $3.0 billion including $2.2 billion of cash after-tax impact from Oracle’s satisfaction of the judgment in the Itanium litigation, up $2.2 billion from the prior-year period.

Free cash flow2, 3 of $94 million, down $129 million from the prior-year period.

Capital returns to shareholders of $157 million in dividends and $213 million of share repurchases.

Segment Results

  • Intelligent Edge revenue was $815 million, up 4% from the prior-year period or 2% when adjusted for currency, with 10.7% operating profit margin, compared to 12.3% from the prior-year period. Aruba Services revenue was up high-single digits from the prior-year period when adjusted for currency and Intelligent Edge aaS ARR was up triple-digits from the prior-year period.
  • High Performance Computing & Artificial Intelligence (HPC & AI) revenue was $1.0 billion, up 1% from the prior-year period or flat when adjusted for currency, with 14.3% operating profit margin, compared to 13.0% from the prior-year period. We remain on track to achieve 8-12% CAGR outlook from FY20 to FY22.
  • Compute revenue was $3.2 billion, up 1% from the prior-year period or down 1% when adjusted for currency, with 9.4% operating profit margin, compared to 6.6% from the prior-year period. Revenue was up 4% from the prior-quarter period and 4% from the prior-quarter period when adjusted for currency, and above normal sequential seasonality.
  • Storage revenue was $1.3 billion, up 3% from the prior-year period or up 2% when adjusted for currency, with 13.8% operating profit margin, compared to 18.2% from the prior-year period. All flash Arrays grew 7% from the prior-year period led by Primera, up strong double-digits from the prior-year period. Notable strength in software-defined solutions, including Nimble, up 4% from the prior-year period with strong momentum in dHCI growing double-digits.
  • Financial Services revenue was $858 million, up 1% from the prior-year period or flat when adjusted for currency, with 14.1% operating profit margin, compared to 7.8% from the prior-year period. Net portfolio assets were flat from the prior-year period or down 1% when adjusted for currency. The business delivered return on equity of 23.8%, up 10.9 points from the prior-year period.

Fiscal Year 2021 Full-Year Results

Net revenue of $27.8 billion, up 3% from the prior-year period or up 1% when adjusted for currency.

GAAP gross margins of 33.7%, up 230 basis points from the prior-year period and non-GAAP gross margins of 33.9%, up 220 basis points from the prior-year period.

GAAP diluted net EPS was $2.58, compared to ($0.25) in the prior-year period and above the previously provided outlook of $0.80 to $0.88 per share, primarily due to the judgment in the Itanium litigation with Oracle.

Non-GAAP diluted net EPS was $1.96, compared to $1.54 in the prior-year period and at the high end of the previously provided outlook of $1.88 to $1.96 per share. Fiscal year 2021 non-GAAP diluted net EPS excludes after-tax adjustments of $0.62 per diluted share primarily related to the judgment in the Itanium litigation with Oracle offset by transformation costs, stock-based compensation expense and the amortization of intangible assets.

Cash flow from operations of $5.9 billion including $2.2 billion of cash after-tax impact from Oracle’s satisfaction of the judgment in the Itanium litigation, up $3.6 billion from the prior-year period.

Free cash flow2, 3 of $1.6 billion, up $1.0 billion from the prior-year period.

Capital returns to shareholders of $625 million in dividends and $213 million of share repurchases.

Dividend

Board of Directors have declared a regular cash dividend of $0.12 per share on the company’s common stock. This dividend, the first in Hewlett Packard Enterprise’s fiscal year 2022, is payable on January 7, 2022, to stockholders of record as of the close of business on December 10, 2021.

Fiscal 2022 first quarter outlook:

Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.19 to $0.27 and non-GAAP diluted net EPS to be in the range of $0.42 to $0.50. Fiscal 2022 first quarter non-GAAP diluted net EPS estimates exclude after-tax adjustments of approximately $0.23 per diluted share, primarily related to transformation costs, stock-based compensation expense and the amortization of intangible assets.

Fiscal 2022 outlook:

Hewlett Packard Enterprise reiterates GAAP diluted net EPS outlook of $1.24 to $1.38 and non-GAAP diluted net EPS outlook of $1.96 to $2.10. Fiscal 2022 non-GAAP diluted net EPS estimates exclude after-tax adjustments of approximately $0.72 per diluted share, primarily related to transformation costs, stock-based compensation expense and the amortization of intangible assets.

Reiterates free cash flow3 guidance range to $1.8 to $2.0 billion.

1 Annualized Revenue Run-Rate (“ARR”) is a financial metric used to assess the growth of the Consumption Services (“CS”) offerings. ARR represents the annualized value of all recurring [net] HPE GreenLake services revenue, related financial services revenue (which includes rental income for operating leases and interest income for capital leases), and Software-as-a-Service, subscription, 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 deferred revenue and is not intended to be combined with any of these items.

2Excludes $2,172 million of cash after-tax impact from Oracle’s satisfaction of the judgment in the Itanium litigation.

3Hewlett 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 (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 revenue on a constant currency basis, 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 income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, cash flow from operations and free cash flow, each excluding litigation judgment, net of taxes paid, net debt, net cash, operating company net debt and operating company net cash financial measures. Hewlett Packard Enterprise also provides forecasts of non-GAAP diluted net earnings per share and free cash flow. A reconciliation of adjustments to GAAP financial measures for this quarter and prior periods is 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 useful information to investors is included under “Use of non-GAAP financial measures” 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, net earnings, diluted net earnings per share, cash, cash equivalents and restricted cash, cash flow from operations, investments in property, plant and equipment, or total company debt 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 (“CS”) offerings. ARR represents the annualized value of all recurring net GreenLake services revenue, related financial services revenue (which includes rental income for operating leases and interest income for capital leases), and Software-as-a-Service (“SaaS”), subscription, 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 GreenLake as-a-Service, Aruba SaaS, CMS 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”, “aim”, “will”, “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 the scope and duration of the novel coronavirus pandemic (“COVID-19”) and its impact on our business, operations, liquidity and capital resources, employees, customers, partners, supply chain, financial results and the world economy; any projections of revenue, margins, expenses, investments, effective tax rates, interest rates, the impact of the U.S. Tax Cuts and Jobs Act of 2017 and related guidance or regulations, net earnings, net earnings per share, cash flows, liquidity and capital resources, inventory, goodwill, impairment charges, hedges and derivatives and related offsets, order backlog, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates, repayments of debts including our asset-backed debt securities, or other financial items; any projections of the amount, execution, timing and results of any transformation or impact of cost savings, restructuring plans, including estimates and assumptions related to the anticipated benefits, cost savings, or charges of implementing transformation and restructuring plans; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of corporate transactions or contemplated acquisitions, 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 regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; 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; the need to manage third-party suppliers, the distribution of Hewlett Packard Enterprise’s products and the delivery of Hewlett Packard Enterprise’s services effectively; 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 pandemics and public health problems, such as the outbreak of COVID-19); the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers, clients and partners, including any impact thereon resulting from events such as the COVID-19 pandemic; the hiring and retention of key employees; the execution, integration, and other risks associated with business combination and investment transactions; the impact of changes to 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; 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, 2020, 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, 2021. 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)

(In millions, except per share amounts)

 

 

 

Three months ended

 

October 31,

2021

 

July 31,
2021

 

October 31,

2020

Net revenue

$

7,354

 

 

$

6,897

 

 

$

7,208

 

Costs and expenses:

 

 

 

 

 

Cost of sales

4,935

 

 

4,515

 

 

5,002

 

Research and development

502

 

 

506

 

 

484

 

Selling, general and administrative

1,280

 

 

1,291

 

 

1,166

 

Amortization of intangible assets

78

 

 

82

 

 

80

 

Transformation costs

197

 

 

213

 

 

304

 

Disaster charges

10

 

 

5

 

 

2

 

Acquisition, disposition and other related charges

2

 

 

3

 

 

25

 

Total costs and expenses

7,004

 

 

6,615

 

 

7,063

 

Earnings from operations

350

 

 

282

 

 

145

 

Interest and other, net

(106

)

 

(50

)

 

(57

)

Tax indemnification and related adjustments

5

 

 

76

 

 

(15

)

Non-service net periodic benefit credit

17

 

 

19

 

 

35

 

Litigation judgment

2,351

 

 

 

 

 

Earnings from equity interests

71

 

 

79

 

 

17

 

Earnings before (provision) benefit for taxes

2,688

 

 

406

 

 

125

 

(Provision) benefit for taxes

(135

)

 

(14

)

 

32

 

Net earnings

$

2,553

 

 

$

392

 

 

$

157

 

Net earnings per share:

 

 

 

 

 

Basic

$

1.95

 

 

$

0.30

 

 

$

0.12

 

Diluted

$

1.91

 

 

$

0.29

 

 

$

0.12

 

Cash dividends declared per share

$

0.12

 

 

$

0.12

 

 

$

0.12

 

Weighted-average shares used to compute net earnings per share:

 

 

 

 

 

Basic

1,312

 

 

1,314

 

 

1,293

 

Diluted

1,335

 

 

1,338

 

 

1,306

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In millions, except per share amounts)

 

 

 

Twelve months ended October 31,

 

2021

 

2020

Net revenue

$

27,784

 

 

$

26,982

 

Costs and expenses:

 

 

 

Cost of sales

18,408

 

 

18,513

 

Research and development

1,979

 

 

1,874

 

Selling, general and administrative

4,929

 

 

4,624

 

Amortization of intangible assets

354

 

 

379

 

Impairment of goodwill

 

 

865

 

Transformation costs

930

 

 

950

 

Disaster charges

16

 

 

26

 

Acquisition, disposition and other related charges

36

 

 

80

 

Total costs and expenses

26,652

 

 

27,311

 

Earnings (loss) from operations

1,132

 

 

(329

)

Interest and other, net

(211

)

 

(215

)

Tax indemnification and related adjustments

65

 

 

(101

)

Non-service net periodic benefit credit

70

 

 

136

 

Litigation judgment

2,351

 

 

 

Earnings from equity interests

180

 

 

67

 

Earnings (loss) before (provision) benefit for taxes

3,587

 

 

(442

)

(Provision) benefit for taxes

(160

)

 

120

 

Net earnings (loss)

$

3,427

 

 

$

(322

)

Net earnings (loss) per share:

 

 

 

Basic

$

2.62

 

 

$

(0.25

)

Diluted

$

2.58

 

 

$

(0.25

)

Cash dividends declared per share

$

0.48

 

 

$

0.36

 

Weighted-average shares used to compute net earnings (loss) per share:

 

 

 

Basic

1,309

 

 

1,294

 

Diluted

1,330

 

 

1,294

 

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Unaudited)

(In millions, except percentages and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended October 31, 2021

 

Diluted net earnings per share

 

Three months ended July 31, 2021

 

Diluted net earnings per share

 

Three months ended October 31, 2020

 

Diluted net earnings per share

GAAP net earnings

$

2,553

 

 

$

1.91

 

 

$

392

 

 

$

0.29

 

 

$

157

 

 

$

0.12

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Amortization of initial direct costs

2

 

 

 

 

2

 

 

 

 

1

 

 

 

Amortization of intangible assets

78

 

 

0.06

 

 

82

 

 

0.06

 

 

80

 

 

0.06

 

Transformation costs

197

 

 

0.15

 

 

213

 

 

0.16

 

 

304

 

 

0.23

 

Disaster charges

10

 

 

0.01

 

 

5

 

 

 

 

2

 

 

 

Stock-based compensation expense (a)

78

 

 

0.06

 

 

86

 

 

0.06

 

 

59

 

 

0.05

 

Acquisition, disposition and other related charges

2

 

 

 

 

3

 

 

 

 

25

 

 

0.02

 

Tax indemnification and related adjustments

(5

)

 

 

 

(76

)

 

(0.05

)

 

15

 

 

0.02

 

Non-service net periodic benefit credit

(17

)

 

(0.01

)

 

(19

)

 

(0.01

)

 

(35

)

 

(0.03

)

Litigation judgment

(2,351

)

 

(1.76

)

 

 

 

 

 

 

 

 

Early debt redemption costs

100

 

 

0.07

 

 

 

 

 

 

 

 

 

Earnings from equity interests (b)

18

 

 

0.01

 

 

23

 

 

0.02

 

 

35

 

 

0.03

 

Adjustments for taxes

$

23

 

 

0.02

 

 

$

(88

)

 

(0.06

)

 

$

(106

)

 

(0.09

)

Non-GAAP net earnings

$

688

 

 

$

0.52

 

 

$

623

 

 

$

0.47

 

 

$

537

 

 

$

0.41

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP earnings from operations

$

350

 

 

 

 

$

282

 

 

 

 

$

145

 

 

 

Non-GAAP adjustments

 

 

 

 

 

 

 

 

 

 

 

Amortization of initial direct costs

2

 

 

 

 

2

 

 

 

 

1

 

 

 

Amortization of intangible assets

78

 

 

 

 

82

 

 

 

 

80

 

 

 

Transformation costs

197

 

 

 

 

213

 

 

 

 

304

 

 

 

Disaster charges

10

 

 

 

 

5

 

 

 

 

2

 

 

 

Stock-based compensation expense (a)

78

 

 

 

 

86

 

 

 

 

59

 

 

 

Acquisition, disposition and other related charges

2

 

 

 

 

3

 

 

 

 

25

 

 

 

Non-GAAP earnings from operations

$

717

 

 

 

 

$

673

 

 

 

 

$

616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating profit margin

4.8

%

 

 

 

4.1

%

 

 

 

2.0

%

 

 

Non-GAAP adjustments

4.9

%

 

 

 

5.7

%

 

 

 

6.5

%

 

 

Non-GAAP operating profit margin

9.7

%

 

 

 

9.8

%

 

 

 

8.5

%

 

 

Contacts

Editorial contact

Katherine Ducker
katherine.b.ducker@hpe.com

Investor contact

Andrew Simanek
investor.relations@hpe.com

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