Hewlett Packard Enterprise reports Q4 results to close impressive fiscal 2023

Via HPE

Nov 29, 2023

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

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 

Houston, Texas –  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

Download the Q4 FY23 earnings infographic here.

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.

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.

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.

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