10-QPeriod: Q1 FY2022

Hewlett Packard Enterprise Co Quarterly Report for Q1 Ended Jan 31, 2022

Filed March 3, 2022For Securities:HPEHPE-PC

Summary

Hewlett Packard Enterprise Company (HPE) reported strong top-line growth in its fiscal first quarter ended January 31, 2022, with total net revenue increasing by 1.9% year-over-year to $7.0 billion. This growth was driven by improved demand and effective pricing strategies, particularly in networking products and server offerings, with notable double-digit growth in the Intelligent Edge segment. The company also saw a significant increase in earnings from operations, up 101.8% to $448 million, and a substantial improvement in net earnings, which more than doubled to $513 million, resulting in diluted EPS of $0.39. Despite positive revenue and profit trends, the company continues to navigate supply chain constraints which impacted inventory levels and resulted in a negative cash flow from operations of $76 million for the quarter. This was further reflected in a significant decrease in free cash flow to a negative $577 million, largely due to unfavorable working capital management and increased investment in property, plant, and equipment. HPE's strategic focus on its as-a-service pivot and the HPE GreenLake platform remains a key initiative for future growth.

Financial Highlights

48 data points
Beta

Revenue

$6.96B

Net Income

$513.00M

7.4% Net Margin

EPS (Diluted)

$0.39

Total Assets

$57.87B

Cash & Equivalents

$3.86B

Free Cash Flow

-$76.00M

Financial Statements
Beta
Revenue$6.96B
R&D Expenses$504.00M
SG&A Expenses$1.20B
Operating Expenses$6.51B
Operating Income$448.00M
Net Income$513.00M
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)1.30B
Shares Outstanding (Diluted)1.32B

Key Highlights

  • 1Total net revenue increased by 1.9% to $7.0 billion, driven by strong demand and pricing.
  • 2Earnings from operations more than doubled, increasing by 101.8% to $448 million.
  • 3Net earnings rose significantly by 130.0% to $513 million, with diluted EPS at $0.39.
  • 4The Intelligent Edge segment showed robust revenue growth of 11.2%.
  • 5Despite revenue growth, cash flow from operations was negative at ($76) million, impacted by supply chain constraints and working capital management.
  • 6Free cash flow declined significantly to ($577) million due to operational cash flow and increased capital expenditures.
  • 7Annualized Revenue Run-Rate (ARR) for HPE GreenLake services and other as-a-service offerings grew by 23% year-over-year.

Frequently Asked Questions

HPE's revenue growth was primarily driven by strong demand across its segments, particularly in networking products and server offerings, supported by effective pricing strategies. The Intelligent Edge segment saw double-digit revenue growth, and the HPC & AI segment also experienced growth.

The negative cash flow from operations of ($76) million was primarily due to unfavorable net working capital management. This was largely a consequence of ongoing industry-wide supply chain constraints, which led to higher inventory levels and a backlog of orders, as well as increased investment in property, plant, and equipment.

HPE is experiencing ongoing industry-wide supply chain constraints that have moderated revenue growth, elevated costs, and delayed shipments. The company is managing these constraints, which has resulted in a higher level of backlog and inventory at the end of the period. These factors are expected to continue in the near term.

HPE is accelerating its pivot to an edge-to-cloud platform as-a-service model with its HPE GreenLake Cloud platform. The company is investing in key growth areas and strengthening its core businesses to support this strategy. The strong growth in Annualized Revenue Run-Rate (ARR) of 23% for HPE GreenLake services indicates positive traction in this area.