10-QPeriod: Q3 FY2022

Hewlett Packard Enterprise Co Quarterly Report for Q3 Ended Jul 31, 2022

Filed September 1, 2022For Securities:HPEHPE-PC

Summary

Hewlett Packard Enterprise Company (HPE) reported solid revenue growth in its third quarter and the first nine months of fiscal year 2022, with a 0.8% increase in Q3 revenue to $6.95 billion and a 1.0% increase for the nine-month period to $20.63 billion. The company saw strong demand across its portfolio, particularly in High Performance Computing & Artificial Intelligence (HPC & AI) and Intelligent Edge segments, driven by new product introductions like the Frontier supercomputer and strong demand for networking products. However, revenue growth was moderated by persistent global supply chain constraints, unfavorable currency fluctuations, and the company's managed exit from Russia and Belarus. Despite these challenges, HPE demonstrated improved operational efficiency, with earnings from operations increasing by 65.2% in Q3 and 43.4% for the nine-month period. This was primarily driven by lower transformation costs and a reduction in selling, general, and administrative expenses. The company also saw an increase in its Annual Revenue Run-rate (ARR) by 22% year-over-year, indicating growth in its as-a-service offerings, notably the HPE GreenLake platform. HPE returned capital to shareholders through dividends and share repurchases, while maintaining a strong liquidity position.

Financial Highlights

48 data points
Beta

Revenue

$6.95B

Net Income

$409.00M

5.9% Net Margin

EPS (Diluted)

$0.31

Total Assets

$57.67B

Cash & Equivalents

$3.76B

Free Cash Flow

$1.25B

Financial Statements
Beta
Revenue$6.95B
R&D Expenses$509.00M
SG&A Expenses$1.23B
Operating Expenses$6.49B
Operating Income$466.00M
Net Income$409.00M
EPS (Basic)$0.31
EPS (Diluted)$0.31
Shares Outstanding (Basic)1.30B
Shares Outstanding (Diluted)1.32B

Key Highlights

  • 1HPE reported a 0.8% year-over-year increase in Q3 net revenue to $6.95 billion, and a 1.0% increase for the first nine months to $20.63 billion, driven by strong demand in HPC & AI and Intelligent Edge.
  • 2Earnings from operations saw significant growth, up 65.2% in Q3 to $466 million and 43.4% for the nine-month period to $1.12 billion, primarily due to cost efficiencies.
  • 3Annual Revenue Run-rate (ARR) increased by 22% year-over-year, highlighting the growth of HPE's as-a-service offerings and the HPE GreenLake platform.
  • 4The company is actively managing its exit from Russia and Belarus, incurring pre-tax charges of $36 million in Q3 and $162 million for the nine-month period.
  • 5Gross profit margin remained stable at 34.5% for Q3, though it slightly decreased to 33.5% for the nine-month period, impacted by supply chain costs.
  • 6HPE continues to return capital to shareholders through dividends and share repurchases, with a remaining authorization of $1.5 billion for future repurchases.
  • 7Despite supply chain constraints and currency headwinds, the company maintains a strong liquidity position with $4.45 billion in cash, cash equivalents, and restricted cash as of July 31, 2022.

Frequently Asked Questions

Revenue growth was primarily driven by strong demand in the High Performance Computing & Artificial Intelligence (HPC & AI) and Intelligent Edge segments. Key contributors included the introduction of the Frontier supercomputer from HPE Cray and strong demand for networking products. Growth in Annual Revenue Run-rate (ARR), up 22% year-over-year, also reflects the success of HPE's as-a-service offerings, particularly the HPE GreenLake platform.

HPE faced several challenges, including persistent global supply chain constraints which moderated revenue growth and increased costs. Unfavorable currency fluctuations also impacted revenue, especially for international operations. Additionally, the company continued its managed exit from Russia and Belarus, incurring associated charges.

HPE demonstrated improved operational efficiency by reducing selling, general, and administrative expenses and transformation costs. Despite increased costs from supply chain issues, the company maintained its Q3 gross profit margin and saw a significant increase in its earnings from operations due to these cost management efforts.

HPE continues to prioritize returning capital to shareholders. During the first nine months of fiscal 2022, the company repurchased $384 million of its stock and paid dividends. As of July 31, 2022, there was a remaining authorization of $1.5 billion for future share repurchases, indicating a continued commitment to shareholder returns.