(GlobeNewswire) - Hewlett Packard Enterprise (NYSE: HPE) today held its annual Securities Analyst Meeting and provided strategy and financial updates from president and CEO Antonio Neri, executive vice president and CFO Tarek Robbiati, and other business leaders. The webcast and presentations can be found on the HPE Investor Relations Website: hpe.com/investor/SAM2018
HPE Strategy & Market Opportunity
Neri discussed the forces driving HPEs performance, as well as the companys vision, outlook and strategy.
HPE is committed to developing the breakthrough technology solutions that will advance the way we live and work, and drive our customers businesses forward, said Neri. With improved execution and a simplified operating model, were on track to significantly exceed our financial commitments in fiscal year 2018, and we continue to be well-positioned to create attractive value for our shareholders. Our priorities in fiscal year 2019 are to accelerate growth in the Intelligent Edge, deliver profitable growth in Hybrid IT, and grow overall operating profits and expand margins.
To transform customers technology, HPE is providing the products to create a software-defined, hybrid operating model that spans any cloud to multi-cloud, on and off-premises and at the edge. HPE is leveraging its HPE Pointnext services offering to help customers foster a culture of innovation for their employees. To drive change in customers economics and technology investment strategy, HPE helps customers unlock capital trapped in underutilized fixed assets and explore as-a-service consumption models to optimize IT investments through the HPE Financial Services business.
Delivering Operating Profit Growth and Expanding Margins
Neri shared an update on the progress of HPE Next, the companys initiative to re-architect HPE from the ground up, with the goal of driving better operational efficiency and effectiveness. For example, in FY18, the company reduced more than 26 platforms to 10 platforms in the Volume product category and simplified more than 400 sales compensation plans to just 25. The companys FY19 HPE Next priorities will include decreasing manufacturing locations, narrowing the companys geographic footprint, and optimizing processes and IT systems.
In addition, Neri discussed how the company has increased its focus on higher-growth markets and higher-value offerings, such as high-performance compute, hyperconverged and all-flash storage arrays.
HPE Next has delivered significant value in FY18 and is on track to drive earnings per share (EPS) growth well into the future, said Neri. By streamlining operations and investing in areas of greatest importance to our customers as they evolve their businesses, we are doing more than anticipating what comes next. We are actually building what comes next.
Tarek Robbiati, executive vice president and CFO, provided a financial update, including an outlook for FY19.
FY18 ExpectationsRevenue in FY18 is expected to grow approximately 7% year-over-year, when adjusted for sales to tier-1 service providers. As previously disclosed in HPEs third quarter earnings call, non-GAAP diluted net EPS is expected to be approximately $1.50 to $1.55.
HPE expects to return $4.1 billion in cash to shareholders in FY18 through $3.5 billion in share repurchases and $600 million in dividend payments.
FY19 OutlookHPE provided its outlook for FY19. The company expects net revenue growth when adjusted for currency fluctuations and sales to tier-1 service providers.
HPE expects its non-GAAP operating profit growth to be approximately 6-8% year-over-year. With Other Income & Expense of approximately $250 million of an expense, a non-GAAP tax rate of 13% and a share count of approximately 1.41 billion to 1.43 billion shares outstanding, it expects non-GAAP diluted net EPS of $1.51 to $1.61. GAAP diluted net EPS is expected to be approximately $0.73 to $0.83.
Free cash flow is expected to grow 50% year-over-year to $1.4-$1.6 billion. On a normalized basis that excludes one-time items, free cash flow is expected to be approximately $2.1-$2.3 billion.
Given HPEs strong net cash position today and the underlying strength of its free cash flow engine, HPE reiterated its commitment to returning approximately $2.9 billion in total to shareholders in FY19, consisting of $2.3 billion in share repurchases and approximately $600 million in dividends.
Long-Term Financial ProfileHPE provided its long-term financial model. The company expects to accelerate growth in the Intelligent Edge segment and drive profitable growth in the Hybrid IT segment. The company expects operating profit to grow approximately 4-5% annually driven by investments in key growth areas and optimized operating model. EPS is expected to grow at a higher rate of approximately 7-9% annually driven by share count reductions over time. Free cash flow is expected to trend towards normalized levels in FY20 and track earnings over time.
A webcast of todays event, along with management presentations and other materials, are available on the Investor Relations website at investors.hpe.com.
This press release contains only a summary of some of the information presented at todays event and should be read in conjunction with the management presentations and other materials made available on that website.
About Hewlett Packard Enterprise
Hewlett Packard Enterprise is a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze and act upon data seamlessly from edge to cloud. HPE enables customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and in to the future.
Use of non-GAAP financial information
To supplement Hewlett Packard Enterprises financial information presented on a generally accepted accounting principles (GAAP) basis, Hewlett Packard Enterprise provides forecasts of revenue adjusted for tier-1, divestitures and currency, as well as non-GAAP operating profit, non-GAAP operating margin, non-GAAP measure of earnings/loss from equity interests, non-GAAP income tax rate, non-GAAP diluted net earnings per share, free cash flow and normalized free cash flow financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, where available, are included in the slides presented at the 2018 Securities Analyst Meeting, which will be available for a period of one year thereafter at http://hpe.com/investor/sam2018. In addition, an explanation of the ways in which Hewlett Packard Enterprises management uses these non-GAAP measures to evaluate its business, the substance behind Hewlett Packard Enterprises 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 Enterprises management compensates for those limitations, and the substantive reasons why Hewlett Packard Enterprises management believes that these non-GAAP measures provide useful information to investors is included under Use and economic substance of non-GAAP financial measures used by Hewlett Packard Enterprise below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for revenue, operating margin, diluted net earnings per share, cash flow from operations in accordance with GAAP.
Use and economic substance of non-GAAP financial measures used by Hewlett Packard Enterprise
Hewlett Packard Enterprises management uses these non-GAAP financial measures for purposes of evaluating Hewlett Packard Enterprises historical and prospective financial performance, as well as Hewlett Packard Enterprises performance relative to its competitors. Hewlett Packard Enterprises management also uses these non-GAAP measures to further its own understanding of Hewlett Packard Enterprises segment operating performance. Hewlett Packard Enterprise believes that excluding the items mentioned above from these non-GAAP financial measures allows Hewlett Packard Enterprises management to better understand Hewlett Packard Enterprises consolidated financial performance in relation to the operating results of Hewlett Packard Enterprises segments, as Hewlett Packard Enterprises management does not believe that the excluded items are reflective of ongoing operating results.
Material limitations associated with use of non-GAAP financial measures
These non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of Hewlett Packard Enterprises results as reported under GAAP.
Compensation for limitations associated with use of non-GAAP financial measures
Hewlett Packard Enterprise compensates for the limitations on its use of non-GAAP financial measures by relying primarily on its GAAP results and using non-GAAP financial measures only as supplement. Hewlett Packard Enterprise also provides a reconciliation of certain non-GAAP financial measures to its most directly comparable GAAP measure in other written materials that include these non-GAAP financial measures accompanying this news release, and Hewlett Packard Enterprise encourages investors to review carefully those reconciliations.
Usefulness of non-GAAP financial measures to investors
Hewlett Packard Enterprise believes that providing forecasts of revenue adjusted for tier-1, divestitures and currency, non-GAAP operating profit, non-GAAP operating margin, non-GAAP measure of earnings/loss from equity interests, non-GAAP income tax rate, non-GAAP diluted net earnings per share, free cash flow and normalized free cash flow financial measures to investors in a
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