Hewlett Packard Enterprise Company (NYSE:HPE) Q3 2018 Earnings Conference Call - Final Transcript

Aug 28, 2018 • 05:00 pm ET


Hewlett Packard Enterprise Company (NYSE:HPE) Q3 2018 Earnings Conference Call - Final Transcript


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Good afternoon, and welcome to the Third Quarter 2018 Hewlett Packard Enterprise Earnings Conference Call. My name is Denise, and I will be your conference moderator for today's call. At this time, all participants will be in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Andrew Simanek, Head of Investor Relations. Please proceed, sir.

Andrew Simanek

Good afternoon. I'm Andy Simanek, Head of Investor Relations for Hewlett Packard Enterprise. And I would like to welcome you to our fiscal 2018 third quarter earnings conference call with Antonio Neri, HPE's President and Chief Executive Officer; and Tim Stonesifer, HPE's Executive Vice President and Chief Financial Officer.

Before handing the call over to Antonio, let me remind you that this call is being webcast. A replay of the webcast will be made available shortly after the call for approximately one year. We posted the press release and the slide presentation accompanying today's earnings release on our HPE Investor Relations webpage at investors.hpe.com.

(Forward-Looking Cautionary Statements)

With that, let me turn the call over to Antonio.

Antonio Neri

Thanks, Andy. Good afternoon, everyone. Q3 was another strong quarter for Hewlett Packard Enterprise. We delivered solid results across all key financial metrics. We grew revenues and we significantly expanded operating margins. We also delivered EPS well above our outlook in the rate [ph] of strong cash flow.

Our focus on shift in our mid-to-higher value growth areas, while optimizing our volume business is working. This is supported by excellent execution of HPE Next. Our initiative to re-architect the company from the ground up with a goal of driving better operational efficiency and effectiveness. Even as we focus on new growth areas, we continue to deliver solid performance across each of our business segments. This combined with the market momentum, will enable us to deliver fiscal year '18 revenue and earnings, well above our original outlook provided at our Securities Analyst Meeting last year. In Q3, we deliver revenue of $7.8 billion, up 4% year-over-year, driven by balanced performance across Hybrid IT, Intelligent Edge, and Financial Services, with particular strong growth in Intelligent Edge segment. We also continue to strengthened our profitability by focusing on the high value segments of the market, while improving efficiency through our HPE Next actions.

In Q3, we achieved non-GAAP operating margins of 9.6%, up 270 basis points from the prior year. As a result, we delivered strong EPS growth in Q3. Non-GAAP EPS of $0.44 double from a year ago, and is well above our outlook range of $0.35 to $0.39. From a free cash flow perspective, we delivered $751 million, and are well on track to deliver $1 billion in free cash flow in fiscal year '18.

Turning to the business segments. In Hybrid IT, we have the right strategy, and in healthy IT spending environment, we