Hewlett Packard Enterprise Company (NYSE:HPE) Q3 2019 Earnings Conference Call - Final Transcript

Aug 27, 2019 • 05:00 pm ET

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Hewlett Packard Enterprise Company (NYSE:HPE) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Antonio Neri

also advanced our innovation agenda. We made organic investments in new products and announced strategic acquisitions that drive growth by significantly enhancing our ability to help customers with their digital transformations.

We delivered revenue of $7.2 billion in Q3, up 1% sequentially and down 3% year-over-year, adjusted for the Tier 1 business. Our revenue growth was primarily impacted by deliberate actions through HPE Next including portfolio rationalization, as well as some macroeconomic factors. Importantly, we continue to deliver growth in key areas of strategic investment, including high performance compute, Hyperconverged Infrastructure, hybrid cloud and HPE Pointnext services orders of which GreenLake is a key driver of our growth.

Our gross margin of 33.9% is up 170 basis points from last quarter and 340 basis points year-over-year. This was fueled by the mix shift of higher value offerings and commodities pricing tailwinds. Non-GAAP operating profit margin of 9.9% is up 80 basis points year-over-year. And our non-GAAP EPS of $0.45 is up 7% year-over-year and above the high end of our previous outlook. Both the quantity and the quality of our free cash flow continues to improve.

Year-to-date, our free cash flow is $860 million, which is up $790 million from the same prior year period. As a result of our ongoing performance, I am very pleased to say that this marks our seventh quarter of raising our non-GAAP EPS outlook for the year. Before I provide specific highlights of our business performance, I will offer a few perspectives on the macro environment. We continue to see uneven demand due in part to ongoing trade tensions which impact market stability and customer confidence.

This is showing up in elongated sale cycles, particularly in larger deals, as we noted last quarter and reiterated during our IR Summit at our Discover Conference in June. However, our customers continue to affirm their need to accelerate their digital transformations to improve business outcomes and customers and employee experiences while reducing cost. Explosion of data will continue to fuel underlying demand for solutions to help protect, store, manage and analyze their data. And this is where we are laser focused. We have a strong portfolio solutions and services that span the Intelligent Edge and hybrid cloud.

We are uniquely positioned to help our customers with this transition. This is why at our Discover Conference, we unveiled new innovations to accelerate customers, enterprises with edge-centric, cloud enabled and data-driven solutions. And I announced that we will offer our entire HPE portfolio as a service by 2022. To share performance [Phonetic] highlights from our business segments, I will start with Intelligent Edge. In Q3, our Intelligent Edge business delivered revenue of $762 million, up 14% sequentially, which is better than our sequential growth last year but down 2% year-over-year.

As we noted last quarter, we are actively addressing the sales coverage model in the United States. I am pleased with the actions taken to date that have resulted in positive attraction [Phonetic] with our US product business, which