Hewlett Packard Enterprise Company (NYSE:HPE) Q4 2019 Earnings Conference Call - Final Transcript

Nov 25, 2019 • 05:00 pm ET


Hewlett Packard Enterprise Company (NYSE:HPE) Q4 2019 Earnings Conference Call - Final Transcript


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Antonio Neri

ago. In fiscal year '19, we realized the benefits of a more streamlined and focused company and we executed with discipline. We made organic investments and targeted acquisitions to shift our portfolio to higher value, higher margin offerings and we made our culture a priority, which has resulted in an 18 point increase in our employee engagement score over the last three years. This reenergized high performing team is committed to accelerating what is next for customers and partners. Through these efforts, we improved profitability across the business and significantly exceeded our original non-GAAP earnings and free cash flow guidance.

Let's take a closer look at our full fiscal year financial results. Revenue has been stable sequentially the last three quarters, with total revenue of $29 billion for fiscal year 2019, down 2% year-over-year when adjusted for Tier 1 and currency. Revenue was impacted by our deliberate action to realign our portfolio as we continue to exit the lower margin Tier 1 server business as well as certain macroeconomic factors. In key areas of strategic investment, we saw strong double-digit growth and reported record revenue for the year in high-performance compute, Hyperconverged Infrastructure and Composable Cloud. We also continued to see very strong growth in HP GreenLake orders. I am pleased to report our first annualized revenue run rate of $462 million consistent with the outlook we provided at our Security Analyst Meeting last month. This metric is to help investors track our progress and better value the recurring and higher margin benefits as we shift our model to as a service.

Our non-GAAP gross margin of 32.6% improved 270 basis points year-over-year. This is a key metric because it demonstrates our success transition into higher margin and recurring revenue. Our non-GAAP operating profit of $2.8 billion grew 4% year-over-year. We deliver fiscal '19 non-GAAP earnings per share of $1.77, an improvement of 20% year-over-year the well above our original and revised guidance. We improve the quality and quantity of our free cash flow generating $1.7 billion, which represent growth of 58% year-over-year, even after a $668 million arbitration award payment to DXC.

These strong results allow us to make significant investments in our R&D spending, which was up 10% year-over-year. And as I committed in early 2018, we completed our plan to return $7 billion to shareholders in the form of share repurchases and dividends over fiscal year '18 and fiscal year '19. Our consistent and strong performance in fiscal year '19 has laid the foundation for the next phase of HPE's journey. HPE is the edge-to-cloud platform-as-a-service company and we will execute our strategic pivot to offering our entire portfolio as a service by 2022 as we drive sustainable profitable growth.

Before providing an overview of our business segment performance, I want to note that our view on the macroeconomy has not materially changed; ongoing global trade tensions and other geopolitical factors have created uncertainty that contributes to an uneven demand environment. The elongation of sale cycles we