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HPE(HPE) - 2023 Q1 - Earnings Call Transcript
HPEHPE(HPE)2023-03-03 00:28
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Financial Data and Key Metrics Changes - HPE reported total revenue of 7.8billionforQ12023,an187.8 billion for Q1 2023, an 18% increase year-over-year, significantly exceeding the high end of the outlook [8][24] - Non-GAAP operating margin reached a record 11.8%, up 80 basis points year-over-year [8][38] - Non-GAAP diluted net earnings per share increased 19% year-over-year to 0.63, surpassing guidance [8][27] - Free cash flow was negative 1.3billion,reflectingtypicalseasonalcashusage[8][27]BusinessLineDataandKeyMetricsChanges−IntelligentEdgesegmentrevenueincreased311.3 billion, reflecting typical seasonal cash usage [8][27] Business Line Data and Key Metrics Changes - Intelligent Edge segment revenue increased 31% year-over-year, surpassing 1 billion for the first time [16][30] - HPC and AI segment revenue grew 37% year-over-year, driven by the Frontier deal [16][31] - Storage segment revenue grew 10% year-over-year, with HPE Alletra showing triple-digit growth [33] - Compute segment revenue increased 19% year-over-year to 3.5billion,benefitingfromimprovedsupplyavailability[34]MarketDataandKeyMetricsChanges−TheorderbookatthestartofQ1waslargerthanthepreviousyearandmorethantwicethesizeofnormalizedhistoricallevels[9][25]−Demandforsolutionsremainsunevenacrosstheportfolio,withstrongperformanceinIntelligentEdgeandHPC,whileComputeshowsslowerdealvelocity[10][23]CompanyStrategyandDevelopmentDirection−HPEisfocusedonleveragingitshybridcloudplatform,HPEGreenLake,toaddressmegatrendsinedge,cloud,andAI[7][14]−Thecompanyannouncedacquisitionstoenhanceitscloudsecurityandprivatenetworkingcapabilities,aimingtocreateacomprehensivecloudportfolio[11][12]−HPEaimstomaintainmomentumthroughinvestmentsinsoftwareandserviceswhileretainingcostdiscipline[24][41]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatsupplychainchallengesareeasing,withexpectationsforcontinuedimprovementthroughoutfiscalyear2023[9][41]−ThecompanyraiseditsrevenueandEPSguidanceforthefullfiscalyear,anticipating53.5 billion, benefiting from improved supply availability [34] Market Data and Key Metrics Changes - The order book at the start of Q1 was larger than the previous year and more than twice the size of normalized historical levels [9][25] - Demand for solutions remains uneven across the portfolio, with strong performance in Intelligent Edge and HPC, while Compute shows slower deal velocity [10][23] Company Strategy and Development Direction - HPE is focused on leveraging its hybrid cloud platform, HPE GreenLake, to address megatrends in edge, cloud, and AI [7][14] - The company announced acquisitions to enhance its cloud security and private networking capabilities, aiming to create a comprehensive cloud portfolio [11][12] - HPE aims to maintain momentum through investments in software and services while retaining cost discipline [24][41] Management's Comments on Operating Environment and Future Outlook - Management noted that supply chain challenges are easing, with expectations for continued improvement throughout fiscal year 2023 [9][41] - The company raised its revenue and EPS guidance for the full fiscal year, anticipating 5% to 7% revenue growth [44] - Management expressed confidence in the long-term strategy and execution, despite macroeconomic uncertainties [20][41] Other Important Information - HPE's as-a-Service total contract value has more than doubled to nearly 10 billion over the past two years [14] - The company plans to return approximately 60% of free cash flow to shareholders through dividends and stock repurchases [45] Q&A Session Summary Question: How is HPE participating in AI investments? - Management highlighted the unique opportunity in deploying large language models requiring supercomputing capacity, leveraging their Cray systems and unique IP [48][49] Question: What segments are showing weakness? - Management indicated unevenness in the Compute business, with longer sales cycles, while Intelligent Edge and HPC remain strong [52][53] Question: Can you explain the full-year guidance increase? - The revenue guidance was raised due to improved macro conditions and easing supply chain issues, despite some pricing pressures in the Compute segment [58][59] Question: Is the strong performance in Intelligent Edge sustainable? - Management confirmed that the growth is part of a continuous momentum, supported by a robust order book and unique value propositions [61][62] Question: Why is HPE's outlook more optimistic than peers? - Management attributed optimism to a diversified portfolio and a unique integrated solution through HPE GreenLake, which enhances customer experience [67][68]