HPE - Earnings call transcript Q3 2018 | Hewlett Packard Enterprise Company

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Operator

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. reminder, is a replay recorded As purposes. Instructions] this being conference for [Operator like presentation turn host would to I now the call, for Mr. over today’s your to Andrew Investor Head Relations. Simanek, of sir. proceed, Please

Andrew Simanek

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

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

are always, businesses and and forward-looking are this based we world as of see As our the our view today. elements of presentation best on them

information, disclaimers risks, uncertainties see detailed involve For the assumptions. that earnings on materials to statements and more please relating forward-looking the

and discussion uncertainties these HPE its recent no to intend XX-K. a of does refer update with and please SEC, not of obligation some statements. most Form HPE’s risks, such any including forward-looking assumes of the to For filings assumptions,

differ Form We on July ended reflects materially report could discussed the at from also XXXX. reported estimates amounts HPE’s information time for note quarterly call this the that on fiscal based and XX, this the financial available on information XX-Q in quarter ultimately

website. With me presentation our earnings tables Antonio. comparable GAAP on we website today’s expressed Please a call to our basis, the provided turn has release for have reconciliations been that information over on the accompanying to let details. and refer to financial that, the on for Finally, slide information non-GAAP

Antonio Neri

everyone. expanded all afternoon, strong quarter Good another we operating grew financial QX solid significantly across metrics. key Hewlett results Packard revenues We and margins. Enterprise. was delivered Andy. We for Thanks,

above outlook cash our flow. well delivered also and strong EPS We generated

Our working. operational shifting from our to higher-value our of execution mix and business while with the is is efficiency growth Company This by re-architect Next, up focus better ground excellent areas goal volume a the to HPE driving on effectiveness. supported initiative optimizing our of

last new deliver we as Edge market across continue delivered revenue strong original of outlook fiscal year-over-year, across we billion, up ‘XX on and business well provided Intelligent balanced Intelligent focus combined analyst of by the we Edge will solid growth segments. Services to year areas, Hybrid revenue meeting enable IT, Even with above each Financial deliver performance This to segment. us momentum and our with year. at $X.X QX, our securities in particular X% earnings In driven growth performance

efficiency In also market, of improving achieved XXX X.X%, actions. continued basis up to points profitability we by high-value segments while We our focusing Next operating the the non-GAAP QX, HPE prior the year. strengthen on our through of from margins

a From flow and QX. in above $X.XX. year As we cash on fiscal $X.XX range growth is delivered a well EPS a track in perspective, free are of delivered year cash $XXX from billion doubled flow $X we outlook $X.XX free of in Non-GAAP ago XXXX. well to million our result, EPS deliver strong and to

improved Next. excluding mix up from Hybrid growth of to X it X% The of X% and operating XX.X% up results. a IT, the environment, we is first executing expanded our business the year-over-year, in year-over-year savings After showing greater And IT from a the revenue to to in or solid $X.X pricing continued and is spend strategy. healthy margin In half, HPE Turning strong we billion, segments. we are points have up with see right XXX GenXX, tier segment. which well, basis a

decline options margin, mix sales, higher year-over-year segments than we and type the systems. accelerated gaining high-performance high-growth better to X attach, demand grew In due the more core and software-defined also commodity XX% market and tier pricing. share drive infrastructure, which of GenXX, that compute, continued in like in mission-critical ISS compute as helped This intentionally improved exit average server of in offset units business. is We’re

now infrastructure than revenue which has segment, $X run hyperconverged delivered record Our HPE X,XXX grew and an includes of year-over-year and offerings, more our composable than XXX% billion. more annual reached Synergy and appliances, customers. over has rate

up public of with sector both year-over-year market area the we another strong leader private and momentum deployments. we is to compute have strength. was be XX% share. and continue And X% increasingly, high-performance Finally, across roughly Revenue market

compares. grew half energy in announced X% example, to models tough U.S. our advance we including QX, for with laboratory. compute, Department year-over-year energy Eagle, build a big same across even science. renewable power the early the that research second will data system growth technologies renewable detailed fields, with of national supercomputer processes and relationship of long-standing we Outside development At new time, new Energy in For a saw vehicle, run XX% the development complex The and storage. revenue named to in new simulate storage data of wind

organic our as We and expect in productivity growth we QX drive as latest storage improved gain customer offerings sales increased traction.

XPAR artificial an offering is customers enables operate our platform HPE customers. our our our expanded now efficiently all-flash data we intelligence July, in autonomous for which helps that InfoSight intelligent our center. of portfolio, example, storage more InfoSight HPE For across in

of advantage our guarantee efficiency. the also that and of investments Storage long-term upfront introduced storage Nimble with more customers’ protection enhances a and offering our store guarantee, generation financial first HPE which by industry’s provides customers platform incorporates next the the our significant of We

we year-over-year, services see Pointnext services-led HPE and grew to execute our In continue strategy. X% X%. orders business, QX, we Pointnext go-to-market significant HPE was our overall opportunity revenue down strengthen We as but

XX%, offerings, in up profitable business as in strong deals. our invest companies largely orders largely services value-added we larger growth was XX services This and exit intensity of capabilities. More some operational professional importantly, to intentional our more and than to new X%, high-growth revenue grew most is Next HPE our shift part more GreenLake in of of Advisory due and due as HPE our with services improvement continue down we services plan, X%. to focus

For instance Las hybrid day Discover our our products them generation Vegas, to HPE continues their to a hybrid than and on cloud the IT HPE environments been, we is GreenLake Hybrid operating simplify to for optimize Overall, solution customers stronger manage innovation. focus new help of it next services manage in GreenLake portfolio hybrid has By enables and in their IT ever our the customers at cloud our and staff their help world. announced of hybrid to need HPE to day, models. eliminating

strength Turning in Intelligent the by strong $XXX campus to XX% million, saw cloud of remains with Edge secure our segment, offerings. We driven segment, year-over-year. our revenue performance up particular

the continued driving statement roll world invest across Looking area our networking forward, right Caesars key we and Intelligent system, cloud-enabled over transition software is on of is And new public the billion there outside OT/IT plan uniquely and is great because large networking advantage driven with are The HPE’s already Intelligent is that Aruba’s edge. out I therefore, where with created completely portfolio resonating edge. the we Edge of with next won deal QX, solution four existing coming. Aruba including Arkansas In word examples generated is we Edge our innovation, University HPE committed solutions customers. now, XX% build the the at which world’s Edge Aruba And innovation, happening a in is Entertainment of a give competitive We Aruba compute is edge-centric, says, I that deep transition edge Intelligent edge long-term center. to wireless LAN to and replace the the why the have services. history with edge transition. in the said data the venues, of and rise certain this new $X storage of a of That of data-driven. brand including market the a the will and explosion for recently see at and Intelligent this Aruba, a by that that significant opportunity software-defined their data pioneering at for years. To investment. deals growth us, Gartner We a announced customers, converge solutions. is And major Edge security. significant the will data next am is with the

Edgeline We’re in also seeing industrial traction system IoT with strong our applications.

and these IT enterprise-class while customers For production to the costs is in to example, a rates. technologies This new auto functions, manufacture convergence a of integration is increasing all manufacturing operations single leading operational the solution. pioneer in allowing deploying reduce systems

Services Financial to up million, quarter, continue strength ways Finally, management revenue with their needs. flexible for look HPE business. finance strong asset alternative technology predictable $XXX as a had Financial us delivering business in Services for another and year-over-year consistent and our X% of remains to consume customers

In performance, progress Next addition the as the year. to to on our made strong efforts with half the business pay we first continue of build we off in HPE

total about order XX% by by live by by we operations, our down nearly XX%. compute simplified in improve nearly example, reducing to SKUs bringing our our significantly For portfolio have XX%, our and platform options our

more have consolidating We’re sites lower we already This half. than supply simplification the around to the up has already our as us costs. and driving and location see our in well of starting In more are setup planning show equipment, the this facilities, by focus product effort as reduced as manufacturing benefits is costs. results cost and chain, test our

in XX.X% to also these revenue. on continue a final value partners drive enable We partner-led which with in to of East execution to in Middle our transition that of focus wave we while Africa, XX and our countries serve markets the improving us models market completed Europe,

in Finally, in software-defined, we Intelligent pleased with technologies. quarter. an Edge, with emphasis intelligence continued invest Overall, to our cloud-enabled also the and in performance artificial have I’m innovation

market excited which partners commitments against continue resonating shareholder with and against execute I strong backdrop, about And as track delivering to Company we to and or financial our our customers to continue the on value. We driving position. customers. are significant full a our for meet year am is well strategy, on exceed we focus clearly

deliver before Hewlett-Packard He of together. at has operation us year. of of me two an period and around we to the history Tim at over I contributing role in half of completion has the partner, other incredible corporate Enterprise. a which billion value down friend me Tim address the Now, the transformation, been during fiscal as let four announced acquisitions. as significant a to and our XX we turn demerge and major Tim change has largest launched tremendous advisor and overseen incredible $XX to businesses, more than helped Company navigated transaction HP in years turning stepping Tim, call we end the played is the today. After news

has As Tim said future possible. in I our announcement, make helped HPE’s

future XXXX through with commitment We end leadership Robbiati transition because very Company, effective Tim’s our and well-positioned the are success our will to new the for Tarek September of shareholders. CFO, October join Company of a employees and remain to as ensure to help will us a smooth who XXth. Tim this

turn have drove closing global companies he recently knowledge. industries. CFO expedience, as Sprint’s and played benefit will and managing leadership to acquisitions against us tremendously details merger to our is will is our Corporation served mergers our You where with repositioning responsible additional outlook. within Tarek him technology with the to at role efforts customer-centric New and operations expertise, Tim about Exchange and significantly to will With media, telecommunications, And that private to for create. XXth. financial to he at sound and achieve. executive the T-Mobile. helped over the York and provide a financial and I And both in He meet financial helped Tim him for we October well functions of all I my forward business his reduce meeting and strategy finance turn as health strategy from a HPE transformation as continue analyst and to significant that, the industry securities as segment performance mindset has Sprint opportunity most look He expenses seasoned its business I’m Tim. he Company strategic services to public over it operating a his development. financial Tarek’s on at call Tarek grateful pleasure the Stock with us partner all to execute ahead now was

Tim Stonesifer

for the Antonio, Thanks, kind words.

than strong expect with were perspective, we competitive our solid up expected healthy by was through favorable. peaked; operating driven volume while was commodities the QX pricing we customer basis-point macro dynamics continue. financial continue to business to From mix to perspective, drive improved have market to revenue performance in better results and better revenue pass Our good robust and good in continue Currency line for a to with continues and expected. significantly costs. core year-over-year flow. to revenue value XXX execution healthy, more continues DRAM than but growth grow cash and IT offerings growth, market Top X% be NAND earnings remains the demand, cost currency. X% our and good spending Total $X.X margins, our we remains tailwind From an year-over-year. increases impact and less appear of become constant that portfolio quarter billion, portfolio a a have on drove rational, prices to

to have rates unfavorably. continued exchange Foreign move

and hold. to QX QX globe. Americas’ solid rates less benefit revenue and we HPE’s X% not performance as the in X will of large revenue down So, in X% tier core currency, Performance in a tailwind and constant but current growth point edge excluding grew business UK, particular in than Regionally, was currency, particularly was if X good in around compute expect have of was grew and with XX%. business. France networking. EMEA the in Italy. data strength compute units, Revenue in constant continued all across X% be up Both strong, center in to EMEA

with all APJ edge. in Japan, business solid Australia. in and Asia-Pacific in Growth strength compute with across currency, normal grew in growth double-digit was segments constant X% and also

operating basis X.X%, longer basis Turning up no this we margin sequentially. improving was costs. quarter significant sequentially, points was year-over-year from and to XXX basis XX XXX compute gross and The points of focus Pricing face XX.X% year-over-year non-GAAP margin XXX basis points we headwinds margins. was of commodity margins up favorable and points on as

also HPE from We delivered expected Next. savings

which full margins by strong cost and continue and much we favorable primarily to was tax and our to reasons the due due QX per higher services operating which term, Pointnext earnings our of We outlook diluted expand as value X% at non-GAAP be prior to operating of will onetime GAAP due HPE expected aligned of expect attached. improving healthy performance, and has well outlook portfolio, elevated benefits tax will the from over the now better optimizes take our business, per demand but ‘XX $X.XX certain rate in is to of further Non-GAAP prior margins Consequently, the QX earnings mix still our for tax operational the shift to mix at in guidance. non-GAAP our our of same delay net is the $X.XX, expected, driving lower-than-expected now share range to the to earnings This of Longer previous approximately favorable come of our a expect $X.XX margin provided target. our to XX% Next full year, range to high-end OI&E compared our we QX below and approximately above results. net provided $X.XX, savings to continue previously The share rate. non-GAAP of to be year, tax rate $X.XX above volume was of QX. advantage expenses XX% from diluted grow $X.XX year X.X% a the tax in profit. Looking than X%. just in previously we fiscal

the higher line mix by improving continued expectations. X% increasing over in points to in AUPs business year-over-year and growth Also, constant and continued revenue XX% Hybrid driven and Compute in we year-over-year and our XX servers strong than were critical richer configurations, synergy drive core pricing In XX.X%, to mission tower. planned, up with of up once up with by to sequentially volume GenXX and attach rack Operating was our XX% a points XX% units. growth and basis low quarter. compute, total excluding revenue costs, with core IT, the turning of DRAM offset and in Now elevated more DRAM margins our declines, costs. Revenue flat again XXX business growing to X. core hyperconverged business double in currency. was which in which moderated our value digits and We up was triple of saw XX%. momentum than and more Tier made AUP X% increase year-over-year lesser increases elevated up extent, digits through this core Structural passing exclude unit than higher basis

GenXX, increases, With Looking up data forward, year-over-year digit continues is to compares. growth tougher the structural big to and portfolio said, by an continue and also entry we of AUP to half increasing expect high driven moderate ramp. just mix storage revenue quarter unit was declines XX% X% over offset as which growth had strong be we that now double was faced second will which by Storage another with solid. of

start offerings, the new that into we the XPAR mentioned, portfolio. as HPE’s to And seeing that of forward QX, particularly we’re we’ve with Looking our to Antonio the hired we enhancements recent this made extended of benefits excited about platform InfoSight should increased number the been earlier sales year. in has specialists

expect included but orders up expect revenue growth rates business. Given HPE up rates deliver storage the year-over-year growth orders But, a center was smaller for quarter pick the vary the this, were year. quarter-by-quarter basis full in solid operational we X% networking X% X% on in with to from deals. up we still declined quarter. revenue to next growth few large can as Pointnext X% year-over-year a down that the Data services

shifting was our up services think in offerings XX% about attach. up intensity, total drive units, have that year-over-year. focus XX% that attach, in which orders value-added been nearly new to to you As more of mind related Pointnext are And orders roughly and the relationship keep we between new

was our non-attach HPE XX%. which over with consumption offerings also up services We’re like based GreenLake, growing other

X% result, a declines sales orders, investments XX.X% was of XX% us have pivoting high-growth were with strategy basis XXX currency Intelligent continued AirWave. driven offset As product profit recent and all and up have given position leadership year-over-year have platform down for year-over-year higher HPE strong constant quarters. Aruba operating in basis campus to the significant in Aruba R&D, year-over-year and grew growth indirect grew the grown basis the all to this with than up significant Edge, in In up revenue in and revenue. like and Intelligent and X% leverage remained Services sales Financial been from Edge, currency, growth making our regions. business. strong operational X.X%. profitable regions services ClearPass and in margins to year-over-year was solid growth residual year-over-year compute. installed opportunity. due to most increased three XX% services direct Operating up business, of in revenue we more business. strong strong, we on constant XX%, points direct to X% Aligned Operating our unit that market our strength points due but our consecutive and across across with base due sequentially switching XXX a investments XX Volume software to points and attach of by both edge in continued our growth XX%

flow negative was XX conversion day to The in Now, Free cycle turning to cash and cash in days. decreased with $XXX by expectations QX. one sequentially cash line was flow. million

inventory to show strategic year, quarters. improvement to similar further positioning of bring commodities conversion last levels cash We we QX, key in expect on prior following cycle in our as

outlook of ‘XX. higher $X cash We achieve of and an earnings track on be operating net well $X.X billion. ended QX to the in also are cash to with year billion flow We fiscal our balance company expect free quarter cash in

allocation. Moving to capital

we our the buy back we capital and We of $XXX through fiscal billion announced return plan shareholders billion in year likely part quarter. QX, shares to XX% buyback for dividend which repurchased ‘XX, in previously target $X our the totaling payments. million we $X.X exceed million includes fiscal in $XXX shares $X.X As will dividend ‘XX returned look announced year as to opportunistically. during the billion in continued This increase, quarter

turning to Now, outlook. our

year the and the our past As a performance quarters, the benefits. of with reminder, to delivered we in outlook fiscal ‘XX the we year $X.XX quarter onetime $X.XX. outlook In we’ve raised for a two started operational

QX and will through We passing and confident outperformance benefits as in a in quarter do remain operational by again execution good we pass OI&E, our QX market upside through our additional that we’ll plus against this backdrop. operational in

$X.XX, GAAP we share ‘XX fiscal our and result, a will net diluted earnings $X.XX. to per net earnings As fiscal increase expect to non-GAAP per ‘XX to year $X.XX share diluted we $X.XX year

So, for and of This overall, performance our forward to operational quarter. looking fiscal analyst the outperformance I’m out another was with financial strong our out proof quarter. the in in third XXXX. strength at with point quarter laid the consecutive with pleased and architecture strategy I’m the to closing the another year security meeting you

just of say, we been it’s open proud be and to before for like team, call up part Now, I’m I’d incredibly the questions, privilege this what of we’ve to accomplished. a

of for is I importantly, this this great for all would for and happen. to to in their giving make to HPE partner, year, insights billion cash we business most for Whitman being position we we’ve to the or all repositioned on Antonio me met I commitments. As my a launched an strategy to of thanks spin, Next CFO, all opportunity, and made all and HPE our excellent significant exceeded to my $XX transformation, amount This like a key while a to our time dedication created Meg with during the ES returning support deliver. colleagues and for multiple we we of financial software with HPE, progress accelerated of great on portfolio value. shareholders, acquisitions and say their Company to reflect we continue the this The mergers, as Board

to open let’s questions. that, with up Now it

Operator

sir. Thank you,

of questions session. We from Katy first [Operator ahead. will Stanley. Please question-and-answer to be Huberty Instructions] The now begin will Morgan go

Katy Huberty

XQ some to the tax And factors of have guidance I time versus and the through increase given beat that execution operational on the much continues? quarter would or $X.XX Then, Good of just Thank you benefits? not servers. How attribute flows you. follow-up EPS beat, one afternoon. that why assume that execution this a

Tim Stonesifer

Katy. Thanks, Sure.

as far say, favorable was going FX, some the really driven $X.XX rate, was driven is tax $X.XX OI&E or to just that between be QX. QX was $X.XX beat then as QX favorable another the a was goes, of driven by So, which operational, and primarily I’d by by -- which shift and

Now, OI&E in along as when of would the look QX, are we expect to to through operational quarters, the benefit, through going to execute say are, prior consistent we backdrop. a $X.XX was continue total $X.XX you your the we at QX from year-ago, of $X.XX is do that where passed $X.XX $X.XX I which flowing market we in to that onetime another up because to good but the point, with improvements operational in improvement of

Katy Huberty

sight you then, the to have we line units think or And growth AUP any do business, shift stabilizing returning as even increases of growth mix foreseeable revenue year-over-year, over server next entirely will and from year? about future in or into the come the

Antonio Neri

afternoon, Good Antonio. is Katy. Yes. This

and reason least, So, and on up as driven AUP that structural changes. you increase why healthy the was And is but space, the made then, reinforce can we yes, grew a the deemphasize last gain can if And we there. not the continue business. growth comment business, XX% Tim business particular maybe we have take structural you to XX%. grow in And share X%, And strategic commoditized continue continue by to that obviously the at he despite ultimately, to comment we grow changes the it’s this our in segment. this because X, quarter, the demand we tier AUPs, made fact to continue because to that our that server see, of categories the that expect and focus

Tim Stonesifer

Yes.

our through of is pass the with commodity structural So, everything increased again, that’s of excluding costs. associated definition

configs. to if to would one, to the attach So, mix server see you And portfolio. going the to fact continue to just by XX% look given you today, as forward, we’re of GenXX look continue expect at over primarily structural improvements, roughly it’s richer going overall I the that

So, there’s room grow still there. to

unit that we going expect pressure offset see I’d So, that to any forward.

Operator

Scribner go The will of Bank. next Deutsche from Please be Sherri open site. this Scribner, your line question Sherri on is ahead.

You muted. maybe

Andrew Simanek

think I got she disconnected.

Operator

to be on ahead. the will from go Sacconaghi Bernstein. go It question. Toni We’ll Please Okay. next of

Toni Sacconaghi

this DRAM Yes. structural felt lot and It volume a Next, tailwinds couple like improvements your and up excellent should pricing profit on down also, execution was segment X Hybrid of on hundred sounded quarter, sequentially of environment, HPE better Thank price you. which helped. million in have tier was IT you had you a mix

see things, So, improvement of operating did those more follow-up, I please. Hybrid have why in guess And light I sequential we not a in in margins IT?

Tim Stonesifer

the Yes. things. by overall, was mean, I it at those Again, if you driven look improvements sequential

Next. size So, we as deliver some HPE if look the mix if across you at improvement, you as we right the look at of the acquisitions, --

expectations. line recent in acquisitions. mind, in did with we do our was Keep that So, some

is little that going We on in OpEx QX margin about QX, QX. we But pleased expect as incremental is a in to a So, into we there improvements. the nice with and of our overall, that And built has talked this we system. that there been expansion bit plan that. were would see that to back take QX, in continue again,

Toni Sacconaghi

And then, I just have two clarifications. minor

So, be your year. you’re for the tax full XX% rate, expecting to

clarify be was you rate there to still server the structural at unit changes? think, growth to next then, discrete could end what Should said then total, thinking you and are or tier year about XX%. tax I in be that X you expected please. ex And your XX% of we QX,

Tim Stonesifer

the in as XX% XX% what -- second that from far range. as the still So, then, tax to was rate to goes, expect would it And a unit question? we be

Antonio Neri

unit The second growth. question was total

on units comment actually remarks his in when the Toni, a down double everything, that low made digits. you So, add one, it was that Tim total

the we the continue areas and see But are growth of on aspects that emphasizing mostly we And exit, that’s we obviously quarter-over-quarter. growing improvement that X, year-over-year. And to right, it’s So, the other we an because emphasizing. are of tier moderate portfolio. as driven the

forward continue price go stabilize, changes expect this expect we moderate quarter, drive that that as to saw I we So, to the then think, we to to structural which and continue. we stabilize,

Operator

Cihra go ahead. The Guggenheim Rob question be will next Partners. from of Please

Rob Cihra

you a It storage market, wondering, slightly times, Is driving of from past was just acquisition Nimble that that? apart that what’s expect growth the mentioned move HPE is the compare, next quarter. easier couple to specific now? as And you improve I’m

Antonio Neri

grew that total hyperconverged growing including we the quarter, this segment we actually platforms, that’s with the mean, XX%, storage demand. also, and within growth as I of a that you When X%. big is composable, base saw plus of segment Sure. look because combination And the storage XX%. other

So, continue. to data hybrid going between have volume, the that’s explosion capabilities so InfoSight. move intelligent store And can with the which data on-prem HPE see data and forth obviously about are proper Nimble an cloud needed and cloud more back platform, off-premises, you somewhere. And our And beauty the we you provides provide of forward.

plus storage. increased sub introduce healing. a we those So, a of we differentiated offer customers in productivity about now, In And our of with to way, many have in differentiated acquainted believe very data differently. storage we market. grow get And each our because as have growth, portfolio, plus combination new ultimately, very We the self platforms ability will to in more the autonomous expect value obviously, storage But that we platforms. force, confident the play true then of the continue are to portfolio accelerate segment our the segment differentiation growth we

Operator

of next James. Please Simon be Leopold ahead. question go Raymond will Your from

Simon Leopold

the $X appreciate taking the you Great. full the billion. flow question. of year Thanks reiterated for free for target generation cash I

think you the in pattern much is free fiscal -- is how help versus because abnormal quarter. term trend? my And is it and that we observe is I here really think, normal, generating Maybe I’m would the about much quarterly you’re target like to puts takes what trying what that the think think I’m around about flow fourth objective understand longer of looks generation. us to a on of cash basis

Tim Stonesifer

the a model of is Sure. the Free of to one cash and balance the complexity sheet flow tough timing. because

you go is back of when the this would you about the at years, mean, I ‘XX couple So, different. discussed last look way think we’ve as and before, it, no business I and

of whole years. And of significant cash of the would has And But, if of prior the we has I year, to consistent. just -- reasons. The a host I we pretty back year profile been second of trends half consistent, cash. consume a first you are the generate the the that go having we’re and lot a half amount that think

at $XXX generated look million. we you QX, If

So, at $XX year. you it’s the we’re date, to million now, quarter if for look

to be last the continued earnings and high some We’d range negative negative improvement similar QX year. very our conversion cycle, XX cash between we in QX, ended at expect cash in to So, XX-day then at days.

So, are those I change expect really to kind go dynamics. wouldn’t of the forward. we as that

Simon Leopold

could I commentary quick of progress around a a Great, Thanks. just we as thanks. your on color if wonder hyperconverged follow-up. infrastructure? And get bit little maybe

Antonio Neri

Sure.

We are very year-over-year, grew pleased in the we X with market. our is hyperconverged. progress which times Again, total XXX% the roughly segment

that’s storage industry of nicely which Our built server, software HPE the very, it most planet. on server the ProLiant leading into platform platform SimpliVity the efficiency the continue grow defined is by secure HPE to the with driven very,

it. built data which software-defined HP more capabilities and our and AI of in infrastructure, automated addition to OneView, a But move very, is hyperconverged, infrastructure, what very of which the the grow has management capabilities that center more to continues we lifecycle part call is superset also, of significant hyperconverged as into we let’s into terms which In provisioning, nicely. remember composable a

now fact, customers In digits, triple have grew we we it. X,XXX and on

we are the proud consume are infrastructure same we And why that already very resonated that’s same platform that’s to bringing and deploy for a the with customers. customers, work which have way our economics to cloud the that’s matters it. and it’s efficient innovation the again, looking like so, with of And really And done.

Operator

And the Please be Goldman next Rod question will Hall of go ahead. Sachs.

Rod Hall

could it’s the I wanted asked you was us couple constant down last give X% in X% and color currency more why Americas the to growth just grown if on the of any in quarters. quarter,

a comment happening to enterprise there, it pretty I able So, would strong a on you considering be environment? follow-up. seems spending then, And what’s have you like

Tim Stonesifer

Sure.

of So, the X%, point, if X a significant business the your amount in we tier at Americas. to if Americas, you you X, at is our look have tier down look

we’re edge up up we were if you you If you excluding XX% tier compute, the look we X%. Americas. XX% And the X, up well, actually at as Americas. at were that exclude in again in And if

overall, about all to growth tier But there. take good pretty really You into need across our account markets. the X we felt of our

Antonio Neri

And America I bills North they’re region. the the in the say, so most of forth, in will created all were concentration X of tier mostly the where and

Rod Hall

But, are servers around wasn’t that commentary that thought just a was that the that heard I revenues were some to XX%. I up down units with low you AUPs commentary. are I if but your total juxtapose then say and segment. saying digits. double then, AUP up you’re And I X%, sub wanted clarify sure for volumes over unit or And

So, for the can unit so me, those the and AUP was clear what for you contribution piece it’s together the total? just contribution that

Tim Stonesifer

QX. is XX% pretty compute, core core was did consistent and that we the related with So, -- the in what to

think, get of you the XX% at So, And take so increases digits, is to through structural attributes cost of pass about down if kind you how that out commodity sort core, the they again, then, I the the best you to the increases, of roughly and if were at units it of think the effect way that’s look double price look in numbers. low increase. of

Operator

Ananda Your next Baruah be ahead. Please will go question Loop from Capital. of

Ananda Baruah

Two, if could. I

‘XX in I from even of year, mix core well in would done be then jump I Next so life little and there it equal, business, you at potential fiscal sort that ‘XX just be pretty op would benefit cetera, the provided else all ‘XX, even if you’ve how from then, -- first you in suggest for that repositioning through bit GenXX that. a that behind as et more income would nice and And up ‘XX. for mix dollars seem given the ongoing holding would through the it is flow The the guess what to next analyst the business, day regards numbers

-- what that’s And that in EPS? I you anecdotal, to could would lift So, then, follow-up. would EPS see be we be maybe have a be the up the reason would from ‘XX mean positioned ‘XX I a Thanks. not reason -- nice what

Tim Stonesifer

Sure.

point, the what think look about. I at your be going of the But, meeting ‘XX, levers on color as the security give things analyst plenty here at similar you to last is to security you we’re of months. laid couple analyst mean, a listen, to year. meeting to next two month we ‘XX So, or will a versus at very in ‘XX out

from nice improvements will HPE ‘XX that basis. So, Next year-over-year a some in drive

also continue on and somewhat that And year. we will make to we’re progress we As on what be that initiative this aligned Mix track. play impact. to well should saw

were go we you continue traction to to rates We’ve ‘XX, the will grow portfolio. going higher and we’re up at pieces margin where those nice drop. would particularly headwind look probably, That as look in market good expect that ‘XX, got FX, continue into to if today that the a So, hold, in rates of can some and mix at against we be before. ‘XX. would you a

had a into one few that QX. onetime year. about had So account. talked in we’ve in this take OI&E, one we benefits just QX, We

look at would you year-over-year account I take as view. a So, that into

than rates I they before. were higher now think are

be lastly pressure account next year. to we’ll that mean in compared the as expected on will take year the XX% rate as to as tax would XX% point. XX% And that I I So, share rate, share rate then between was pressure a if be come this it well. some And as account, then, see that favorable account we year this into should because

security So, are that to color that at again, you we’re those think the about. going levers but meeting the give all I analyst

Antonio Neri

say And a I -- comment will just here.

say, of incredible that articulating this. did have But work financial done. proud of view I we excellent to the think Tim job the in I’m I have

and We’re they driving. all Next plan transformation executing well, despite are the executing we’re further HP

Ananda Baruah

billion. Thanks for a Thanks. about you that for when $X.X the can expect free just cash view I and Discovery, that should been the a time bit quarters, Could little At flow the the related to there? detail. few your would about guys on quickly, about love first cash for normalized a normalized think Tim, talking how gave dynamics you’ve flow. and talk you get we free to you we just guys number

Tim Stonesifer

Yes. Again, lay going the to analyst out meeting. that we’re at all security

Our still view $X flow billion cash free normalized range. our the is in is

but to there security we related are We transforming analyst critical talked meeting. detail this will to the business and us success not have next you charges year, positioning HPE give about, because for we’ll plenty forward, we’ve Next, at as get going again, of which

Operator

Certainly Rakers and Aaron Fargo. Please ahead. Wells that be go of will

Aaron Rakers

a to it I little take congratulations. a Thank wanted Yes. bit back Tim, go discussion ASP and And to differently. you. the little

of to the isolate the how for that And that XX% whether If you component on to should to out that’s the given out of pass side? the possibility be customers of through quarters. environment decline that to to to and the that ASP you be start pricing, just or next starts progressing curious I’m XX% over you see related the not assuming couple have start back ask your pricing component we

Tim Stonesifer

cost, costs. look and those passing DRAM through Yes. moderated, if we at I are incremental you it’s certainly mean, certainly now,

direction, My in when commodities was that move going passed that So, be hold I prior to is to through as in experience little their a down. bit forward, think thing I it’s to if to them a down, different way industries well. this go expect on easier on would

we competitors what were get too So, happens. pricing bit to that if little other what benefit of a is that. from what we’ll out thing And the the doing, there our should and see big happen? But, competitive are is, landscape

Aaron Rakers

think quick you’ve your with but provide that it. around talked the bit this the quarter? in little as coupled you past follow-up, could apologize metrics And missed But growth you if HCI, real provided all-flash a was business, a some I and if I about storage I of then, curious storage I

Tim Stonesifer

-- part of storage, Yes. point, at storage overall the We to typically out. is your the don’t keep All-flash overall break it that level. we but

Operator

Nomura It of Instinet. Please will Jeff ahead. be go Kvaal

Jeff Kvaal

to Yes. the very up question. taking for the the Rod’s in wanted Thank first you about question much follow Americas. decline I on

to is run the much go? picked cited tier Does that Xs. tier You X up, left and the of how imply off that customers of the has that

Antonio Neri

So, was our said total at the business. peak. of was XX% this we this Remember, compute

place. seasonality And that that when with way large based And builds remember on is took in hyperscale -- to that so, there’s still some center go. there these business data buildouts

and build-outs that actually of But, have those business we still are in we before, speak. some So, United most I States. are said business, transitioning as the we as

Jeff Kvaal

for And prepare then, in happen we ask, for eventualities? can eventualities tariff some landscape, have yet. a and you various about might might and what the if how be might various you I And preparing we as wondering follow-up, on to tariffs secondly, I’m thoughts haven’t talked want how

Antonio Neri

this I a Sure. topic. is complex mean, very

chain the HPE U.S. complex on supply not and most relying different. of say, firms is tech Let’s

this, we good to have able in do know latest the wait through job to will scenarios many we’re provided once early. system, there vantage the one, this been And what already still details, you over And we to need don’t the of an going is right September on But depending And to this ways details. we address has details, call looking land. kind built different iterations from not. different there we We to point, till this to end in of believe to we inputs if understand we mitigating So, Obviously we maneuvered have let at the is have we impact are or our the the honestly, decades. have it, it’s problem. forums. see are too full is But, where of happens.

Tim Stonesifer

less directly financial Just than around you envelop to China. some X% of that. context mean, cost I comes total from give our sales of

they with an any not or regards been industry So, so, XX% it’s changes chain supply do point, perspective. how that motion we the look have to number. motion. make with after the kind really minimal X% in a HPE to two, that just thing you to not huge Antonio’s impact changes on but that industry dependent supply our it’s respond passing and go be keep dependent in going can to make three XX%. of on That’s four, thing, just competition think mentioned. an other of the rounds pricing the When It a is our and mind I be thing, risk rounds half the one is there is whether this we will And would number, front. this at is financial chain in that and some To more on will in big through a able from

So, we understand impact Antonio’s an keeping think it’s we we’re point, this at but it the to minimal changes. eye on to stage, make sure

Andrew Simanek

you. Thank

for time have last please. one question, we think I

Operator

that be Paul of Coster will And JP Morgan.

Paul Coster

mode investment in concerned. Intelligent Edge You’re as is as the far

give you dollars? must margins earning follow-up. terms under of it’s in that And some or Could whether much you us be under earning of So, segment. in sense then, you’re how I by, have a

Tim Stonesifer

Sure.

going to the in key note high-growth, we’re And look opportunity you a you were is our That if sales XXX at edge edge a will QX, is our to to about that in R&D. down that us. going So, invest continue primarily for investing Again, are we by basis margins That’s and fact pillar points. driven high-margin there. strategy. the to in that be

Now, it sequentially, you are what up. will note is, I at look they if

So, they’re XXX up basis points.

points So down basis year-over-year. I they’re think XXX

given points important, XXX up the are sequentially, just leverage they leverage that And revenue is profile in that that operating and shows margin you Sorry. that which basis business.

Paul Coster

of give technology points-to-multipoint? is sense convergence particularly some your you’re I’m of what point-to-point, sort of you can And probable us it investing the with interested in in?

Antonio Neri

first, it’s three security also in But areas. Sure. models are there Aruba with Obviously, cloud what we are invest connectivity. And which platform. we big and consumption have first And Those and is a the very based that cloud -- of strong we've Niara, we all and made and let’s doing analytics. mobile inorganic direction. platform provides even in whether geared of with in they our XX Cape platform, think or security type now last, or say embedded Network, which acquisition it’s AI Networks, investments months are about RASA the organic you the if into provides a

and industrial then in which of yet we on adjacency to see generating of for. core provide analyzed. has enterprise computing we data ultimately, customers the the new then, the in which there digitized expand convergence around side, call to that space And new data that are opportunity looking use customers in So, analog of is campus IoT really technologies. customers what the bring difficulty] technologies where provide we we platform industrial operational deploy term cases this that and applications, closer looking be space, class the and see Because obviously, now and what edge the much the [technical for And is digital continue call is to the to data are IT to framework.

be very it’s case-driven. So, that obviously we and very to continue use and going see to industry-driven grow,

Andrew Simanek

Great. Paul. Thank you,

up I today. for joining. Thanks, think the that for with wrap can everyone, we call

Antonio Neri

Thank you.

Operator

Thank Thank presentation. gentlemen, the conference and today’s for concluded. Ladies attending has you you.

now may your You disconnect lines.

Hewlett Packard Enterprise (HPE) 28 Aug 182018 Q3 Earnings call transcript