Hewlett Packard Enterprise Company

Good afternoon and welcome to the first quarter 2023 Hewlett Packard Enterprise Earning Conference Call. My name is Anthony and I'll 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. Should you need assistance during the call, please signal conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded for replay purposes. I'd like to turn the presentation over to your host for today's call, Jeff Kowal, Senior Director of Investor Relations. Please proceed.

Thank you, Anthony, and good afternoon, good evening, everyone. I'm Jeff Kowal, and I'm head of the Investor Relations team for Hewlett Packard Enterprise. I'd like to welcome you to our fiscal 2023 first quarter earnings conference call with Antonio Neri, HPE's President and Chief Executive Officer. and Tarek Robiaty, HPE's Executive Vice President and Chief Financial Officer. Let me remind you that this call is being webcast. A replay of the webcast will be available shortly after the call concludes. We have posted the press release and the slide presentation accompanying the release on our HPE IR webpage. Elements of the financial information referenced on the call are forward-looking and are based on our best view of the world and our businesses as we see them today. HPE assumes no obligation and does not intend to update such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on the information available at this time and could differ materially from the amounts ultimately reported in HPE's quarterly report on Form 10-Q for the fiscal quarter ended January 31, 2023. For more detailed information, please see the disclaimers on the earnings materials related to forward-looking statements that involve risks, uncertainties, and assumptions. Please refer to HPE's filings with the SEC for discussion of these risks. For financial information we have expressed on a non-GAAP basis, we have provided reconciliations to the comparable GAAP information on our website. Please refer to the tables and slide presentation accompanying today's earnings release on our website for details. Throughout this conference call, all revenue growth rates, unless otherwise noted, are presented on a year-over-year basis and are adjusted to exclude the impact of currency. Finally, after Antonio provides high-level remarks, Tarek will be referencing the slides and our earnings presentation throughout his prepared remarks. And with that, let me turn it to you, Antonio.

Well, thanks, Jeff, and good afternoon, everyone. Thank you for joining our earnings call. We begin our fiscal year 2023 from a position of great strength after delivering an outstanding 2022 quarter. I am extremely pleased with how we leveraged that strength to achieve impressive results in Q1. HP posted a record-setting first quarter performance, extending our track record of consistently fulfilling our financial commitments. We generated our highest first quarter revenue since 2016 and our best-ever non-GAAP operating profit margin. Our focus on growth opportunities and pricing discipline produced our highest-ever non-GAAP diluted net earnings per share. Powered by our market-leading hybrid cloud platform, HP GreenLake, we unlocked an impressive $1 billion in annualized revenue run rate, or AIR, for the first time. Our results show the relevance of our strategy that addresses megatrends around edge, cloud, and AI reshaping our industry, the transformation of our industry-leading portfolio, and the outstanding execution of our teams. In the first quarter, total HPU revenue climbed 18 percent to $7.8 billion, significantly above the high end of our outlook. We once again expanded non-GAAP operating margin, this time to a record 11.8 percent, up 80 basis points year-over-year. Non-GAAP diluted net earnings per share increased 19 percent year-over-year to 63 cents. Pre-cash flow was negative $1.3 billion, reflecting working capital needs in a quarter where we typically see use of cash. Our Q1 performance and the size of our order book positioned us well for fiscal year 2023. Our quarterly results, combined with confidence in our strategy and execution, have led us to raise our revenue and EPS guidance for the full fiscal year. Tarek will provide more details in his remarks. From a macro perspective, the supply chain challenges we faced during several quarters continue to ease, and we expect more of that throughout fiscal year 2023. As we mentioned at the close of fiscal year 2022, we do not anticipate all supply shortages coming to an end, but we do expect supply availability to continue to improve. Our order book at the start of Q1 was larger than it was a year ago, and as we exit the quarter, It is more than twice the size of normalized historical levels. Our intelligent edge, HPC and AI, and other service order books continue to stand at the extremely elevated levels. Against today's microeconomic backdrop, demand for our solutions continue, though it is uneven across our portfolio. We also see more elongated cell cycles, specifically in compute, than we have seen in recent quarters. We are responding decisively to demand in the market, working to win deals across all geographies and all parts of our portfolio. The traction of our portfolio is the result of our winning strategy, aligned to major market trends around the edge, cloud and AI. We continue to anticipate what comes next for our customers and invest in innovation to address the data-first modernization needs with an unmatched set of edge-to-cloud solutions. In addition to driving impressive organic innovation across our portfolio, we continue to be opportunistic in considering strategic acquisitions and partnerships that enhance what we can offer to our customers. Today, we announced our agreement to acquire cloud security provider Access Security, which will help fortify network security and strengthen our secure access service edge, or SASE, solutions. as we anticipate further customer demand for enhanced connectivity to our HPE Aruba Intelligent Edge solutions. Last week, we also announced our purchase of Ethernet, which strengthened our private networking capabilities to help enterprises and telcos accelerate 5G deployments. Through these acquisitions, we are creating one of the most complete cloud portfolios in private 5G and wireless connectivity, areas we have identified for growth in coming years. These new private 5G capabilities will be integrated into our HP GreenLake platform, enabling customers to combine their Wi-Fi and private 5G into one subscription they can scale according to demand. Earlier in the first quarter, we also purchased technology from two companies that enhance our cloud computing and AI offerings. Next quarter, we will begin selling scalable compute software technologies from Tidal Scale, introducing additional choice points for customers to meet their compute and data intensive workloads needs. We will also integrate the packet and reproducible AI software with our supercomputing and AI solutions to further expand our AI at scale capabilities. We will continue to assess organic and inorganic investments that improve our competitive position in growth markets while driving higher level of recurring revenue and profitability. As always, we follow a disciplined return-based framework to build on our track record of creating sustainable long-term value for shareholders. Since we began the transformation of our business in 2019 to become the Edge2Cloud company, we have consistently growth our as-a-service business underpinned by the HP GreenLake platform. The relevance of HP GreenLake with customers combined with our disciplined execution has propelled both AIR and our as-a-service total contract value higher. Over the last two years, we have more than doubled our as-a-service total contract value, reaching nearly $10 billion through the end of this quarter. These milestones prove the momentum in our transformation. During the first quarter, we once again increased our new HP Green logos, growing our customer base by 7%. While other service orders this quarter declined 20% year-over-year, it is important to keep in mind that the order figure is compared to prior year growth of a record 136%. One HP Green Lake customer we recently highlighted is the 2023 Ryder Cup, which announced HPE will deliver an intelligent, secure, and flexible high performance network through our platform at the September 2023 golf event in Rome. Our platform will enable the rider cap to deliver the tournament as a service in a sustainable, cost efficient way, while significantly enhancing the spectator experience and engagement. We have continued our investment in HPE GreenLake, expanding our cloud services portfolio and partner ecosystem. In December, At our HPE Discover Frankfurt customer event in Germany, we announced our latest enhancements at the new cloud platform services capabilities in the data analytics, developer, and sustainability areas. Our HPE GreenLake platform continues to attract business and drive performance across the portfolio. In every one of our key segments during the first quarter, we produce more revenues as well as positive operating profit. Let me provide you a few highlights. In our Intelligent Edge segment, revenue increased 31% year-over-year. We continue to see customers switch to our HP Aruba technology from other vendors. We provide a single AI-driven cloud management experience, which is now part of HP GreenLake platform with easy-of-use improvement cost benefits. Year-over-year revenue growth was even higher in our HPC and AI segment, up 37% as we book revenue associated with Frontier, the world's first exascale system. HPE is the clear market leader and has significant growth opportunities as enterprises scale AI models. AI will transform the IT landscape in the coming years and is a generational technology shift like web, mobile, and cloud that have the potential to disrupt existing business models. Supercomputing will be essential to enabling this disruption. For example, building a viable generative large language model for search would require a supercomputer to run the model continuously to stay current and improve accuracy. Our HPC and AI business has strong IP and decades of experience that give HP a competitive advantage in building large computing systems, which are required to increase commercial adoption of AI models globally. We recognize AI will become the dominant supercomputing world when we acquired the market leader Cray in 2019. And we continue to invest in key technology innovations that will enable these AI models at scale. Key examples are our acquisition of Determinate AI in 2021 and Pachyderm early this year, while AIDEN unique and differentiated software to help our customers train AI models and automate data pipelines. Customers recognize this leadership. For example, Aleph Alpha, a German startup building a commercial large language model, has turned to HPE. We're also working with customers across industry verticals, such as life sciences, aerospace, to enable new breakthroughs with AI. In the quarters ahead, we anticipate sharing more news on how we are scaling in this market and attracting new customers. I'm also pleased with the strong and steady performance of HPE Financial Services, which grew revenue 8% and financing volumes 21% year-over-year. Last month, we announced the retirement of our long-standing leader of this business, Irv Rothman, and the promotion of Jerry Gold to take the helm and further accelerate the business momentum. Jerry and her team recently launched a special financing program for customers who score high in ESG and we are seeing great customer and partner response already. I am very proud of how the RHP team members have executed to achieve this quarter's exceptional performance, especially given the uneven macro environment. We have kicked off fiscal year 2023 with another set of standout results, giving us the confidence to raise our revenue and non-GAAP earnings per share guidance for the full fiscal year. Our customers are responding to the hybrid cloud value proposition We uniquely provide as they seek better ways to derive value from data from Azure Cloud. We are attracting more customers and executing with discipline. As we look forward, we remain laser focused on executing our winning strategy, which is delivering unmatched innovation and significant results for our customers and shareholders. We are confident in our strategy and execution for the long term. Let me now ask Tarek to give details on our business segments and greater visibility into our updated financial outlook. So, Tarek, over to you.