Hewlett Packard Enterprise Company

Good afternoon and welcome to the fourth quarter fiscal 2024 Hewlett Packard Enterprise Earnings Conference call. At this time, all participants will be in a 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 a conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Paul Glazer, Head of Investor Relations. Please go ahead, sir.

Good afternoon. I am Paul Glazer, Head of Investor Relations for Hewlett Packard Enterprise. I would like to welcome you to our fiscal 2024 Fourth Quarter Earnings Conference Call with Antonio Neri, HPE's President and Chief Executive Officer, and Marie Myers, HPE's Chief Financial Officer. Before handing the call to Antonio, 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 Investor Relations webpage. Elements of the financial information referenced on this 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 any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available at this time and could differ materially from the amounts ultimately reported in HPE's quarterly report on Form 10-K for the fiscal year ended October 31, 2024. For more detailed information, please see the disclaimers on the earnings materials relating to forward-looking statements that involve risks, uncertainties, and assumptions. Please refer to HPE's filings with the SEC for a 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 noted otherwise, are presented on a year-over-year basis and adjusted to exclude the impact of currency. Finally, Antonio and Marie will reference our earnings presentation in their prepared comments. With that, let me turn it over to Antonio.

Thank you, Paul, and thank you all for joining us today. Before I share my comments on our quarterly and yearly performance, I would like to provide an update on the Juniper Network's acquisition. We have received approvals from key geographies around the world, including the European Union, UK, India, South Korea, and Australia, which have given unconditional clearance and see the competitive benefits of the transaction. In the United States, we are engaged with the Department of Justice, and we expect the review will continue into the new calendar year. We anticipate the deal will close in the early part of 2025 within the previously stated timeframe. Both HPE and Juniper continue to believe the transaction will enable us to provide a complete portfolio of modern, secure networking solutions that offer essential foundations for both hybrid cloud and AI. The combined company's enhanced ability to compete and innovate will fundamentally improve the networking industry. This transaction will also strengthen U.S. national security interests by advancing HPE's position as a strong U.S. innovator among global technology companies. Turning to results, we had an exceptional fourth quarter to cap off a strong year. In actual dollar terms, we generate a record quarterly revenue of $8.5 billion, up 15% year over year, exceeding $8 billion for the first time in our history. Our results reflect the continued adoption of HP GreenLake and the acceleration of our revenue growth in AI. Q4 and fiscal year 24 results exceeded our expectations for revenue, dilute and net earnings per share and free cash flow. We draw sequential revenue growth across each of our segments, a continuation of the positive momentum we saw build throughout the year across our business. Q4 constituted our third consecutive quarter of improved year-over-year growth rates and revenue, non-GAAP operating profit, and non-GAAP diluted net earnings per share. Contributed significantly to our performance was record server revenue of $4.7 billion, up 31% year-over-year, a third consecutive quarter of double-digit growth. Sequentially, AI systems revenue rose up 16% to $1.5 billion exiting fiscal year 24 with $6.7 billion in cumulative orders since Q1 of fiscal year 23. After the close of Q4, I am pleased to share that our AI systems demand remains strong and we have received new orders bringing AI systems backlog to over $3.5 billion. Our traditional server business also continued to reflect improving market dynamics as we drove our third consecutive quarter of year-over-year double-digit orders growth. Hybrid cloud revenue grew 18% year-over-year and 21% sequentially, resulting in revenue of $1.6 billion with increasing revenue for HPE Private Cloud and continued growth in HPE Storage. We are seeing customers like Lupin Limited, a large India pharmaceutical company, repatriate workloads from the public cloud to enhance their data security and meet regulatory and compliance requirements. Customer adoption of our HP Alletra Storage MP solutions continues to rise at an accelerated pace. Since launch, we have sold approximately 3,000 systems. Miami-Dade County, the seventh most populous county in the United States, implemented HP Alletra Storage MP to consolidate an existing storage footprint to lower TCO and improve performance and sustainability. Our Intelligent Edge business achieved its third consecutive quarter of orders growth, reflecting our expectations for an improving demand environment. We are particularly pleased with the double-digit year-over-year orders growth that we saw in data center networking, an important growth market for our HP Aruba networking business. HPE Financial Services' financing volumes of $2.1 billion rose to an all-time high this quarter, driven by strong demand for HPE GreenLake and AI financing. It is clear customers need more investment capacity, whether to deploy AI or to accelerate the adoption of hybrid cloud. Our record-breaking revenue performance in Q4 resulted in record profitability with non-GAAP operating profit of $938 million. That translated to non-GAAP operating margin of more than 11%, a 110 basis points increase sequentially. As a result of our exceptional Q4 performance, Fiscal Year 24 revenue growth topped 3% year-over-year, exceeding $30 billion as we added more than 9,000 new customers across the portfolio. Combined with our disciplined operating expense management, which accelerated in the back half of the year, we generated a record-breaking $2.3 billion in free cash flow, exceeding our guidance of at least $1.9 billion for the year. We closed the year on a strong note, exceeding our full year commitments for revenue diluted net energy per share and free cash flow. We are very pleased with our results and excited about the opportunities ahead for HPE. It is clear our strategy is working. We have a tremendous set of assets, including extensive solutions from edge to cloud, enabling us to meet our customer needs across AI, networking, and hybrid cloud. Providing a full stack of product and services clearly differentiates us versus our competition and accelerate value for our shareholders. In Q4, we continue our investment in innovation, which further enhance our product portfolio and position us to capture additional market share. AI is clearly transformative for our customers, and HP is positioned to lead in the next wave of innovation. At our recent AI Day, we announced the industry-first 100% fanless direct liquid cooling architecture, a critical capability for customers to leverage the next generation of direct liquid cooled GPUs and CPUs, while facilitating peak performance as they manage increased energy densities. This industry-first architecture is unique to HPE and results from decades of experience in liquid cooling technologies. Two weeks ago at SC24, we announced our newest 400 gigabits HP Slingshot Direct Liquid Cool Networking Fabric of products, engineered to support both generative AI cluster workloads and exascale supercomputing. These innovations are enhancing the performance of our AI systems and supercomputing product lines, differentiating us from the competition. At AC24, we also announced that HPE has delivered the fastest verified supercomputer in the world to the US Department of Energy's Lawrence Livermore National Laboratory. El Capitan is not only the world's fastest supercomputer at more than 1.7 exafloat, it is also among the most energy efficient in the world. HP now has deployed seven of the top 10 fastest supercomputers in the world, including numbers one, two, and three on the list. We also continue to innovate to help accelerate enterprise adoption of AI. Since launching HPE Private Cloud AI, we have expanded our collaboration with Deloitte to help businesses of all sizes to deploy AI solutions tailored for their industry-specific use cases, such as C-suite AI and many others. In addition, we introduced the Unleash AI Partner Program to grow our ecosystem and expand customers' ability to address their AI use cases with HP Private Cloud AI. While we are still in early days, interest is strong with hundreds of customers in the pipeline with many compelling proof of concept underway. We closed our first deals during Q4, including RWE, a leading company in the field of renewable energy, which selected HP Private Cloud AI to unlock insights from weather data. Customers are also asking us to help them simplify their VMware Private Clouds and optimize their virtualization costs. At HP Discover Barcelona two weeks ago, we launched HPE VM Essentials, which enables customers to manage their virtualization states across HPE VMware and many others. We have built on our recent acquisitions of Morpheus Data and OpsRamp, giving customers operational flexibility and allowing them to no longer be locked into a single virtualization vendor. With HPE VM Essentials, they can achieve up to five times lower TCO. As a part of our HPE VM Essentials, we also provide an enterprise-grade open-source KVM virtualization solution. This allows customers to dramatically reduce costs while increasing their flexibility to innovate across a full suite of hybrid cloud operations capabilities in an on-premises multi-stack and a multi-cloud public environment. In storage, we continue to invest in our multi-protocol HP Alletra Storage MP platform as we transition our storage portfolio to an AI-driven, cloud-native, and desegregated architecture. Our new HP Alletra Storage MPX10000 is a revolutionary new high-performance object storage designed for AI exabyte scale and optimized for high-speed unstructured data lakes with rapid restore for backup and recovery. Our AWS S3 compatible object storage interface and deduplication supports up to 20 times data reduction and streamlines integration with any available backup solution in the market. With HP Alletra Storage MPX 10,000, customers can achieve up to 600 faster object storage performance compared to competitor solutions in the market. Finally, our innovation intelligent edge are helping us to advance HP Aruba Networking Central with AIOps co-pilot capabilities built into our HP GreenLake Cloud. During the quarter, we announced two new solutions to enhance the networking operators' experience and security for our customers. The first is the integration with the HPE OpsRamp to monitor third-party devices. We also introduced a behavioral analytical-based network detection and response capability where we are leveraging network intelligibility to train AI models to monitor customer IoT devices. We have an important place in the market as a leading technology innovator. I am proud that HP team members around the globe bring our innovations to customers every day to help them modernize their IT infrastructure and transform for the better. I am very pleased with our exceptional four quarter results and the resulting outperformance in several of our full year commitments to our shareholders. Our strategy is well aligned to the megatrends reshaping networking, hybrid cloud, and AI, and our unique product portfolio is well positioned to capture new customers and accelerate value for our shareholders. We expect the pending acquisition of Juniper Networks to further enhance our portfolio, providing customers with complete edge-to-cloud solutions. I am extremely excited about the significant opportunity we have in the coming fiscal year to drive increased value for our shareholders. I am optimistic about what we can achieve and look forward to the year ahead. Now let me turn the call over to Marie, who will provide more details about our Q4 results and guide for the first quarter. Marie.