Third quarter gross margins of 33.9%, up 340 basis points from the prior-year period.
Third quarter GAAP diluted net earnings per share (“EPS”) from continuing operations was ($0.02), includes ($0.42) adjustment for a one-time arbitration award to DXC, compared to GAAP diluted net EPS from continuing operations of $0.29 in the prior-year period.
Third quarter non-GAAP diluted net EPS $0.45, up from non-GAAP diluted net EPS of $0.42 in the prior-year period. Third quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $630 million and $0.47 per diluted share, respectively, primarily related to the impact of acquisition, disposition and other related charges, transformation costs, tax indemnification adjustments, and adjustments for taxes.
Third quarter cash flow from operations of $1.2 billion, and $2.6 billion year-to-date, up $927 million from the prior-year-to-date period.
Free cash flow of $648 million, and $860 million year-to-date, up $790 million from the prior-year-to-date period.
- Intelligent Edge revenue was $762 million, with 4.9% operating margin. HPE Aruba product revenue was down 4% year over year when adjusted for currency and HPE Aruba Services revenue was up 16% year over year when adjusted for currency.
- Hybrid IT revenue was $5.5 billion, with 12.7% operating margin, up 250 bps year over year. Mix-shift continues towards HPE’s higher-margin value products with revenue from High-Performance Compute up 2% year over year when adjusted for currency, Composable Cloud up 28% year over year when adjusted for currency, and Hyperconverged Infrastructure showing continued momentum, up 4% year over year when adjusted for currency. HPE Nimble Storage was up 21% year over year when adjusted for currency. HPE Pointnext operational services orders and Nimble services orders were up 3% year over year when adjusted for currency.
- Financial Services revenue was $888 million, with 8.7% operating margin, up 90 bps year over year. Net portfolio assets were up 2% year over year when adjusted for currency, and financing volume was up 5% year over year when adjusted for currency. The business delivered return on equity of 15.8%, up 350 bps from the prior-year period.
FY2019 GAAP Outlook
For the fiscal 2019 fourth quarter, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of $0.24 to $0.28. For fiscal 2019 full-year Hewlett Packard Enterprise now estimates GAAP diluted net EPS to be in the range of $0.65 to $0.69 due to a one-time arbitration award to DXC.
Raised FY2019 Non-GAAP Outlook
For the fiscal 2019 fourth quarter, Hewlett Packard Enterprise estimates non-GAAP diluted net EPS to be in the range of $0.43 to $0.47. Fiscal 2019 fourth quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.19 per diluted share, primarily related to transformation costs and the amortization of intangible assets.
For fiscal 2019 full-year, Hewlett Packard Enterprise now estimates non-GAAP diluted net EPS to be in the range of $1.72 to $1.76. Fiscal 2019 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.07 per diluted share, primarily related to acquisition, disposition, and other related charges, transformation costs, an adjustment to earnings from equity interest, and the amortization of intangible assets.
FY2019 Free Cash Flow Outlook
For fiscal 2019 full-year, Hewlett Packard Enterprise reiterates free cash flow guidance range of $1.4 to $1.6 billion, up over 35% at the mid-point from the prior year.
Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis, as the company cannot predict some elements that are included in reported GAAP results. Refer to the discussion of non-GAAP financial measures below for more information.
About Hewlett Packard Enterprise
Hewlett Packard Enterprise is a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze and act upon data seamlessly from edge to cloud. HPE enables customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future.
Use of non-GAAP financial information
To supplement Hewlett Packard Enterprise’s condensed consolidated financial statement information presented on a generally accepted accounting principles (GAAP) basis, Hewlett Packard Enterprise provides revenue on a constant currency basis as well as non-GAAP operating expense, non-GAAP operating profit, non-GAAP operating margin, non-GAAP income tax rate, non-GAAP net earnings from continuing operations, non-GAAP net earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations, non-GAAP diluted net earnings per share from discontinued operations, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash financial measures. Hewlett Packard Enterprise also provides forecasts of non-GAAP diluted net earnings per share and free cash flow. A reconciliation of adjustments to GAAP financial measures for this quarter and prior periods is included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which Hewlett Packard Enterprise’s management uses these non-GAAP measures to evaluate its business, the substance behind Hewlett Packard Enterprise’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Hewlett Packard Enterprise’s management compensates for those limitations, and the substantive reasons why Hewlett Packard Enterprise’s management believes that these non-GAAP measures provide useful information to investors is included under “Use of non-GAAP financial measures” further below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for revenue, operating profit, operating margin, net earnings from continuing operations, net earnings from discontinued operations, diluted net earnings per share from continuing operations, diluted net earnings per share from discontinued operations, cash, cash equivalents and restricted cash, cash flow from operations, investments in property, plant and equipment, or total company debt prepared in accordance with GAAP.
This press release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, effective tax rates, the impact of the U.S. Tax Cuts and Jobs Act of 2017, net earnings, net earnings per share, cash flows, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of corporate transactions or contemplated acquisitions, transformation and restructuring plans and any resulting benefit, cost savings, revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements or assumptions underlying any of the foregoing.
Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise’s businesses; the competitive pressures faced by Hewlett Packard Enterprise’s businesses; risks associated with executing Hewlett Packard Enterprise’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Hewlett Packard Enterprise’s products and the delivery of Hewlett Packard Enterprise’s services effectively; the protection of Hewlett Packard Enterprise’s intellectual property assets, including intellectual property licensed from third parties and intellectual property shared with its former Parent; risks associated with Hewlett Packard Enterprise’s international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers, clients and partners; the hiring and retention of key employees; execution, integration and other risks associated with business combination and investment transactions; and the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of Hewlett Packard Enterprise's business) and the anticipated benefits of the transformation and restructuring plans; the effects of the U.S. Tax Cuts and Jobs Act and related guidance and regulations; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2018.