Hewlett Packard Enterprise Company (NYSE:HPE) Q1 2016 Earnings Conference Call - Preliminary Transcript

Mar 03, 2016 • 05:00 pm ET

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Hewlett Packard Enterprise Company (NYSE:HPE) Q1 2016 Earnings Conference Call - Preliminary Transcript

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Presentation
Executive
Timothy C. Stonesifer

to focus on disciplined cost controls, but is still making strategic R&D investments in growth areas that align well with the broader HPE portfolio. In Financial Services, revenue declined 3% year-over-year, but grew 3% in constant currency as we began to see more impact from the volume growth we delivered last year. Financing volume in the quarter declined 4% year-over-year, but was up 3% in constant currency.

Operating profit improved 1.7 points year-over-year to 12.9% as we were able to adjust bad debt reserves to reflect the improved loss rates and our high quality portfolio. Return on equity was up one point year-over-year to 18.1%. Now turning to our outlook. We will not formally update our fiscal year 2016 outlook for the impact of Tsinghua transaction until after it closes, but I wanted to give you some information about how to think about the potential impact. We now anticipate the deal to close near the end of May and expect the transaction will impact fiscal year 2016 EPS operationally by approximately $0.05.

This includes some stranded costs from corporate administrative functions that we will mitigate in the near term. After the transaction closes, we will update our fiscal year 2016 free cash flow and EPS outlook, including any expected benefit from share repurchases made with the sales proceeds. Also, we do have an EPS benefit from our share repurchases completed in Q1 and still feel confident in the underlying operating performance of the business, but it's too early in the year to change our full-year outlook given the softness in January and near-term market uncertainty.

With that in mind, we expect non-GAAP diluted net earnings per share to be $0.39 to $0.43 in Q2 2016, and continue to expect full-year fiscal 2016 non-GAAP diluted net earnings per share of $1.85 to $1.95. We expect GAAP diluted net earnings per share to be $0.13 to$0.17 in Q2 2016 and continue to expect full-year fiscal 2016 GAAP diluted net earnings per share of $0.75-$0.85.

Now let's open it up for questions.