Apple 3rd Quarter Financial Reports
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Apple ended the quarter with $231 billion in cash PLUS additional assets in short term assets. $218 billion of this is off shore.
Actual iPhone sales during the quarter when inventory draw down is taken into account, was close to 45 million units, not the 40.4 million!
• Start of conference call
• Quarterly revenue: $42.4 billion
• Net income of $7.8 billion
• Gross margin was 38 percent
• Cook feels good about channel inventory levels
• iPhone SE demand outstripped supply all quarter – just recently brought into balance
• iPhone SE is popular in both developed and emerging markets
• iPhone SE is bringing in new users are high levels
• Switchers account for greatest Apple has ever seen for any 9 month period
• Apple’s Services business alone will be the size of a Fortune 100 company next year
• Apple’s Services includes revenue from Internet Services, AppleCare, Apple Pay, licensing and other services.
• Best iPad compare in 10 quarters thanks to rollout of 9.7-inch iPad Pro
• Apple Watch continues to be best-selling smartwatch in the world
• Cook: We’re just getting started with Apple Watch and look forward to more exciting announcements in that space
• Cook: Opened 41st retail store in China last quarter. Cook very excited about Greater China prospects
• Cook: In first three quarters, revenue from Greater China topped $40 billion, up 55% vs. same time frame two years ago, iPhone units up 47%
• Cook: Our biggest WWDC ever was held during quarter in June. We now have four platforms (macOS, iOS 10, tvOS, watchOS)
• AAPL After hours: $103.40, up $6.73 (+6.96%) as of 5:12PM EDT
• Cook recaps WWDC announcements
• Cook thrilled by customers’ and developers’ response to software and services we previewed at WWDC in June
• Differential Privacy will enhance Apple’s ability to deliver groundbreaking services without compromising security and privacy
• Apple Pay customers up more than 450% YOY in June
• More than 11 million Apple Pay-ready locations, including 3 million in the USA
• Apple Pay now live in 9 markets; adoption outside USA has been explosive
• Apple’s unparalleled Continuity across device will become even more powerful (and inimitable – MDN Ed.)
• Cook: I am very bullish on the future
• Apple CFO Luca Maestri: Operating Segments:
– Americas: $17.953 billion (-11% YOY)
– Europe: $9.643 billion (-7% YOY)
– Greater China: $8.848 billion (-33% YOY)
– Japan: $3.529 billion (+23% YOY)
– Rest of Asia Pacific: $2.375 billion (-20% YOY)<
• Product Summary:
– iPhone: 40.399 million units, $24.048 billion revenue (-15% units, -23% revenue YOY)
– iPad: 9.950 million units, $4.876 billion revenue (-9% units, +7% revenue YOY)
– Mac: 4.252 million units, $5.239 billion revenue (-11% units, -13% revenue YOY)
– Services: $5.976 billion revenue (+19% YOY)
– Other Products: $2.219 billion revenue (-16% YOY)<
• Overall iPhone ASP was $595; Apple expects higher this quarter
• 75% of corporate customer in USA intend to buy Apple iPhones (highest ever)
• App Store growth rate 37% in Q316
• AAPL After hours: $103.14, up $6.47 (+6.69%) as of 5:20PM EDT
• NPD: iPad gained share in overall US tablet market and has 84% share of tablets over $200
• Services business grew 19 percent year-over-year and App Store revenue was the highest ever, as our installed base continued to grow and transacting customers hit an all-time record
• Apple has now returned over $13 billion to investors through share repurchases and dividends, and has now completed almost $177 billion of the company’s $250 billion capital return program
• Apple cash on-hand: $231.5 billion (+$1.4 billion this quarter)
• Apple invested $1 billion in Didi Chuxing during the quarter
• Apple’s board of directors has declared a cash dividend of $.57 per share of Apple’s common stock
• Apple is providing the following guidance for its fiscal 2016 fourth quarter:
– revenue between $45.5 billion and $47.5 billion
– gross margin between 37.5 percent and 38 percent
– operating expenses between $6.05 billion and $6.15 billion
– other income/(expense) of $350 million
– tax rate of 25.5 percent
• Apple’s board of directors has declared a cash dividend of $.57 per share of Apple’s common stock
• The dividend is payable on August 11, 2016 to shareholders of record as of the close of business on August 8, 2016
• Cook on investments: We invest in our business (R&D and production). We’re constantly looking for great talent and great IP. We have been buying companies, on average, every 3-4 weeks and we continue to do that
• Cook: We see Didi Chuxing as a great financial investment and see things companies could work together on in the future and as a learning opportunity
• Maestri: 37.5%-38% gross margin guidance (product transition costs, see overall commodity prices to decline)
• Cook: We will not discuss future products or product transitions
• We saw double-digit growth in some important countries last quarter
• Highest ever recorded number of iPhone switchers
• We expect Services to grow “very briskly”
• We think to have a great platform you have to have a really healthy ecosystem
• We want to do everything we can to help developers create and offer great apps
• AAPL After hours: $103.79, up $7.12 (+7.37%) as of 5:34 PM EDT
• Maestri: Gross margin impacted by specific product mixes, currency headwinds, hedging programs rolling off, etc. US dollar about 15% stronger than it was this time in 2014
• Cook on iPhone upgrade rate: Won’t talk about unannounced products.
• We have seen iPhone upgrade rates fro the iPhone 6S is very similar to the 5S
• iPhone 6 was significantly higher that 6S
• Cook: I’m very optimistic about the future of iPhone upgrade rate
• iPhone install base has gotten incredibly large
• iPhone is becoming even more essential to people’s lives
• High rates of switchers – all of these vectors are positive for iPhone upgrade rates
• iPhone SE is opening the door to people Appel hasn’t reached before
• Maestri: $3.6 billion channel inventory reduction during the quarter counts across all product lines, not just iPhone
• Maestri: The macroeconomic environment is slowing down in numerous places around the world, so we’ve accounted for that in our guidance
• Cook: iPhone demand is made up of upgraders, switchers, and new-to-smartphone (penetration is at 42% currently worldwide; there’s much opportunity there)
• Switchers: We really like what we’re seeing. As the smartphone itself becomes more and more essential in users’ daily lives, we think people will put more focus on what they’re buying and the user experience Apple offers will lead people to iPhone
• Upgraders: More and more people have joined upgrade programs. Apple’s plans and carriers’ plans will change out the iPhone every year or every 18 months – as of today, there are more people on these types of programs than ever before – these programs really just started in the last year
• Cook: I’m very optimistic on iPhone
• Cook: In China for Books and Movies, our online stores are currently off (those two stores’ revenue during the several months they were operational were less than $1 million)
• The stores are to increase the value of the iPhone. Apple looks to run those stores back on in China ASAP
• Cook: Apple Pay revenue are in the Service line, the growth is astronomical, but the base is very small
• Cook: Augmented Reality (AR) and Pokémon GO phenomenon shows the power of App Store distribution model
• Cook: Apple has been and continues to invest in AR
• Cook calls them “Pokémans” when describing what game players are chasing.
• Cook: We do continue to invest significantly in R&D
• Cook: Quite a bit of R&D growth and expenditures are beyond products that Apple is currently shipping
• Maestri: We’ve reduced more than 4 million units of iPhone channel inventory on the high end
• Maestri: We believe the iPhone SE is doing exactly what is intended: Higher rate of switchers and current customers upgrading who prefer the 4-inch form factor
• iPhone SE is bringing more people into the iOS ecosystem
• AAPL After hours: $103.25, up $6.58 (+6.81%) as of 5:59PM EDT
• Cook: Apple TV last October and and tvOS are building the foundation for what Apple beleives can be a broader business over time. You shouldn’t look at what’s there today and think that’s all Apple wants to do.
• AAPL After hours: $103.27, up $6.60 (+6.83%) as of 6:02PM EDT
• End of conference call.
I sure hoped they continue making the Mac Pro, my Apple Care warranty is close to expiring.
thanks, Sword!
