MacDailyNews presents live notes from Apple’s Q117 conference call

MacDailyNews ^ | Tuesday, January 31, 2017 · 4:45 pm

[Swordmaker]

MacDailyNews presents live notes from Apple’s Q117 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q117 Results Conference Call using Apple’s industry-leading QuickTime multimedia software.

The live webcast will begin at 2pm PDT/ 5pm EDT today here.

Apple today announced financial results for its fiscal 2017 first quarter ended December 31, 2016. The Company posted all-time record quarterly revenue of $78.4 billion and all-time record quarterly earnings per diluted share of $3.36. Analysts’ consensus called for the company to report revenue of $77.4 billion and $3.23 EPS.

For their fiscal 2017 second quarter, Apple guided for revenue between $51.5 billion and $53.5 billion.

• Unit sales:
  • iPhone: 78.290 million (+5% units, +5% revenue YOY)
  • iPad: 13.081 million (-19% units, -22% revenue YOY)
  • Mac: 5.374 million (+1% units, +7% revenue YOY)

• AAPL After hours: $124.41, +$3.06 (+2.52%) @ 4:57PM EST
• AAPL After hours: $124.40, +$3.05 (+2.51%) @ 4:48PM EST

• Other Products: $4.024 billion revenue (-8% YOY) (includes Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories)
• Services: $7.172 billion revenue (+18% YOY)

• Start of conference call

• Tim Cook: Highest quarterly revenue in Apple’s history
• iPhone: exceptional demand beat Apple’s internal expectations
• iPhone 7 Plus demand did not come into supply/demand balance until after the quarter ended
• App Store customers broke all-time quarterly revenue record
• Comcast to accept Apple Pay for bill payments beginning this quarter
• Apple’s goal is to double Services business within the next 4 years
• MacBook pro supply-constrained throughout quarter; now coming into supply/demand balance
• Apple could not make enough Apple Watches to meet strong demand throughout the quarter
• Cook: We could not be more excited about Apple Watch
• Every major car maker incorporating CarPlay
• Cook: Number of HomeKit accessories growing rapidly
• Cook: We are unmatched when it comes to securing your home with IoT locks, etc.
• Cook pitches Apple’s iOS, Home app, and HomeKit for home automation
• Enterprises using IBM MobileFirst for iOS in increasing number
• SAP SDK for iOS coming soon
• Cook thanks developers, business partners, employees, and Apple customers for the outstanding quarter.
• Apple CFO Luca Maestri reviews results
• Very challenging currency headwinds during quarter due to strength of the U.S. dollar
• Apple had the benefit of a 14th week this year during the quarter
• Strong customer demand left Apple scrambling to meet supply for many products during most/all of the quarter
• $695 ASP for iPhone due to strong demand for iPhone 7 Plus
• 451 Research: 97% customer satisfaction rating for iPhone owners; 99% sat. rating for iPhone 7 Plus owners
• Services: $7.172 billion revenue
• App Store revenue continues to outpace industry; more than double the revenue of Google Play during calendar 2016
• iPad was ahead of internal expectations (13.081 million units (-19% units, -22% revenue YOY))
• NPD: iPad has 85% market share of tablets priced over $200
• Apple Retail Stores posted strong, double-digit growth
• Apple has $246.1 billion in cash on-hand; $231.2 outside the U.S.A.
• Apple will update capital return program as usual this spring
• Apple is providing the following guidance for its fiscal 2017 second quarter:
  • revenue between $51.5 billion and $53.5 billion
  • gross margin between 38 percent and 39 percent
  • operating expenses between $6.5 billion and $6.6 billion
  • other income/(expense) of $400 million
  • tax rate of 26 percent
• Apple’s board of directors has declared a cash dividend of $0.57 per share of the Company’s common stock
• The dividend is payable on February 16, 2017 to shareholders of record as of the close of business on February 13, 2017
• Maestri: Foreign exchange is very volatile, so we’ve broadened the range of gross margin
• If dollar is weaker than expected, we’ll do a bit better; we’ll see where we land
• Cook: I am optimistic given what I’m hearing that there will be some sort of tax reform and tax repatriation this year; very good for the country [U.S.] and for Apple
• We’ve acquired 15-20 companies every year for the last few years; based on strategic value
• We have put out toe in the water on creating original content for Apple Music and we’re learning. They will roll out throughout the year and we’ll build from there
• We are learning about the original content business and thinking about our opportunities
• Maestri: The number of people transacting on Apple stores [iTunes, iBooks, Music, Movies, etc.] is increasing in double digits
• Apple Services will be a Fortune 100 company this year and we have a goal to double it in the next four years
• Cook: Greater China revenue down 12% and 4 points of that was due to currency, so 8% in constant currency; much better performance in China vs. previous 3 quarters
• Apple set a new revenue record in China in Q117
• We also saw 50% of iPhone sales in China were to switchers and to first-time buyers
• Challenges include currency headwinds and Hong Kong remains a very, very difficult market
• Maestri: App Store is driving significant growth (43% growth 13 weeks/13 weeks YOY) for Services business
• We can grow in various parts of the world; grow our developer community
• We are the market leader in digital music
• Apple’s music business has returned to growth over the last three quarters
• iCloud storage is also growing very quickly as is the AppleCare business
• Level of interest for Apple products is very strong
• Apple brand is very strong around the world
• Revenue ahead of expectations, so Apple gained some leverage
• Cook: Despite demonetization move in India that created lots of economic pressure, Apple has all-time quarterly revenue results
• In the longer term, I feel good about how we’re doing in India; fully intend in investing in the country
• Apple had an exceptional iPhone quarter; did not predict iPhone 7 Plus demand well
• Number of upgraders and switcher were highest Apple has seen in any quarter
• The way Apple looks at this is that in a quarter where there is a significant supply constraint, it’s difficult to draw firm conclusions
• iPhone 7 Plus was the most popular Plus model Apple has ever had
• Maestri: iPhone install base growing in strong double digits
• Apple feels very good about iPhone unit growth in many markets around the world
• In the U.S. annual upgrade programs are proving to become popular; that is good for Apple’s iPhone sales
• Strong dollar forces price increases in certain countries which doesn’t help Apple move product in those countries
• Pent-up demand for iPhone 7 Plus surprised Apple
• Cook: I don’t like litigation and view it as a last resort. Qualcomm lawsuits should be viewed as a last resort
• Qualcomm instead on charging for technologies they had nothing to do with
• The more Apple innovated, the more Qualcomm charged for technology they had nothing to do with
• Qualcomm withheld a billion dollars in payments they owed Apple, so Apple had no choice but to litigate
• Cook expects it to take time, but, in the end, the courts will see it the way Apple sees it
• Cook: 1.6 million unit swing in iPad inventory YOY
• We did under-call the number of iPad models that would be in demand, so there were supply issues there, too
• We have some things coming regarding iPad in the future; customer sat. numbers for iPad Pro are 99%
• We are still in a shortage situation now and not projecting to totally get out supply/demand imbalance throughout the quarter
• The smartphone is still in the early innings of the game and there is still a lot more to do
• Home automation, enterprise, health, CarPlay, etc.
• Cook: “We’ve got some exciting things in the pipeline.”
• End of call.

• AAPL After hours: $125.09, +$3.74 (+3.08%) @ 5:57PM EST

[Swordmaker]

Blow by Blow notes of the Apple Financial Conference Call as noted by MacDailyNews. — PING!

Apple Financial News Conference Call Notes
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[ImJustAnotherOkie]

Thanks for staying on top of the minutia for us.

[CodeToad]

Back around 1995, I was heavily involved in Microsoft as one of only 22 managed partners at the time. Bill G. made a presentation where he was asked what makes Microsoft successful. He stated that every day he wakes up and asks how he can innovate and compete, while it seems his competitors did not. Evidence of that was WordPerfect, Corel, and Borland that refused to market much, have developer days or training, or do any of the things Microsoft was doing to get people to use and develop for their products.

Well, as we all know, Microsoft has stopped innovating or competing to the extent Bill talked about in 1995, but Apple has grown their innovations. The successes Apple is experiencing is simply because every day they wake up and ask how they can innovate and compete. In 1995 Apple had problems. Today, Microsoft has problems and Apple is winning.

The cycle of corporate life.

[ProtectOurFreedom]

Great summary. Thanks.

$246.1 billion in cash on-hand; $231.2 outside the U.S.A. — Wow, I had no idea >90% of their cash was outside the U.S.

Go Trump! Fix the damned tax code!