MacDailyNews presents live notes from Apple’s Q219 conference call

MacDailyNews presents live notes from Apple’s Q219 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q219 Results Conference Call using Apple’s industry-leading QuickTime multimedia software.

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

The company posted quarterly revenue of $58 billion, a decline of 5 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.46, down 10 percent. International sales accounted for 61 percent of the quarter’s revenue.

For Q219, Apple guided for revenue between $52.5 billion and $54.5 billion.

Live notes from Apple’s Q219 Conference Call in reverse chronological order:

• AAPL After hours: $210.90, +$10.23 (+5.10%) @ 5:58PM EDT

• End of conference call.

• India is primarily an Android market currently which means these is a lot of opportunity for Apple iPhone there, long term
• Apple is increasing local production in India
• Apple would like to place Apple Retail Stores in India; working with gov’t to get approval to do so
• Cook: India is a very important market in the long term; it is very challenging in the short term

• Cook on the the new services: “These aren’t hobbies.”
• Apple News+ supports magazine publishers
• Apple TV+ addresses the general move of consumers from cable/satellite to over-the-top TV
• Gaming is the top category on the App Store, hence Apple Arcade
• Apple Card has a significant level of interest

• AAPL After hours: $210.87, +$10.20 (+5.08%) @ 5:53PM EDT

• We are focused on getting Apple Arcade (autumn), Apple Card (summer), and Apple TV+ (autumn) out to market this year
• Cook: We are always working on new things
• Apple will not share the financial terms of the Qualcomm settlement as confidentiality is part of the agreement

• It’s good for the environment and good for users to trade in old devices and upgrade; old iPhones are refurbed or recycled
• Installment payments on iPhone are different in different geographies; China is doing the best in iPhone installment plans
• Cook: iPhone product being traded in is “all over the place.” iPhone 6, 6s, 7, 7s – all different replacement cycles

• Cook: Improved trade dialog between U.S.-China increased consumer confidence in China
• Trade-in programs and installment payments appeal to many customers
• Cook: Many people want to trade up to new iPhones; the trade-in to customers looks like a subsidy
• Cook: Declines to discuss 5G in any detail or even say “5G”

• AAPL After hours: $210.20, +$9.53 (+4.75%) @ 5:42PM EDT
• Guidance includes a 300 basis point hit from currency headwinds

• Luca: OpEx increase in part due to new services coming online

• Apple has made some adjustments in India that look positive initially
• Cook: We are glad to put Qualcomm litigation behind us; happy to have a multi-year supply agreement and a direct license; “we feel good about the resolution”
• Improved trade dialog between U.S. and China; this has affected consumer confidence in China positively
• China economic stimulus helping
• Trade-in and financing programs has been very well received in China
• Apple made some price reductions, essentially backing out the weaker currency effect and then some
• Cook: In iPhone we are seeing a better YOY performance in the last weeks of the quarter

• • Analysts’ questions begin —

• Apple is providing the following guidance for its fiscal 2019 third quarter:
– revenue between $52.5 billion and $54.5 billion
– gross margin between 37 percent and 38 percent
– operating expenses between $8.7 billion and $8.8 billion
– other income/(expense) of $250 million
– tax rate of approximately 16.5 percent

• The dividend is payable on May 16, 2019 to shareholders of record as of the close of business on May 13, 2019
• Apple raised quarterly cash dividend to $0.77 per share; Apple plans annual dividend increases
• Apple BoD has authorized an additional $75 billion for share repurchases
• Apple plans to reach a net cash neutral position over time.
• 55.1 million AAPL shares retired
• $27 billion returned to investors during the quarter
• $115 billion net cash position
• $225 billion in cash
• Native iOS apps continue to grow in the enterprise
• Apple sees great momentum in iOS traction in the enterprise
• Adoption of iPad has cut maintenance delays in half at “one of the world’s largest airlines”
• Across 450 airlines, Apple iPad is overwhelmingly the chose for electronic flight bags

• Apple Watch is the best-selling smartwatch in the world; 3/4th of buyers bought their first Apple Watch during the quarter
• Wearables, Home and Accessories: $5.129 billion (vs. $3.944 billion YOY)
• Luca: iPad Pro the “perfect PC laptop replacement for both consumers and professionals.”
• iPad: $4.872 billion (vs. $4.008 billion YOY)
• More than half of Mac buyers were “new to Mac.” (Read: Upgrading from crappy Windows PCs – MDN Ed.)
• New all-time Mac revenue records in Japan and South Korea
• Mac: $5.513 billion (vs. $5.776 billion YOY)

• All subscription categories are growing in double digits
• Services accounted for about 20% of revenue and about 33% of profit

• XR, XS, XS Max customer satisfaction: 99% (can’t please everyone – MDN Ed.)
• Active installed base of iPhone reached a new all-time high at the ned of March
• iPhone: $31.051 billion (vs. $37.559 billion YOY)
• Headwinds from foreign exchange
• Best iPad growth rate in six (6) years
• Luca: Quarterly revenue of $58 billion

• Everyone at Apple is hard at work on WWDC2019; Cook: “You are not going to want to miss this one.”
• Cook: Apple is as excited as ever in their great pipeline

• AAPL After hours: $211.00, +$10.33 (+5.15%) @ 5:19PM EDT

• Apple’s environmental initiatives continue to expand worldwide (recycling, solar, forestry, and much more)
• In Q219, Apple Health Records came to U.S. Veterans Administration
• Apple Watch ECG launched in 19 more countires during the quarter; it is changing lives
• iPhone trade-ins in Apple Stores initiatives; all-time record response, more than 4X iPhone trade-ins YOY

• Demand for AirPods (2nd gen.) is phenomenal; a cultural phenomenon
• Strong iPad sales quarter
• New iPad Air and iPad mini were launched
• iPad Pro had strong customer response
• Apple faced some Mac processor constraints; Apple believes Mac sales would have been higher without these constraints
• Apple launched a new, more powerful iMac
• In the quarter, Apple announced Apple News+, Apple Card, Apple Arcade, Apple TV+
• Apple News is already the No.1 news app in the U.S. and U.K.
• Over 390 million paid subscriptions, a increase of over 30 million in the quarter alone

• AAPL After hours: $211.50, +10.83 (+5.40%) @ 5:10PM EDT
• Apple Pay transactions more than doubled YOY
• Apple had best quarter ever for App Store and Apple Music
• Apple’s installed base continues to grow, setting new records

• iPhone declines were significantly smaller in the final weeks of the quarter
• Apple believes strongly in long term opportunity in China
• Record Q2 results in U.S., U.K., and Japan
• Headwinds faced from weaker foreign currency; in constant currency, report would have been 200 basis points higher
• Cook: “This has been an exciting and productive quarter for Apple.”

• AAPL After hours: $211.21, +$10.54 (+5.25%) @ 5:04PM EDT

• Start of conference call

• Apple Q219 R&D expenses: $3.948 billion (vs. $3.378 billion YOY)

• Apple Q219 total net sales: $58.015 billion (vs. $61.137 billion YOY)
• Apple Q219 net income: $11.561 billion (vs. $13.822 billion YOY)

• Net sales by reportable segment:
– Americas: $25.596 billion
– Europe: $13.054 billion
– Greater China: $10.218 billion
– Japan: $5.532 billion
– Rest of Asia Pacific: $3.615 billion

• AAPL After hours: $211.00, +$10.33 (+5.15%) @ 4:58PM EDT

• iPad: $4.872 billion (vs. $4.008 billion YOY)
• Wearables, Home and Accessories: $5.129 billion (vs. $3.944 billion YOY)
• Mac: $5.513 billion (vs. $5.776 billion YOY)
• iPhone: $31.051 billion (vs. $37.559 billion YOY)
• The company set an all-time quarterly record for Services: $11.450 billion
• Apple posted quarterly earnings per diluted share of $2.46, down 10% YOY
• Apple posted quarterly revenue of $58 billion, a decline of 5% YOY
• Apple’s fiscal 2019 second quarter ended March 30, 2019

• AAPL After hours: $211.73, +$11.06 (+5.51%) @ 4:53PM EDT
• AAPL After hours: $210.88, +$10.21 (+5.09%) @ 4:50PM EDT
• AAPL After hours: $210.67, +$10.00 (+4.98%) @ 4:48PM EDT