MacDailyNews presents live notes from Apple’s Q215 Conference Call

MacDailyNews presents live notes from Apple’s Q215 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple today announced financial results for its fiscal 2015 second quarter ended March 28, 2015. The company posted quarterly revenue of $58 billion and quarterly net profit of $13.6 billion, or $2.33 per diluted share. These results compare to revenue of $45.6 billion and net profit of $10.2 billion, or $1.66 per diluted share, in the year-ago quarter.

Gross margin was 40.8 percent compared to 39.3 percent in the year-ago quarter. International sales accounted for 69 percent of the quarter’s revenue.

Thomson Reuters‘ analysts consensus called for Apple to report net income of $2.16 per share on revenue of $56.08 billion.

Apple Unit Sales and Revenue Q215:
• iPhone: 61.170 million units, $40.282 billion revenue (vs. 43.719 million units (+40%), $26.064 billion revenue (+55%) YOY)
• iPad: 12.623 million units, $5.428 billion revenue (vs. 16.350 million units (-23%), $7.610 billion revenue (-29%) YOY)
• Mac: 4.563 million units, $5.615 billion revenue (vs. 4.136 million units (+10%), $5.519 billion revenue (+2%) YOY)
• Services: $4.996 billion revenue (vs. $4.573 billion revenue (+9%) YOY) (includes revenue from the iTunes Store, App Store, Mac App Store, iBooks Store, AppleCare, Apple Pay, licensing and other services.)
• Other Products: $1.689 billion revenue (vs. $1,880 billion revenue (-10%) YOY) (includes sales of iPod, Apple TV, Beats Electronics and Apple-branded and third-party accessories.)

Apple today announced that its Board of Directors has authorized an increase of more than 50 percent to the company’s program to return capital to shareholders. Under the expanded program, Apple plans to utilize a cumulative total of $200 billion of cash by the end of March 2017.

As part of the revised program, the Board has increased its share repurchase authorization to $140 billion from the $90 billion level announced last year. In addition, the company expects to continue to net-share-settle vesting restricted stock units.

The Board has also approved an increase of 11 percent to Apple’s quarterly dividend, and has declared a dividend of $.52 per share, payable on May 14, 2015 to shareholders of record as of the close of business on May 11, 2015.

From the inception of its capital return program in August 2012 through March 2015, Apple has returned over $112 billion to shareholders, including $80 billion in share repurchases.

Live notes from Apple’s Q115 Conference Call in reverse chronological order:

• End of conference call.
• After Hours : 134.40 Up 1.75 (1.32%) 5:59PM EDT

• Cook: We’re on the early stages of major, major changes in media that will be great for consumers and Apple will be a part of that
• Cook: HBO, in particular, has some incredibly great content.
• Cook: HBO Now is about giving the customer something they want via Apple’s classic ease-of-use
• Cook: In emerging markets, iPhone revenue up 58% YOY; BRIC up 64% YOY.
• Cook: There is significant opportunity for iPhone 6 and iPhone 6 Plus with only 20% of user base having upgraded

• Maestri: A good portion of the capital return program will be funded by debt in and outside the U.S.
• Maestri: We are super confident in our pipeline for products and services

• Cook: As iPad inventory plays out and Apple invests in the future of iPad, it will begin to grow again
• Cook: Underlying iPad numbers are positive. Usage numbers are off the charts. Customer satisfaction at or near 100%. Intent to buy numbers are strong
• Cook: I am a big believer in iPad in enterprise. Apple+IBM in early days
• Cook: There is cannibalization on iPad from iPhone and from the Mac (notebooks). That will stabilize long term

• Chinese developers in greater China now paid nearly $5 billion, over half of which was paid out in the last six months
• Apple is investing a lot in China
• Apple added Union Pay, iPhone point of sales up 9% to over 40,000 YOY
• In China (PRC), iPad unit sales had their best quarter ever
• App Store in China grew over 100% YOY
• Mac units sales up 31% in China. IDC estimates that PC sales in China contracted by 5% last quarter.

• 134.66 Up 2.01 (1.52%) 5:42PM EDT

• Cook: Third-party Apple product teardown estimates are never accurate
• Cook: Apple Watch functionality is remarkable.
• Cook: The Watch gross margins for the current quarter are lower than the company average. In the first quarter of any product, you have a number of things to learn: demand, supply, ASPs, etc.
• Cook: I am thrilled with Apple Watch reception. When demand is much greater than supply, it is very difficult to gauge total demand. Customer response to Apple has been nearly 100% positive.

• iPhone ASP was $659, down from FQ1’s $687 but up from FQ4’s $603 (iPhone 6 Plus boost). iPad ASP was $430 vs. $419 in FQ1 and $432 in FQ4. Mac ASP was $1,231 vs. $1,258 in FQ1 and $1,200 in FQ4.

• Cook: About 20% of the iPhone install base has upgraded to iPhone 6 or iPhone 6 Plus. Much headroom remains

• After Hours : 134.19 Up 1.54 (1.16%) 5:35PM EDT

• Cook: I think things look very, very good. We’re also pleased, in addition to the switcher number, that we’re doing fairly well with first time buyers, which is also a key metric for us. And so it’s tough to find something in the numbers not to like.
• Apple is providing the following guidance for its fiscal 2015 third quarter:
– revenue between $46 billion and $48 billion
– gross margin between 38.5 percent and 39.5%
– operating expenses between $5.65 billion and $5.75 billion
– other income/(expense) of $350 million
– tax rate of 26.3%
• Cook: We are bullish on the current quarter, as our guidance indicates
• Cook: iPhone grew 2.5X the smartphone market
• Maestri on R&D: Innovation is the core of the company
• Maestri on elevated R&D spending: Product development is now broader (two iPhones, two iPads, Apple Watch) plus product pipeline
• Cook: We are learning quickly about customer preferences for Apple Watch. We understand how to do this and are executing
• Cook: Apple Watch customer response to their new Watches over the weekend was overwhelmingly positive
• Cook: We are in a good position and sometime by late June, we anticipate that Apple can expand Watch to additional countries beyond the original 9 countries
• Cook on Apple Watch: Demand is greater than supply. We are working hard to remedy that and we’ve made progress over the past week. Apple is moving preorder shipment estimates up

• Cook: We saw higher rate of switchers to iPhone than we have seen in previous cycles. We are extremely excited about that. We see a reasonable percentage of first-time buyers, particularly in emerging markets

• Apple feels very good about the gross margins and guidance given the severity of the currency headwinds
• Currency headwinds happened as Apple expected. 40 basis points of negative impact expected in current quarter

• Next update to capital return program will come at this time next year (Q216 earnings release)
• Maestri: We continue to plan for additional dividend increases in the future
• China: 6 stores opened in last quarter alone, now have 21 Apple Retail Stores in 11 cities total, with 40 total stores in China by end of year
• App Store led Services revenue growth
• Apple+IBM focused on iPad apps
• ChangeWave: 77% of corporate buyers plan to buy iPads
• iPad sales set quarterly records in Japan and China. More muted in other areas.
• Mac sales particularly impressive especially in light of IDC’s estimate of 7% decline of PC shipments in quarter
• $659 iPhone ASP, up $62 YOY
• Demand for iPhone 6 and iPhone 6 Plus remains exceptionally strong
• China revenue $16.8 billion – all-time record
• Luca Maestri reviews earnings results

• Cook thanks developers, customers, and employees
• Apple Watch response has been overwhelmingly positive. Over 3,500 Apple Watch already available. We can’t wait to see more
• Apple teamed with HBO to launch HBO Now, incredibly popular with Apple TV users
• Cook: Very happy with reception of all-new MacBook – “This is the future of the notebook.”
• June quarter off to exciting start
• Cook: Apple working hard on renewable energy and environmental projects
• Cook: Apple responsible for creating over 670,000 jobs across Europe
• Over 1,000 researchers have contacted Apple regarding developing ResearchKit applications
• ResearchKit for medical researchers have enrolled over 60,000 iPhone users
• Over 1,000 HealthKit-enabled apps now available via App Store
• 135 million iPhones, 34 million iPads, 10 million Macs sold in the first 6 months of the 2015 fiscal year
• Mac remains strong
• Cook: App Store surpasses $5 billion in quarterly revenue
• Cook: Our strongest March quarter results ever. Experiencing a higher rate of switchers to iPhone ever
• Conference call begins
• After Hours : 134.57 Up 1.92 (1.45%) 4:58PM EDT


    1. Wow. The trollbot and its socially awkward keeper really are targeting my comments. This comment (I just repeated something obvious from the article) was intended as trollbot “bait.”

      That’s AWESOME! 🙂

    1. Even after the buybacks and dividends, more than $30 per share is pure cash. That means the ongoing business of Apple is being valued at less than $100 per share, at the current price. Just the iPhone business by itself is worth more, like getting the Mac, iPad, and “other” operations for free.

      AAPL is the stock bargain of this century… 🙂

    1. AAPL P/E ratio: 17

      AMZN P/E ratio: 176

      This is why I think buybacks are stupid. Wall Street doesn’t give a flying F*** how many AAPL shares are outstanding, or what AAPL’s P/E ratio is. Apple could have a PE of 0.5 with 12 shares outstanding and Wall Street would still price the stock at around $130.

      Meanwhile, Amazon posts a loss and apparently its P/E ratio of 176 is just dandy.

        1. If Apple hadn’t initiated buybacks/dividends, that $70/share price would be ENTIRELY cash and would have nothing at all to do with profits, so I have a hard time believing that the share price would be $70.

          As it stands now, $30 of Apple’s share price is cash, that’s after giving more than 200 billion away. (Apple might as well have just put it all in a pile and lit it on fire, since I don’t believe the buybacks have had much effect at all on the stock price.)

      1. Exactly. Tim is letting the Wall Street crowd get to him.
        Steve just flipped them off and told them to go screw themselves when they got to close.
        Tim needs to stop doing buybacks and other crap. The Wall Street crowd are not his friends. All they want is to get the billions out of Apple and into their pockets, and if Apple is destroyed in the process, they don’t care. On to the next big company to rape and pillage.

      2. Your pain is obvious and I feel for you but the reality is that you and people like you who are bullish on AAPL are not buying and that is the sole reason that the stock price is where it is today. Quit complaining and start buying AAPL and get all your relatives and friends to buy it too. The stock will ‘magically’ rise. This is the reality of it.

    2. The Wall Street Casino is inscrutable. It’s so obvious they’re favoring certain stocks based on vague premises and no one gives a damn. Jeff Bezos has to have hooks into certain investors so no matter how poorly the company performs it won’t drop in share price. From what I see, Apple met 98% of Wall Street’s capital returns conditions and exceeded sales expectations and yet not even a 2% gain in share price is an abomination. Wall Street is certainly a group of investors’ personal piggy bank.

      1. Wall Street doesn’t buy into the proverb that a bird in hand is better than two in the bush. Wall Street keeps hoping upon hope that Amazon will develop monopolies like it has with books in other industries. That’s why it has a PE of 176.

        Apple generates Cash on a scale never seen before. I’ll take one Apple over 176 Amazons. I want my retirement funds invested in a Company that actually generates Cash not Promises.

      2. It’s simple really. Apple is higher risk. Wall Street sees Apple as a company with a few products. The market is fickle and one never knows when the “next big thing” will come along. Amazon has fewer points of failure.

        Apple’s fortunes rest on a phone, a tablet, a watch and a computer. They’re really seen as a single product company and Wall Street has been burned too many times before.

        1. But Amazon is failing. Their revenue growth (YoY) has been decreasing over the last few quarters. They are still reporting earnings losses. Their core business is s total flop. If they didn’t have their cloud business their AP would probably be over a year.

          AMZN is the Bernie Madoff of equities. The last investors holding the bag will lose it all. Hopefully, the AMZN house of cards won’t bring down the rest of the market. They are a nonprofit charity and should be delisted.

        2. I dont see Apple as higher risk because of its limited diversity – thats its strength.
          Computer, phone, watch are all linked into an ecosystem – that locks customers in.
          The vast majority of sales are for manufactured products with very large margins. Particularly where Apple continues to lead and others mimic and follow.
          Start-ups with software empires are worth what people are prepared to pay. Facebook could go the way of OpenSpace if customers switch off – and that could happen very quickly. They are the ones I would class as risky and which I would never invest

      3. Wall Street is banking on the premise that Amazon is using its “lossy” selling tactics to become the biggest seller in every marketplace. And when it has made all other competitors unviable, they can ratchet up prices and roll up tons of money. With the volume they do they would just have to price things “normal” to turn on the cash spigot. And We The People will have very few other choices; we will all be well trained on the One-Click shopping at Amazon. I try to resist them, but it’s just so darned convenient and cost effective.

        1. No joke. I’ve used Amazon to buy lightbulbs and toilet paper. Wal-Mart has actually lost a lot of my $$$ in the last year because of Amazon Prime and two-day delivery. It’s just more convenient than driving to Wal-Mart, and way more pleasant than having to be inside a Wal-Mart.

    3. Wall Street should punish the FSCK out of AMZN for not properly monetizing its web services and running the Webservices unit at a loss. When they up their prices Amazon Web services is going to be left with a huge investment in lost price hunting customers.

    1. It’s strange, because you’ll never hear Wall Street saying Google relies too much on search ad revenue. I don’t really see how there’s a difference. Doesn’t Intel rely too much on processor chips or Boeing relies too much on commercial airliners? ExxonMobil will really be in trouble if oil dries up.

      1. Right. So all this is just excuses to not call Wall Street what they really are, “blood sucking criminals that would knife their mother for a dime”.
        That’s putting it nicely.

  1. “Apple is moving preorder shipment estimates up”

    NOT MINE!! Order placed at 12:05am PDT on preorder day…42mm black Sport w/black band…order still “Processing” with May 13 as the earliest listed delivery date.

  2. whatever insane positives they´re always “priced in”. WS is just searching for ANY negative to dump stock. This is capitalism 2.0 – WS is not interested in “products”, it wants the fast buck.

  3. Microsoft Q2 FY15 Revenue: 21.7 billion

    Apple Q2 FY15 Revenue: 58 billion

    Apple’s quarterly revenue is now 2.5x that of Microsoft. If you could go back in time to 2005 and tell people about 2015, they wouldn’t believe you.

  4. I find the most interesting tidbit in the conference call is this:

    Mac units sales up 31% in China. IDC estimates that PC sales in China contracted by 5% last quarter.

    If the Mac really takes off in China, the Mac will eventually surpass Windows in marketshare. How sweet is that!

  5. +10% YOY for Macs. That’s great news and not surprising to me. The hardware is slick, powerful and sexy.
    Just received my retina iMac last week and I can’t stop hugging the thing. It’s a work of beauty.
    It’s also a rare occurrence these days in cafes to see anything that does not have that Apple logo on its cover.
    Apple is untouchable right now and I will hang on to those stocks awhile longer.

    1. I’m definitely hanging on until well after Apple moves into its modern new campus. Remember, the Apple spaceship was Steve Jobs’ last invention, and was designed specifically to encourage the kind of face-to-face random interactions that he believed were key to Apple’s innovation and success.

      So far, Apple has accomplished everything it has with its employees working in shitty decrepit 1970s buildings scattered far apart…so imagine what they’ll be able to do when they’re all working together in the same ultra-modern building with a beautiful giant private nature preserve in the middle. It’s a building deliberately designed to inspire creativity, and I can’t wait to see how it impacts their culture.

  6. The fact that the Apple Watch is going to be 100% additive to Apple’s revenues with high-30’s percentage margins just boggles the mind. None of that is in these results obviously, so next quarter will be interesting to see. When iPad stabilizes and grows as Tim mentions it will, the Mac business continues to kill it, the iPhone continues to take share, the services side continues to reach critical mass … there’s a lot to like for a shareholder. 5-legged stool.

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