MacDailyNews presents live notes from Apple’s Q116 Conference Call

MacDailyNews presents live notes from Apple’s Q116 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q116 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 2016 first quarter ended December 26, 2015. The Company posted record quarterly revenue of $75.9 billion and record quarterly net income of $18.4 billion, or $3.28 per diluted share. These results compare to revenue of $74.6 billion and net income of $18 billion, or $3.06 per diluted share, in the year-ago quarter. Gross margin was 40.1 percent compared to 39.9 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter’s revenue.

Apple Inc. Q1 2016 Unaudited Summary Data
(Units in thousands, Revenue in millions)
Apple Inc. Q1 2016 Unaudited Summary Data

Live notes from Apple’s Q415 Conference Call in reverse chronological order:

• After Hours : 97.65 Down 2.34 (2.34%) 6:00PM EST
• End of conference call.

• Cook: Our strategy is always to make the best products. We are able to provide several different price points for iPhones. We continue to offer the iPhone 5s at the low end and it continues to do quite well.

• Apple Upgrade Program geared to helping customers simply and easily upgrade to the new iPhone models each year
• After Hours : 97.82 Down 2.17 (2.17%) 5:56PM EST
• Cook: Apple’s services assets are huge and the investment communtity should focus upon more

• Cook: Number of people who were iPhone users prior to iPhone 6/Plus (before September 2014) stands at 60%. Much headroom remains.

• Cook: Demographics in India are incredibly great for Apple products, so Apple continues to invest in India – a really good business environment for the future
• Cook: Number of people moving into middle class in China is massive and Apple remains “very bullish on China and don’t subscribe to the doom and gloom outlook on China, frankly.”
• Cook: China LTE penetration at end of Dec. was in the mid 20% area; tremendous headroom remains
• Cook: Apple will invest confidently through any downturns
• Cook: BRIC economies admittedly currently look pretty bleak, but “this too shall pass.”
• Cook: We will continue to invest in India
• Cook: Our Apple Retail Store expansion plans in China have not changed

• Maestri: We grew iPhone channel inventory by 3.3 million units as we were below channel inventory target range at the start of the quarter

• Cook: iPhone has a lot of headroom. There is still a tremendous number of people in the world who buy smartphones and Apple should be able to win their fair share of those
• Cook: If we make a great product and have a great experience, we expect people to move to iPhone
• Cook sees overall economic “malaise” in virtually every country around the world
• Cook: We do think that iPhone units will decline in Q2. We do not project beyond Q2. Q2 will be the toughest compare vs. the rest of the fiscal year

• Data center capacity expenditures tied to rapid installed base growth

• After Hours : 98.65 Down 1.28 (1.34%) 5:35PM EST

• Maestri: We entered the Dec. quarter below 5-7 week target inventory for iPhone, but we have existed on the low end of the 5i7 week target range
• Maestri: $691 ASP for iPhone counting a $49 impact on ASP due to currency; iPhone mix was very, very strong

• Cook on Virtual Reality. It don’t think it’s a niche market. I think it’s really cool and presents some opportunities.
• Cook: iPhone Upgrade Program will be meaningful over time
• Cook: We were blown away by the level of Android to iPhone switchers last quarter. The highest numbers “by far.”

• Maestri: We have increased prices in certain countries based on currency rates, which protects margins, but affects demand
• Maestri: Macroeconomy is weakening worldwide YOY
• Maestri: In constant currency, revenue would actually be down between 5-15%, we are looking at a 400 basis point impact for the March quarter

• Maestri: We believe the March quarter faces the most difficult YOY compare vs. the other quarters this year

• Apple is providing the following guidance for its fiscal 2016 second quarter:
– revenue between $50 billion and $53 billion (larger range than usual, due to currency fluctuations)
– gross margin between 39 percent and 39.5 percent
– operating expenses between $6 billion and $6.1 billion
– other income/(expense) of $325 million
– tax rate of 25.5 percent

• The dividend is payable on February 11, 2016, to shareholders of record as of the close of business on February 8, 2016
• Apple’s board of directors has declared a cash dividend of $.52 per share of the company’s common stock
• Apple will update on capital return program when they report Q216 earnings in April

• $215.7 billion in cash on-hand, up 10.1 billion sequentially, $201 of which is located outside the U.S.A.

• Apple Watch and Apple TV established new all-time quarterly record sales
• App Store growth set all-time records
• $5.5 billion in services revenue, up 15%, a new all-time quarterly record

• After Hours : 99.27 Down 0.72 (0.72%) 5:23PM EST

• Cisco partnership continues to grow
• IBM released 48 IBM MobileFirst for iOS apps during the quarter

• In November, 451 Research measured 97% customer satisfaction rate for iPad Air 2
• iPad channel inventory is within 2-4 week target range
• Mac channel inventory is within 2-4 week target range
• Apple exited the quarter at the low end of the target 5-7 weeks of inventory

• iPhone ASP: $691 despite very unfavorable currency headwinds
• iPhone sales grew 76% in India

• All-time record iPhone sales, all-time quarterly Apple TV sales, all-time record net income

• Luca Maestri: Apple is in an unequalled position of strength
• Apple’s installed base drove over $31 billion in related purchases in FY15, up 23% YOY, and almost $9 billion in Q1’16, up 24% YOY
• Apple’s services business is now one of the largest in the world

• Apple customer satisfaction is unmatched

• Cook: We have the “Mother of All Balance Sheets” with $216 billion on hand; that’s $39 per diluted share of Apple stock
• Cook: Apple Music now has over 10 million paying subscribers

• Cook: China, Hong Kong, Spain, and Singapore to get Apple Pay in 2016
• Cook: We set a new quarterly record for Apple Watch sales
• Cook: We had our best quarter by far for Apple TV sales. 3,600 apps now available

• Apple remains committed to innovation and will invest through the current economic uncertainty


Apple Currency Index

• Currency headwinds are extraordinary
• Cook: 74.779 million iPhone units sold is an incredible accomplishment
• Cook: In constant currency, Apple’s growth rate would have been 8%
• Cook: Apple’s strongest financial results ever.

• Apple has now completed $153 billion of their $200 billion capital return program
• Apple returned over $9 billion to investors through share repurchases and dividends
• Apple generated operating cash flow of $27.5 billion during the quarter

• Apple’s installed base recently crossed a major milestone of one billion active devices (iPhone, iPad, Mac, iPod touch, Apple TV, and Apple Watch devices that have been engaged with our services within the past 90 days)
• International sales accounted for 66 percent of the quarter’s revenue
• Gross margin was 40.1 percent (vs. 39.9 percent YOY)
• Record quarterly net income of $18.4 billion, or $3.28 per diluted share (vs. $18 billion, or $3.06 per diluted share YOY)
• Record quarterly revenue of $75.9 billion (vs. $74.6 billion YOY)

• After Hours : 99.46 Down 0.53 (0.53%) 5:00PM EST
• After Hours : 99.50 Down 0.49 (0.49%) 4:55PM EST
• After Hours : 98.79 Down 1.20 (1.20%) 4:50PM EST
• AAPL: After Hours : 100.24 Up 0.25 (0.25%) 4:45PM EST

38 Comments

  1. yeah, but again they bring in more money in one quarter then most companies bring in all year and the stocks still down, and that’s crap… $18.4 billion….. that’s $18.4 billion…. this stock should be rocketing

    1. 66% of Apples sales are outside the USA. Those currencies are down relative to the US$. So when overseas sales get “translated” into US dollars at current exchange rates, the sales are lower than they would have been at last year’s (eg, higher) foreign exchange rates.

    1. VR is going to be the biggest killer app to hit the internet since email. Everybody who has tried the new generation of VR loves it and can’t wait for it to go commercial. It’s got so much potential that goes way beyond games. There isn’t a social interaction in real life that won’t be possible with VR over the internet, including shopping, tourism, business meetings and wild sex parties. You think people won’t want to get inside the internet, and will be content to just look at it through a rectangular glass monitor forever? You’re not thinking it all the way through.

        1. You, sir, are stuck in the mindset of the way things are today, and can’t see past next week. VR will be a revolution in gaming, conferencing, commerce, sexuality…it’s about to change literally everything about our lives. It allows people to switch out the body they were born with for whatever body they want to wear that day. The coming revolution caused by the ability for people to get inside the internet instead of just looking at it CANNOT be overstated.

          The first versions will be clunky and awkward, and will require a tether to a computer or game console. In five years, it’ll be light and sleek and entirely self-contained. Everyone will have one, even you.

          “I Finally Tried VR and it Brought Me to Tears” – Time Magazine, January 8, 2016.

          http://time.com/4172998/virtual-reality-oculus-rift-htc-vive-ces/

          1. I will note that – you can’t use VR in daily life it will be only in niche/specialized markets Gaming included.. Will go the way of 3D tv’s which were thought of as the savior of the TV market.

            1. Who says you can’t use VR in daily life? You? Have you even heard of AR (Augmented Reality)? Check out Microsoft’s Hololens:

              The word “revolution” doesn’t do justice to what’s coming between now and 2020. Everything is about to change, and you’re going to feel just as silly as all the people who saw the first iPhone in 2007 and declared it a fad, a niche, and “nothing special”. And like them, once its influence and success becomes too obvious to ignore, you’ll deny that you said or ever even thought that VR/AR was going to be a “fad” that had “no real purpose”.

    2. No where near… Its not even in the same realm as 3d movies….
      It already has and will dramatically have more actual , material effect on human behaivior, society and culture… …

  2. It is crazy the negative spin the media is putting on Apple after these earnings.. Absolutely nuts!! Just because iPad is down does’t mean that people are buying other tablets just means the market is a bit smaller but still quite a healthy business and if Apple manages demand like they always do then this is a positive.

  3. It’s a mindset of leadership which tells me he isn’t thinking forward enough for the company I could give a crap if they invest or not but this mind set will affect future products.

  4. Apple numbers are quite good, 18 b profit largest in history is no joke (regardless of analysts own nuts estimates) especially as currency issues trimmed a lot off.

    BUT I think Apple could have done even better if they got their marketing act together.
    As I’ve been complaining for years Apple today without Steve Jobs master marketeer has been weak. Apple still sells a lot due to many new outlets and good products but it’s marketing compared to its products is subpar.

    The product launches especially for things like Apple Watch (the first NEW PLATFORM in years which is a serious thing) was marred with klutzy launch. What was the ADVERTISED Apr 24 launch date about? when they ran out of stock before that they didn’t bother to put out corrections , PR didn’t sooth the irate confused customers or press. I was waiting and waiting for Apple PR/Marketing to explain to the customers (especially the general public who don’t read sites like MDN) but NOTHING. Later PR released a video on the San Francisco Gay Parade (no I’ve nothing against gays just telling what happened).

    then apple music, (another important new platform) the weird unrehearsed WWDC launch , then putting out the INSTRUCTION GUIDE , the Guided Tour videos at the END of the three month initial launch period… ! (with 200 b in the bank you would think they would have a guide BEFORE launch or if not prepared after customers said they were confused take a WEEK or so to do the videos ? 3 months… ? ) That created a ‘hard to use’ tag for Apple Music into public consciousness …

    Seriously compare that the launch of even new products to the PASSION PR/Marketing had over SOCIAL ISSUES like the Confederate Flag issue where they rushed banning Civil War HISTORY games practically OVERNIGHT…

    (No, one more time I’m not anti Social Issues but with Apple stock one third Google’s P.E I think it’s time for Apple management to to drill their staff like the PR guys that it’s Apple BUSINESS that is their priority, so much of Apple publicity is on social issues that I think big investors are worried that Apple leaders are losing business focus )

    Other marketing weirdness like the Bono free album (costing tens of millions) fiasco etc

    And NO serious mac ad campaigns.
    Macs by revenue is near iPads . Macs in profit are larger than Dell, or Lenovo or Acer.
    but there hasn’t been a serious Mac campaign since Mac PC guy (66 different ads, one new ad a month) years ago .

    Note one big drag if not the biggest is the ONE PRODUCT iPhone company investor worry, marketing other products strongly will help.

    I grimace every time I think the GIANT opportunity Apple missed attacking Windows 8.

    (and BTW what happened to certain parts of the Mac lineup like Mac Pros their Flagship have no upgradeable 3 GB video cards while PCs have 12 GB? New initiatives are great but pay attention to your line up)
    .
    (Actually apple spends very little on all marketing, a fraction of Microsoft’s and less than 10% Samsung’s).

    There hasn’t been a recent ad campaign that has gone into public consciousness (gone ‘viral’) like that old Apple campaigns like 1984, Think Different etc ? (Time magazine discussed Think Different, they still teach 1984 in advertising school ). seriously I can name 5 Steve Jobs ad campaigns in 20 seconds , can anybody name 5 new Ad campaigns in the same time?

    I seriously hope the quarter has been a wake up call for Apple leaders on marketing. (Weak marketing to me is that you have the products but you don’t MAX the sales ). Cook sort of realizes this and has hired a new VP for Media marketing Tor Myhren.

    1. Dave…. cool.
      I would like to see Apple do more advertising also, cool advertising. Please send your wonderful ideas to Apple.

      Per “As I’ve been complaining for years Apple today without Steve Jobs master marketeer has been weak.” Please bring Steve back from the dead. Or clone him. Other wise, live in todays world. Thank you.

      Just a thought, but getting into a yelling match with MS or Android fans is POINTLESS. They do not want to get better…. You have to talk to the average person. And Marketing is an art.

      Apples goal is NOT to make the most money!!! That is Microsofts goal and you see what it does to their mentality!

      Yes Apple needs to talk to the stock market better…. but not let it drive the conversation or its way of doing business. Apple is the biggest company in the world.. Not because of HYPE, BS marketing, over promising, etc BECAUSE it makes GREAT PRODUCTS and has super customer service.

      Android and windows users keep migrating to Apple. And they don’t leave.

      Last word. Apple will get more bad press because the growth of the number of Apple buyers will one day flatten.

      Unless we get a bunch of aliens to land and buy Apple, when we ALL one Apple, there will be no more growth. Apple will be doomed in the market. LOL Just such a funny picture.

      1. “Apples goal is NOT to make the most money!!”

        eh.. this is a Stock Market financial report quarter… we’re talking money here. All the stuff T.C etc said today is RELATED to MONEY.

        and you’re saying SELLING MORE and MAKING MORE MONEY is NOT GOING to RAISE the STOCK ? like if they sold a few million more macs, more iPhones, raise profits by a few more billion won’t do any good? like blast way past estimates? really? (wow… . I think that reasoning will make business history).

        2) does making more money staff etc STOP APPLE from making Great Products.
        How do you figure it’s a ‘Either OR’ situation , that one PRECLUDES THE OTHER?????
        won’t having more money mean MORE RESOURCES for R&D, buying companies (like the A chip designers, fingerprint sensor) forge new initiatives like the Watch, Car, more money to hire top talent etc. LESS MONEY is better for this???
        do your realize that Apple’s big advantages like the A chip is due to having money to work with? HTC etc can’t do that…

        3) Not making more money by screwing launches and not explaining stuff like the Apr 24 watch date (which was EASY to fix) is OKAY ? really?

        4 “makes GREAT PRODUCTS”
        when you have great products you don’t want to make Great Marketing to sell it?????????

        so if you ran a restaurant you won’t spend money to light up your “OPEN” for business sign. really?
        when you use free range organic eggs you won’t advertise the fact and leave your customers wondering why your breakfast sandwiches cost $2 more than the restaurant down the street… ?

        (as for customer service, great products space precluded me from going into all the ‘loss of focus’ recently in product issues like Wifi , lost of people’s music files etc. I DID mention that apple sold a lot due to good products but I stand by my reasoning that apple could have SOLD MORE if they focused better on marketing and product issues)

        4) IF MARKETING IS SO USELESS AS YOU DESCRIBE WHY DID STEVE JOBS SPEND SO MUCH PERSONAL TIME ON IT? He spent countless hours perfecting ad campaigns with the ad agencies. He hired Ridley Scott to direct 1984. He spent hundreds of thousands of dollars on GLASS STAIRCASES in apple stores , thats for MARKETING dude ( a normal staircase at a fraction of the cost would have done it but he wanted to MARKET)…

        dear lord almighty.

        I can write more but I think I would be wasting my time for you.

        1. and this “A”pple today without Steve Jobs master marketeer has been weak.Please bring Steve back from the dead. Or clone him. Other wise, live in todays world. Thank you.”

          what you are talking about?

          it’s OKAY that marketing standards have gone down because Steve is not around?
          so IF iPhones today had a lot or Hardware or Software problems and someone said that standards have gone down unlike Steve’s time will you say ‘that ok that iPhones today suck because we can’t “bring Steve back from the dead?’ Using Jobs comparison for standards is wrong?

          before trying to be so cleverly sarcastic you should think first…

          (for me I hold ALL apple to the highest standards, hardware, software AND marketing. like Jobs.)

        2. I said I won’t write more but your post irritates me. level of ignorance…

          “Please send your wonderful ideas to Apple.”

          I can see issues with marketing, like the launches (apr 24 watch date, no guided tours for apple music until end) , no mac marketing, ad campaigns that don’t stick to my mind but you’re arguing I NEED TO BE ABLE TO SEND IDEAS TO APPLE for me to have a point? and you said it so sarcastically.

          so if my devices had Wifi issues due to an OS update I NEED TO “Please send your wonderful ideas to Apple” on technically how to fix it before I can have a point? really?

          your logic fails again.

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