MacDailyNews presents live notes from Apple’s Q419 conference call

MacDailyNews presents live notes from Apple’s Q419 Conference Call with analysts starting at 5pm EDT/2pm PDT today, October 30, 2019.

Apple will provide live audio streaming of its Q419 Results Conference Call using Apple’s industry-leading QuickTime multimedia software. This stream is best experienced on an iPhone, iPad, or iPod touch using Safari on iOS 10 or later; a Mac using Safari on macOS Sierra 10.12 or later; or a PC using Windows 10 and Microsoft Edge. Streaming to Apple TV via AirPlay requires an Apple TV (2nd generation or later) with the latest Apple TV software or tvOS. Other platforms may also be able to access the stream using recent versions of Chrome or Firefox (MSE, H.264, and AAC required).

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

The company posted quarterly revenue of $64 billion, the biggest fiscal fourth quarter ever, an increase of 2 percent from the year-ago quarter, and quarterly earnings per diluted share of $3.03, up 4 percent. International sales accounted for 60 percent of the quarter’s revenue.

For Q120, Apple guided for revenue between $85.5 billion and $89.5 billion.

Live notes from Apple’s Q419 Conference Call in reverse chronological order:

• AAPL after hours: 248.10 +4.84 (1.99%) @ 6:01PM EDT

• Congrats, Nancy, and good luck in the future!
• End of conference call

• Cook: We are really please with the number of people who entered the Apple Arcade trial period. It’s too early to tell what the conversion rate will be, “but I feel like we’re off to a really good start.”

• Cook: It’s important to solve some things and “get to a better place” in U.S.-China trade deal
• Cook on U.S. import tariffs: We are paying some tariffs today, but in general “my view is positive on the way things are going” in U.S.-China trade negotiations

• We decided to be more aggressive on iPhone pricing and it’s paying off
• Cook: Apple has the best iPhone lineup we’ve ever had.

• Apple is cognizant that a lot of users want a recurring payment and the receipt of new products on a regular basis and Apple is committed to making that easier
• Cook: Not ruling out that we might see another bundling opportunity for some other service over time
• Cook: We look at each service and look at what’s best for it. So, that’s why Apple TV+ is a gift to new buyers
• Apple TV+ accounting: Apple contemplates a number of factors: multiple device purchases, geographical availability, family sharing, etc.
• Apple TV+ to new buyers of Apple devices is unique

• Luca again laments negative impact of foreign exchange headwinds
• The guidance Apple is providing at the midpoint shows an acceleration of growth

• Apple is launching new services; the engineering and advertising require cost money
• We continue to run selling, general and administrative tightly
• Luca on operating expenses: We want to invest in the business; primarily in R&D

• Wearables are doing very well in China
• It’s not all about iPhone in China; Services grew double digits
• Pricing and monthly payments have also moved the dial
• Product are well-received
• Trade tension is less and that’s a positive
• We feel good about how we’re doing [in China]
• Cook: We had a very good September in China; good reception for iPhone 11, 11 Pro, and 11 Pro Max

• 3/4 of Apple Watch buyers are new to Apple Watch (not a mature market, plenty of headroom there)
• Cook: We are not releasing the precise numbers of wearables
• Cook: We have opportunities in growth of installed base; the iPhone trade-in program and secondary markets have been helpful
• Cook: Free Apple TV+ for a year is a “bold move”; pricing is aggressive, too
• We’d like for as many people as possible to see Apple TV+ content
• In the future we’ll look back an see Apple’s greatest contribution was to people’s health
• Cook will not talk about things Apple is working on
• Cook: I think the Always On display for Apple Watch Series 5 is a game-changer for users
• Wearables have done extremely well: “We are thriled with the results” – Cook
• Better commodity pricing vs. last year, but foreign exchange is negative 120 basis points YOY
• Luca: Foreign Exchange is Apple’s biggest headwind, negative 70 basis points on a sequential basis

• Congrats, Nancy, and good luck in the future!
• Nancy Paxton, Senior Director Investor Relations, will retire in December after 93 earnings calls and 33 years at Apple

• The dividend is payable on November 14, 2019 to shareholders of record as of the close of business on November 11, 2019
• Apple’s BoD has declared a cash dividend of $0.77 per share of the Company’s common stock

• $3.5 billion in dividends
• $18 billion in buybacks
• Over $21 billion returned to shareholders in quarter
• Apple continues on path to reaching cash neutral position over time
• $108 billion total debt
• Apple has $260 billion in cash and marketable securities

• Apple is helping government agencies to increase efficiency and reduce costs (U.S. Census given as example; Apple products will play an important role in the U.S. Census)
• 80 of the 100 largest retailers of the world are choosing to deploy Apple products
• Apple is seeing strong demand in the enterprise market
• Apple is seeing more than 5X iPhone trade-in volume YOY
• Tremendous growth for Apple Watch revenue
• More than 80% of tablet purchasers plan to buy Apple iPads

• Active install base of iPad reached a new all-time high (number not disclosed)
• Active install base of Mac reached a new all-time high (number not disclosed)

• Over 5,000 Apple Authorized Service Providers worldwide
• Best quarter ever for AppleCare
• Apple will have over 500 million paid subs in fiscal 2020
• Over 450 million paid subscriptions (vs. 330 million YOY)
• U.S. has 99% iPhone customer satisfaction (451 Research)

• iPhone: $33.362 billion
• Services: $12.511 billion
• Mac: $6.991 billion
• Wearables, Home and Accessories: $6.520 billion
• iPad: $4.656 billion
• Diluted EPS was a Q4 record at $3.03 per share
• New Q4 revenue records in Americas and Rest of Asia Pacific segments
• Luca: Foreign exchange headwinds were close to a billion dollars

• BTW: Cook sounds like he has a cold
• At Apple, user privacy is at the center of everything the company does
• Apple runs on 100% renewable energy; committed to clean power generation

• New yearly Services record set in all geos; Apple Services is the size of a Fortune 70 company
• Mac Pro to be manufactured in Austin, Texas
• For fiscal 2019 Mac generated highest revenue ever
• Mac: $7 billion revenue

• 7th gen. iPad – most affordable iPad
• iPad: 17% growth driven by iPad Pro

• New Research app launched with major medical studies
• New Apple Watch Series 5 launched
• Wearables set revenue records everywhere

• Cook: I have binge-watched everything on Apple TV+ and there is much to look forward to
• Apple TV+ launches in over 100 countries and regions in two days
• Apple News expanded to Australia and UK during the quarter
• Apple happy to be working with Oprah on Book Club
• Customer feedback on Apple Arcade has been overwhelmingly positive
• Apple Arcade launched this quarter
• Later this year, customers will be able to purchase iPhones via Apple Card, pay over 24 months, with no interest rate
• Apple Pay offers the safest, most secure solution on the planet
• All-time record revenue for Apple Pay – more than doubled YOY
• Service are on a tear

• iPhone 11/Pro produce the highest quality video in a smartphone
• iPhone 11 has quickly become Apple’s best-selling iPhone
• iPhone 11/Pro has produced a wave of the best photos you’ve ever seen from a smartphone
• Apple set Q4 wearable records in every geo
• iPhone YOY performance continues to improve
• Cook: We saw further improvement in revenue trends in China
• Cook: This was Apple’s highest fiscal fourth quarter ever
• Start of call

• AAPL after hours: $245.98 +2.72 (1.12%) @ 4:51PM EDT

• Maestri continued: “We also returned over $21 billion to shareholders, including almost $18 billion in share repurchases and $3.5 billion in dividends and equivalents, as we continue on our path to reaching a net cash neutral position over time.”
• Apple CFO Luca Maestri in statement: “Our strong business performance drove record Q4 EPS of $3.03 and record Q4 operating cash flow of $19.9 billion.”
• Cook continued: “With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we’re very optimistic about what the holiday quarter has in store.”
• Apple CEO Tim Cook in statement: “We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad.”

• AAPL after hours: $247.60 +$4.34 (+1.78%) @ 4:47PM EDT