MacDailyNews presents live notes from Apple’s Q220 Conference Call with analysts starting at 5pm ET/2pm PT today, April 30, 2020.
Apple will provide live audio streaming of its Q120 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).
Apple’s live conference call webcast will begin at 5pm ET/2pm PT today here.
The company posted quarterly revenue of $58.3 billion, an increase of 1 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.55, up 4 percent. International sales accounted for 62 percent of the quarter’s revenue.
For Q220, Apple guided for revenue between $63.0 billion and $67.0 billion.
Live notes from Apple’s Q220 Conference Call in reverse chronological order:
• AAPL After hours: -$6.90 (-2.35%) to $286.90 @ 5:58PM EDT
• End of call.
• Cook: For March we saw NAND pricing increase slightly, and DRAM, display decline
• Q: Commodity pricing?
• Cook: Apple wants to give people the best deal they can while making the best product
• Q: iPhone SE affect gross margins
• Cook: SE offers the engine of our top iPhones, faster than an Android phone – it’s an incredible value at that low price
• Cook: I think SE plays in every geo, but I expect to see it do better in places where median incomes are less. I also expect to see some fair number switching over to iOS
• Q: Strong demand for iPhone SE, will that affect iPhone mix?
• Retail set a quarterly record due to phenomenal online store sales
• In China store traffic is recovering, but not as strong as before COVID-19 outbreak. Apple is seeing strong online sales
• Cook: What we saw in mainland China was stong result in iPad, wearables, and services. Strong January, then a significantly reduced demand in February, then in March a recovery with further recovery in April
• Q: China? Store traffic?
• iPad Pro has been received very well, so we’re not seeing any shift downward in lower priced products
• Cook: No, but have seen strong iPhone SE sales (low priced iPhone) due to customers wanting smaller phone and also coming from Android
• Q: Have you seen shifts in mix during quarter due to COVID-19 shutdowns?
• Advertising will also be affected (App Store, Apple News, thirid-party agreements).
• Luca: AppleCare have been affected by store closures; Appel does expect AppleCare to be affected during the June quarter
• Luca: As we look into the June quarter, we see two trends: Ecosystem (music, video, cloud) is very strong, will continue to grow double digits
• Q: Do macro impacts hit the Services line?
• Cook: Our products are truly made everywhere (final assembly is very visible). For supply chain to come back so quickly from COVDI shock demonstrates resiliency.
• Q: Diversify production supply chain?
• iPhone reduction more than previous year, generally speaking Apple reduces channel inventories on first half of year; Appel ended quarter in comfortable position (within target range)
• Q: iPhone channel inventory in Q2?
• Luca: Nothing has changed on M&A; we purchase companies on a regular basis and will continue to do that
• Q: Any M&A opportunities?
• Luca: That $50 billion is in addition to over $40 billion still remaining that’s already authorized to be spent
• Q: $50 billion repurchase is impressive, but lower than in recent years?
• On the health area, we are looking at other areas beyond Apple Watch ECG, You will see us continue to explore health avenues
• Cook: Many are finding that they can learn remotely and work remotely in some areas and some jobs
• Cook: This is a great reminder of how important our products are for remote work
• Q: Where do you see structural changes due to COVID-19 aftermath and opportunities?
• Cook: Our trade-in programs are great for the environment and also to get the initial price down
• Cook: We launched payment plan for iPhone on Apple Card – more to come, shortly
• Q: Bundling of services?
• Cook: Despite the environment, we have our heads down and are working
• Cook: new products are our lifeblood
• We were able to launch and ship iPad Pro with Magic Keyboard, MacBook Air, and iPhone SE, so business continues
• Cook: We are continuing to operate
• Q: Product development impacted?
• We purchased modem business from Intel and will continue to invest in that as well
• Luca: We manage for the longterm, so we will continue to invest in innovation and out pipeline
• Q: Macro challenges?
• Cook: iPad and Mac are going to improve on a YoY basis in Q3 due to working and schooling remotely
• Rest of the world: Great during first 5 weeks, next 5 week were spent working on supply chain, then global shutdown (last 2-3 week saw sharp decline in demand), in second half of April, Apple saw an uptick across the board, not limited to specific geography or products
• Cook: China was very good in January, February saw a steep decline in demand, improvement in March and further improvement in April
• Q: What are you seeing the various regions?
• Luca: Apple believes the company will emerge from COVI-19 stronger
• Apple’s board of directors has declared a cash dividend of $0.82 per share of the company’s common stock, an increase of 6 percent
• The dividend is payable on May 14, 2020 to shareholders of record as of the close of business on May 11, 2020
• The board of directors has also authorized an increase of $50 billion to the existing share repurchase program
• Apple News reached 125 million monthly active users.
• Apple committed to achieving a net cash neutral position over time
• Apple believe there is great value in AAPL stock
• Advertising rates have been negatively impacted in App Store and Apple News ads (tell us about it!)
• App Store, video, and Apple Music usage has been very strong during the quarter
• Apple’s production is now returned to typical levels, as has inventory, including ramping of new products
• $18.5 billion spent in repurchases of 64.7 million shares during the quarter
• Liquidity has not been an issue for Apple with a very strong balance sheet
• Apple has seen companies deploy entire fleets of Macs overnight to enable work-from-home (Peloton, for example)
• User base for Mac and iPad both reached a new all-time high
• Around 50% of iPad Pro and MacBook Air customers were new to the products
• New iPad Pro and new MacBook Air introduced during the quarter
• Over 75% of Apple Watch buyers were new to Apple Watch
• Apple will hit over 600 million in subscriptions by the end of the year
• 515 million paid subscriptions to Apple Services, up 125 million YOY. +35 million sequentially
• Apple well on the way toward their goal of doubling 2016 Services in fiscal 2020
• AppleCare set a new quarterly record
• iPhone 11/Pro/Mac customer satisfaction: 99%
• Active installed base of iPhones hit an all-time high (no number given)
• COVID-19 affected demand as lockdowns and social distancing became common around the world
• Apple faced some temporary iPhone supply shortages in February
• 14.4% taxes during quarter
• Apple Services: $13.348 billion – an all-time quarterly record
• Apple installed base of active devices reached an all-time high (no number given)
• Luca: We could not be more proud of how resilient the business has been throughout these challenging times
• Apple will continue to do all they can do to contribute to the global COVID-19 response
• Apple’s 5-year commitment to contribute $350 billion in the U.s is moving full speed ahead
• Apple Service is growing and is a reflection of Apple’s strong install base
• Apple remains confident in the business
• Due to the lack of visibility, Apple will not issue Q3 guidance
• During the last three weeks: Apple saw downward pressure on demand
• Next, China demand ebbed, but the rest of the world stayed strong
• First five weeks, Apple was confident of setting a record quarter at the very high end of their guidance
• Apple products are used by hospitalized patients and doctors/nurses to reduce exposure risk
• Apple Watch ECG is being used to facilitate remote monitoring to reduce contact and possible COVID-19 exposure
• Apple in the process of deploying major iPad orders to school systems around the world (hundreds of thousands of units)
• Apple production back to typical levels by the end of March
• Apple Retail employees compensated normally despite worldwide store closures
• Apple contributions to the global COVDI-19 response are significant and diverse
• Apple Store Online understandably set a revenue record during the quarter
• Apple let customers in need skip payments without any interest charges in March and April
• Apple designed and made more than 7.5 million face shields and continues to ship over 1 million per week
• Apple sourced more than 30 million masks for frontline health workers around the world
• Apple forges ahead while others might feel an instinct to fall back
• Cook: We’re proud to say that Apple grew during this challenging quarter
• Cook: All-time record for Services
• Cook: Good afternoon, everyone. I hope you’re staying safe and well
• Call begins…
• Apple now has $192.8 billion in cash on hand, down from Q120 ($207.06 billion).
• AAPL After hours: -$3.80 (-1.29%) to $290.00 @ 4:55PM EDT
• Apple’s Q220 Condensed Consolidated Statements of Operations are here.
• Apple CEO Tim Cook statement: Despite COVID-19’s unprecedented global impact, we’re proud to report that Apple grew for the quarter, driven by an all-time record in Services and a quarterly record for Wearables. In this difficult environment, our users are depending on Apple products in renewed ways to stay connected, informed, creative, and productive. We feel motivated and inspired to not only keep meeting these needs in innovative ways, but to continue giving back to support the global response, from the tens of millions of face masks and custom-built face shields we’ve sent to medical professionals around the world, to the millions we’ve donated to organizations like Global Citizen and America’s Food Fund.
• Apple CFO Luca Maestri statement: We are proud of our Apple teams around the world and how resilient our business and financial performance has been during these challenging times. Our active installed base of devices reached an all-time high in all of our geographic segments and all major product categories. We also generated operating cash flow of $13.3 billion during the quarter, up $2.2 billion over a year ago. We are confident in our future and continue to make significant investments in all areas of our business to enrich our customers’ lives and support our long-term plans — including our five-year commitment to contribute $350 billion to the United States economy.
• AAPL After hours: -$4.99 (-1.70%) to $288.81 @ 4:45PM EDT
