MacDailyNews presents live notes from Apple’s Q320 Conference Call with analysts starting at 5pm ET/2pm PT today, July 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 $59.7 billion, an increase of 11 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.58, up 18 percent. International sales accounted for 60 percent of the quarter’s revenue.
For the June quarter, analysts polled by FactSet expected Apple to post revenue of $52.12 billion and GAAP EPS of $2.04.
Live notes from Apple’s Q320 Conference Call in reverse chronological order:
• End of conference call.
• AAPL after hours: $408.10, +$23.34, (+6.07%) @ 5:57PM EDT
• Cook: We want to delight Apple users; with Apple silicon, we can envision products that we can achieve that we could not achieve otherwise.
• Q: Would Apple every make processors for other companies?
• Cook: We are very happy with Apple Card – fastest rollout in history of credit cards
• Q: Apple Card?
• So expect iPhone release dates to be “a few weeks later” than usual this year – MDN Ed.
• Luca: A year ago we launched the new iPhone in late September. This year the supply of the new product will be a few weeks later.
• Q: iPhone “a few weeks later?”
• Cook: We need to see a vaccine or therapeutic or both and we see some promising news; if this happens it’ll boost consumer sentin=ment quite a bit
• Q: Christmas shopping season affected by COVID-19?
• Cook: On Apple Watch, like the iPhone, it’s more affected by retail store closures because it’s a product that people like to try on first, choose bands, etc.
• Q: Wearables negatively impacted by COVID-19?
• Luca: We like the Services business because it’s recurring; we want to offer very compelling, great services (and products) to our customers
• Luca: We’ve had sequential expansion in gross margin in Services which was driven by mix
• Q: Gross margin increase in Apple Services?
• Retail stores reopened in a number of geographies; stores open and close based on COVID-19 cases
• Luca: Opex affected (travel, internal meeting costs, contributions to charities) by COVID-19; costs outweigh the savings, but well worth it
• Q: COVID-19 impact on opex?
• Cook: iPhone is slightly less YOY at end of Q3; iPad and Mac are constrained and therefore less YOY
• Q: Where do you think channel inventory is across major product categories?
• Cook: we believe we will have a strong back-to-school season
• There is some amount of work-from-home and remote learning that helps Mac and iPad and hurts wearables somewhat
• Cook: Install base is growing; bodes well for the future
• Q: Install base?
• Cook: Financing and trade-ins are working quite well in enticing customers to upgrade older iPhones
• Cook: Upgrade cycle extended in China, the rest of the world, during the depths of COVID-19 and continues somewhat today
• Q: High percentage of iPhone users on older iPhones in China?
• Foreign exchange and product mix changes will impact going forward
• Luca: Currency headwinds were strong during June quarter due to strong dollar; different mix can affect gross margins
• Q: Gross margins?
• Cook: iPhone SE, and stimulus, plus strong cycle of iPhone 11/Pr and retail store reopens helped
• Q: Was is iPhone growing so strongly during a pandemic?
• Cook: We look forward to shipping first Mac with Apple silicon later this year
• Apple silicon Macs will let Apple have a common architecture across all products that will unleash new innovation
• In China, Apple saw about 3 out of 4 buyers are new to Mac; 2 out of 3 buyers are new to iPad
• iPad very strong and the Mac also are strong double-digits
• iPhone 11 is No.1 in sales in urban China
• Cook: The growth in Greater China for the quarter of 2%. It was affected by currency headwinds
• Q: China sales?
• Luca: We expect all non-iPhone categories to have very strong performance; we are excited for the Mac and for iPad sales going forward
• Q: Mac momentum to continue?
• Content shot in LA area is particularly delayed due to COVID-19
• Cook: Production has been affected by COVID-19 for Apple TV+ as it has been for most content producers
• Q: Unintelligible
• Cook: iPhone 11 is the most popular iPhone
• Cook: With iPhone SE, we are seeing a higher switcher number and also people upgrading from older iPhones
• Apple iPhone is the top selling smartphone in many geographies
• Cook: We are optimistic with size of iPhone install base
• Cook: We are very pleased with how we did on iPhone in the quarter
• Cook: In June, we rolled out the ability to do interest-free financing and trade-in (which is becoming a more common trend, which is great for the environment) which makes the products “super affordable.”
• Q: How is Apple making products more affordable?
• Analysts’ questions begin
• Trading will begin on a split-adjusted basis on August 31, 2020
• Each Apple shareholder of record at the close of business on August 24, 2020 will receive three additional shares for every share held on the record date
• The Board of Directors has also approved a four-for-one stock split
• 16.5% tax rate expected
• $9.8-$9.9 billion opex expected
• Apple expects projects new iPhone supply to be available a few weeks later
• No revenue and margin guidance due to COVID-19 for fiscal Q420
• Retires 15.2 million AAPL shares during quarter
• Apple continues on path to become net cash neutral over time
• $113 billion in debt
• $194 billion in cash and marketable securityes
• Apple Business Chat has proven invaluable during COVID-19
• Active install base for both Mac and iPad reached a new all-time highs as 50% of buyers were new to Mac/iPad
• New iPad Pro received extremely well around the world
• New MacBook Pro and MacBook Air response has been extremely strong
• Mac grew double digits in each geographic segment
• Wearables business alone is the size of a Fortune 140 company
• Over 550 million paid subscriptions across all Services, up 130 million YOY
• Customer engagement in Apple ecosystem grows: New all-time high of paid accounts increasing double digits
• Apple attributes stronger May and June performance to iPhone SE and stimulus
• COVID-19 was most impactful during the first three week of April with marked improvement in May and June
• Services gross margin: 67.2%
• Products gross margin: 29.7%
• Compnay-wide gross margin: 38%
• AAPL after hours: $406.25, +$21.49 (+5.59%) @ 5:17PM EDT
• Mac, iPad, Wearables saw strong double-digit growth
• Apple’s record June quarter was driven by double-digit growth in both Products and Services and growth in all geographic segments
• Luca: June quarter was testament to Apple’s ability to innovate during difficult times
• Apple works to be carbon neutral by 2030
• Mac transition to Apple silicon will achieve unprecedented performance for the Mac
• WWDC 20 set a new standard of online virtual conference and had more than 22 million viewers
• Cook thanks AppleCare and Apple Retail teams for work during COVID-19 closures
• Net sales by category:
– iPhone: $26.418B (vs. $25.986B YOY)
– Mac: $7.079B (vs. $5.820B YOY)
– iPad: $6.582B (vs. $5.023B YOY)
– Wearables, Home and Accessories: $6.450B (vs. $5.525B YOY)
– Services: $13.156B (vs. $11.455B YOY)
• Apple proud to announce having hit gaol of doubling 2016 Services revenue six months early
• All-time records in Apple Services
• Apple saw two distinct trends: AppelCare and advertising were reduced as expected du to COVID-19
• New all-time records for install bases across all categories
• Wearables grew by strong double digits
• iPad and Mac saw very strong results despite production backlogs
• iPhone revenue grew 2% this quarter – saw better than expected demand in May and June
• Cook: Due to COVID-19, Apple did not provide guidance
• Cook: Apple started the $100 million Racial Equity and Justice Initiative
• Cook: In an uncertain environment, Apple set a June quarter record of $59.7 billion, up 11% YOY
• Cook: Mourns and memorizes John Lewis
• Start of conference call
• The dividend is payable on August 13, 2020 to shareholders of record as of the close of business on August 10, 2020
• Apple’s Board of Directors has declared a cash dividend of $0.82 per share of the Company’s common stock
• AAPL: $405.70, +20.94 (+5.44%) @ 4:36PM ED
• AAPL after hours: $398.00, +13.24 (+3.44%) @ 4:30PM EDT
• AAPL at close: $384.76, +4.60 (+1.21%) @ 4:00PM EDT
