MacDailyNews presents live notes from Apple’s Q320 Conference Call with analysts starting at 5pm ET/2pm PT today, July 30, 2020.
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