Apple Inc., Q1 2021 Earnings Call, Jan 27, 2021 - NasdaqGS:AAPL

NasdaqGS:AAPL

During the Apple Q1 Fiscal Year 2021 Earnings Conference Call on January 27, 2021, Tejas Gala, the Director of Investor Relations and Corporate Finance, made the following statements:

1. Opening Remarks:

   • Thanked participants and introduced the call.
   • Passed the call over to Apple's CEO, Tim Cook, and CFO, Luca Maestri, for opening remarks.

2. Forward-Looking Statements Disclaimer:

   • Noted that some of the information provided during the call would include forward-looking statements, including revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation, and future business outlook.
   • Emphasized that these statements involved risks and uncertainties that could cause actual results to differ materially from forecasts.
   • Directed listeners to refer to the risk factors discussed in Apple's most recently filed annual report on Form 10-K and the Form 8-K filed with the SEC that day, as well as the associated press release.
   • Stated that Apple assumed no obligation to update any forward-looking statements or information, which spoke as of their respective dates.

3. Introduction to Tim Cook:

   • Passed the call over to Tim Cook for introductory remarks.

4. Closing Remarks:

   • Provided details on how to access the replay of the call, including availability on Apple Podcast, as a webcast on apple.com/investor, and via telephone.
   • Provided telephone replay numbers and the confirmation code.
   • Mentioned that the replay would be available by approximately 5 p.m. Pacific Time on the day of the call.
   • Offered contact information for press inquiries (Kristin Huguet) and financial analysts (Tejas Gala himself).

These points summarize the contributions made by Tejas Gala during the call.

During the Q1 Fiscal Year 2021 Earnings Conference Call, Timothy D. Cook, CEO & Director of Apple Inc., provided the following remarks:

1. Opening Remarks:

   • He expressed gratitude for the hard work of Apple team members worldwide.
   • He reported that Apple achieved an all-time revenue record of $111.4 billion.
   • He acknowledged the challenges of the past year, particularly related to the COVID-19 pandemic.

2. Overview of Business Performance:

   • Apple saw strong double-digit growth across every product category.
   • All-time revenue records were achieved in each of Apple’s geographic segments.
   • He emphasized the role of Apple’s products in helping users navigate the challenges posed by the pandemic.

3. Hardware Performance:

   • Apple hit a new high watermark for its installed base of active devices, with over 1.65 billion devices worldwide.
   • iPhone grew by 17% year-over-year, driven by strong demand for the iPhone 12 family.
   • The active installed base of iPhones surpassed 1 billion.
   • iPad and Mac grew by 41% and 21%, respectively, reflecting their continuing role in users’ lives during the pandemic.
   • Wearables, Home, and Accessories grew by 30% year-over-year, driven by demand for Apple Watch, AirPods, and HomePod mini.

4. Services Performance:

   • Services achieved an all-time quarterly record of $15.8 billion.
   • The App Store ecosystem remained crucial for individuals, families, and businesses adapting to the pandemic.
   • Apple introduced the App Store Small Business Program to reduce commission rates for small businesses.
   • The company launched Apple One, a bundle of services, and felt optimistic about the future of its services.

5. Privacy and Social Responsibility:

   • Apple continued to set new standards for user privacy.
   • The company announced a $100 million Racial Equity and Justice Initiative.
   • Apple committed to supporting minority-owned businesses through investments in Harlem Capital and the Clear Vision Impact Fund.

6. Community Engagement:

   • Apple employees donated nearly $600 million and volunteered over 1.6 million hours to organizations.
   • The company adapted its $250 million effort to support HIV and AIDS work globally.
   • Apple is ahead of schedule on its multiyear commitment to invest $350 billion in the American economy.

7. Looking Forward:

   • Cook emphasized the need to work towards a durable and hopeful future post-pandemic.
   • Apple intends to be a partner in rebuilding communities and ensuring healing and progress.

8. Q&A Session:

   • Cook addressed questions about Apple’s strategy for evaluating new markets and entering new categories.
   • He discussed the strength of the installed base and the balance between switcher and upgrade activity.
   • Cook commented on the company’s performance in China, highlighting the strong response to the iPhone 12 family and the overall strength across product categories.
   • He shared insights into the growth opportunities for Apple, emphasizing the company’s strong product portfolio, pipeline, and expanding installed base.
   • Cook addressed the growth rates for Mac and iPad, noting the excitement around the M1 chip and the versatility of iPad as a laptop replacement or complement.

These remarks reflect Cook's overview of Apple's performance, his vision for the company's future, and his responses to specific questions from analysts.

Luca Maestri, CFO and Senior Vice President of Apple Inc., provided financial details and analysis during the Q1 Fiscal Year 2021 Earnings Conference Call on January 27, 2021. Below is a detailed summary of his statements:

Opening Remarks

• Apple achieved an all-time record revenue of $111.4 billion in Q1 FY2021, marking a 21% increase from the previous year.
• All product categories experienced strong double-digit growth, and all geographic segments set new revenue records.
• Products revenue reached an all-time record of $95.7 billion, up 21% from the prior year.
• Services set an all-time record of $15.8 billion, growing 24% year-over-year.
• Gross margin was 39.8%, up 160 basis points sequentially.
• Product gross margin was 35.1%, growing 530 basis points sequentially.
• Services gross margin was 68.4%, up 150 basis points sequentially.
• Net income, diluted earnings per share, and operating cash flow all set all-time records.

Revenue Category Details

iPhone

• iPhone revenue reached a record $65.6 billion, growing 17% year-over-year.
• Active installed base of iPhones surpassed 1 billion devices.
• Customer satisfaction for the iPhone 12 family was reported at 98%.

Services

• Services revenue set an all-time record of $15.8 billion, with growth in most categories, including App Store, cloud services, Music, advertising, AppleCare, and payment services.
• More than 620 million paid subscriptions across services on the platform, up 140 million from the previous year.
• Apple Music recently released a significant product update with features like Listen Now, all new search, personal radio stations, and autoplay.
• Apple Pay coverage expanded to nearly 90% of stores in the United States.

Wearables, Home, and Accessories

• Wearables, Home, and Accessories grew 30% year-over-year to $13 billion, setting new all-time records in every geographic segment.
• Wearables business is now the size of a Fortune 120 company.
• Nearly 75% of customers purchasing Apple Watch during the quarter were new to the product.

Mac

• Mac set a December quarter record for revenue at $8.7 billion, up 21% over the previous year.
• Strong demand for the new MacBook Air, MacBook Pro, and Mac mini, all powered by the M1 chip.
• Set all-time revenue records in Europe and Rest of Asia Pacific, as well as December quarter records in the Americas, Greater China, and Japan.

iPad

• iPad revenue was $8.4 billion, up 41%.
• Set an all-time record in Japan.
• Customer satisfaction for iPad was measured at 94%.

Cash Position

• Ended the quarter with nearly $196 billion in cash plus marketable securities.
• Retired $1 billion of maturing debt, leaving total debt at $112 billion.
• Net cash was $84 billion at the end of the quarter.
• Returned over $30 billion to shareholders during the December quarter, including $3.6 billion in dividends and $24 billion through open market repurchases.

Guidance for the March Quarter

• Will not be guiding to a specific revenue range due to continued uncertainty around the world.
• Expects growth to accelerate year-over-year and follow typical seasonality on a sequential basis.
• Gross margin expected to be similar to the December quarter.
• Operating expenses (OpEx) expected to be between $10.7 billion and $10.9 billion.
• Other income and expense (OI&E) expected to be up around $50 million.
• Tax rate expected to be around 17%.
• Board of Directors declared a cash dividend of $0.205 per share of common stock.

Conclusion

• Luca concluded by opening the call to questions from analysts.