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Apple Inc. (AAPL)

Q1 2015 Earnings Conference Call

January 27, 2015 05:00 PM ET

Executives

Nancy Paxton - Senior Director, IR

Tim Cook - CEO

Luca Maestri - SVP and CFO

Analysts

Shannon Cross - Cross Research

Steve Milunovich - UBS

Katy Huberty - Morgan Stanley

Benjamin Reitzes - Barclays

Toni Sacconaghi - Bernstein

Gene Munster - Piper Jaffray

Rod Hall - JPMorgan

Amit Daryanani - RBC Capital Markets

Sherri Scribner - Deutsche Bank

Bill Shope - Goldman Sachs

Presentation

Operator

Good day ladies and gentlemen and welcome to this Apple Incorporated First Quarter Fiscal Year 2015 Earnings Release Conference Call. Today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead ma’am.

Nancy Paxton

Thank you. Good afternoon, and thanks to everyone for joining us. Speaking first today is Apple's CEO, Tim Cook; and he will be followed by CFO, Luca Maestri, and after that we’ll open the call to questions from analysts. Please note that some of the information you’ll hear during our discussion today will consist of forward-looking statements, including without limitation, those regarding revenue, gross margins, operating expenses, other income and expense, taxes and future products.

Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in Apple’s Form 10-K for 2014 and the Form 8-K filed with the SEC today, along with the associated press release. Apple assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. And I’d also just like to remind you that as we indicated in our last quarterly call, we’re now including the results of our retail stores in the geographic segments where the stores are located and retail is no longer classified as an operating segment.

We’ve also updated our product summary reporting and we’re now reflecting five categories of results; iPhone, iPad, Mac, Services and Other Products. We’ve prepared schedules showing reclassifications of historical operating segment and product results for each of the last 12 quarters to conform to these new groupings and they are available now on our Web site at apple.com/investor.

So I’d now like to turn the call over to Tim for introductory remarks.

Tim Cook

Thanks, Nancy. Good afternoon, everyone and thank you for joining us. Today we’re reporting on a historic quarter and I'm incredibly proud of everyone who contributed to the amazing results we’re about to hear. Interest in Apple products is at an all time high, with over 0.5 billion customer visits to our physical and online stores during the quarter. Demand for iPhone has been staggering, shattering our high expectation, with sales of over 74 million units, driven by the unprecedented popularity of iPhone 6 and iPhone 6 Plus. This volume is hard to comprehend. On average we sold over 34,000 iPhones every hour, 24 hours a day, everyday of the quarter.

The execution by all of our teams to achieve these results was spectacular. By the end of the quarter, our new iPhones were available in 130 countries around the world, making this our fastest and most successful roll out ever. Additionally, the App Store and the Mac each set new records for quarterly revenues. Mac units were up 14% to $5.5 million, while the rest of the PC market continued to decline. App Store revenues was up a remarkable 41%. Demand was strong around the world. Flurry estimated that Apple products accounted for over half all mobile device activations globally from December 19th to December 25th.

It was truly a momentous quarter for iOS. On November 22nd we shipped our 1 billionth iOS device. It was a Space Gray 64 gigabyte iPhone 6 Plus, which we’ve saved here at Apple. 1 billion devices is an almost unfathomable milestone, and we are all incredibly proud to be a part of it. Apple’s mission is to make the greatest products on earth and enrich the lives of others. Through the success of iOS we have provided hundreds and millions of people with powerful personal technology that is simple and fun to use. Our customers are using Apple products to transform education, discover new ideas for business and express their creativity in ways that no one could have imagined when we sold the first iPhone less than eight years ago. It’s amazing to watch and it reminds that people and great ideas are the reasons we make the things we make.

Our strong overall performance in the December quarter resulted in total company revenue of $74.6 billion, and earnings of $18 billion. Both of these numbers are all-time records for us, with revenues up 30% and earnings up 38% over last year. And due to our very large capital return activities, earnings per share were up even more at 48% to $3.06, also an all-time quarterly record. Our results would have been even stronger, absent fierce foreign exchange volatility.

We’ve also made great progress on a number of very exciting new initiatives to further strengthen our ecosystem. We’ve been blown away by the reaction to Swift, our new programing language. Inventing a new programing language is something very few companies can do, and we believe it will have a profound effect on our ecosystem. Swift became available in September as part of the Xcode tools and in the first month those tools were downloaded over 11 million times. A recent report from Redmonk showed that Swift has had unprecedented growth and is quickly climbing the list of the most popular programing languages.

Read the rest of this transcript for free on seekingalpha.com