Apple FY 1Q15 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

This volume is hard to comprehend

” 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”

Apple may have accounted for half of all mobile activations globally

“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.”

Watch should start shipping in April

“Development for Apple Watch is right on schedule and we expect to begin shipping in April. ”

Huge growth everywhere

“Our growth was broad based across the world, with revenue from developed countries up 20% and revenue from emerging countries up 58%. The performance of our Greater China segment was particularly impressive, with revenue up 70%”

iPhone revenue grew 57% y/y

“iPhone ASPs were $687, an increase of $50 over the year ago quarter. This led to iPhone revenue growth of 57% year-over-year, with quarterly sales exceeding $50 billion for the first time ever.”

Our customers love their iPhones

“Our customers love their iPhones. A December ChangeWave survey measured a 97% customer satisfaction rating for iPhone. A study published by Chitika Insights last month indicated that iPhone accounts for 53% of North America smartphone web traffic, almost twice the level of the next closest brand. And in the corporate market ChangeWave found that among IT buyers planning to purchase smartphones in the March quarter this year, 77% intend to purchase iPhones.”

Unprecedented currency impact

“Obviously, what we’ve seen during Q1 has been unprecedented movements in currencies. I would say during the course of the quarter the biggest impact came from the Japanese yen, the Russian rubel, but also from euro, Australian dollar, Canadian dollar. Our revenue growth during Q1 would have been four percentage points higher on a constant currency basis.”

Currency headwinds will be stronger in Q2 than Q1

“the foreign exchange headwinds will be stronger in Q2 than they were in Q1 for two main reasons. The first one is the fact that the U.S. dollar has continued to appreciate against foreign currencies during the last few weeks. And the other one is the fact that our existing hedges expire.”

Our hedges will continue to expire too

“our hedges continue to expire, they get replaced by new hedging contracts at current levels and so — and there is the impact that we would see during the course of the year.”

Just got to supply balance in Jan

“Just recently we became in supply demand balance on the 6 and 6 Plus in January. We were not able to reach a balanced state during our fiscal Q1.”

Lots of people still need to upgrade, lots of new customers. Very bullish on iPhone

“We believe that it’s the best smartphone in the world. Our customers are telling us that. The market is telling us that. We’re doing well in virtually every corner of the world. And so we’re very bullish that it does have legs. I would point out that only a small fraction of the installed base has upgraded. And so there is a lot more people within the installed base. But I would also point out that we had the highest number of customers new to iPhone last quarter than in any prior launch. And also that the current iPhone line up experienced the highest Android switcher rate in any of the last three launches in the three previous years.”

Very high expectations on the watch

“My expectations are very high on it. I’m using it every day and love it and I can’t live without it. So I see that we’re making great progress on the development of it. The number of developers that are writing apps more for it are impressive and we’re seeing some incredible innovation coming out there. ”

I think this is the year of Apple Pay

“given that we’ve launched in October, I’m actually unbelievably shocked, positively shocked at how many merchants were able to implement Apple Pay in the heart of their holiday season, because generally most people sort of lock down and don’t do very much. But we were able to get this in a lot of different merchants and I give them a lot of credit for that. But I think we’re just on the front end. And I think that this is the year of Apple Pay. ”

There are still a lot of potential new customers

“given there are fair amount of Android units out there, there is also an enormous amount of Android customers that could switch. And I’d also remind you that there is a lot of people that have not yet bought a smartphone. And I know it doesn’t feel like that when you’re sitting in the United States, but from a worldwide point of view there’s still lots of them. “