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Q2 2017 Transcript: The Financial Conference Call's Opening Statement from Apple's CEO



The following report covers the traditional opening commentary from Apple's CEO Tim Cook on the highlights for their latest financial quarterly results. The following transcript covers Apple's Q2 2017 highlights for: iPhone, Product RED; Services; App Store; Apple Music subscriptions; Apple Pay; Mac; iPad; iMessage; Apple Watch; AirPods; Greater China; Apple Retail, India, Capital Return Program; WWDC 2017; Environmental Responsibility; Apple Park and Investing in America.


While in some ways it's easier to just listen to the audio of the conference event, a transcript makes it easier to quote Tim Cook accurately in future reports while acting as a quick reference document for our guests and fans.


Tim Cook's Opening Statement began with iPhone


Today we are reporting strong March Quarter results with accelerating revenue growth and earnings per share up 10% over last year. We feel great about this performance. Revenue was 52.9 billion dollars, near the high-end of our guidance range. Local revenue was up 5% year-on-year with growth accellerating from out December performance. That's despite a one billion dollar year-over-year revenue headwind from foreign exchange in the March quarter and a larger iPhone channel inventory reduction this year versus last year.


iPhone sales were inline with our expectations and we're thrilled to see the continued strong demand for the iPhone 7 Plus with its beautiful large display and dual camera system. Our active installed base of iPhones grew by double digits year-over-year and based on the latest data from IDC we gained market share in nearly every country we track.


Product RED


Late in the quarter we released the stunning Product RED special edition version of iPhone 7 and 7 Plus in recognition of ten years of our partnership with RED. This relationship has given our customers an unprecedented way to contribute to the Global Fund and bring the world step closer to an Aids-Free generation. We've seen a wonderful customer response to these eye-popping new iPhones.




For the second quarter in a row our services revenue topped $7 billion dollars and its well on the way to being the size of a fortune 100 company. We've very happy to see the deep level of customer engagement with the Apple ecosystem across all of our services.


App Store


App Store momentum is terrific with revenue growing 40% year-over-year to an all-time quarterly record. The number of developers offering apps for sale on our store was up 26% over last year and we're thrilled to see their success.


Apple Music Subscriptions


We also saw double digit revenue growth from Apple Music subscriptions and iCloud storage and overall very strong growth in the total number of paid subscriptions for our own services and the third party content we offer on our stores. Paid subscriptions now exceeds a 165 million.


Apple Pay


Apple Pay is experiencing phenomenal traction with the launch of Taiwan and Ireland in the March quarter Apple Pay is now live in 15 markets with more than 20 million contactless ready locations including more than 4.5 million locations accepting Apple Pay in the U.S. alone.


We're seeing strong growing usage as points of acceptance expand with transaction volume up 450% over the last 12 months. In the UK for example, points of acceptance have grown by 44% in the last year while monthly Apple Pay transactions have grown by nearly 300%.


In Japan, where Apple Pay launched last October more than half a million transit users are completing 20 million Apple Pay transactions per month. And we're always excited to see our partners bring their customers new ways to use Apple Pay.




You can now even send a Starbucks gift card via iMessage with just a touch. We're seeing great momentum from our powerful advances in Messages. In fact one point during the Superbowl in February customers were sending 380,000 messages per second, more than double the previous year.


A few weeks ago we introduced 'Clips,' a new app that's another great example of how we're continually making our products even more engaging and it's off to a great start.


With Clips its fun and easy to combine video, photos and music on an iPhone or an iPad into great looking expressive videos, with great visual effects and titles just using your voice and share you Clips with friends through the Messages app or on social media.




We had great Mac results during the quarter. Revenue grew 14% to a new March quarter record and gained market share thanks to strong demand for our new MacBook Pros. Our Macs business has generated over $25 billion dollars in revenue over the past four quarters. We're investing aggressively in its future and we're very excited about the innovation that we could bring to the platform.




We've also updated our most popular sized iPad with a brighter Retina display and best in class performance at its most affordable price ever – and customer response to date has been very strong.


iPad results were ahead of our expectations and we believe we gained share during the March quarter in a number of major markets including the U.S., Japan and Australia.


iPad remains the world's most popular tablet and it's the primary computing device for millions of customers across the globe.


Apple Watch


Building on the momentum of the holiday quarter, Apple Watch sales nearly doubled year-over-year (YoY). Apple Watch is the best selling most loved smartwatch in the world and we hear wonderful stories from our customers about its impact on their fitness and health.




We're also seeing great response to AirPods with a 98% customer satisfaction rating based on a recent Creative Strategies survey. Demand for AirPods significantly exceeds supply and growth in Beats products has also been very strong. In fact, when we combine Apple Watch, AirPods and Beats headphones, our revenue from Wearable products in the last four quarters was the size of a fortune 500 company.


Greater China


In Greater China we were very pleased to see strong double digit revenue growth from both Mac and services during the March quarter. We also had great results from our retails stores in Mainland China with total store revenue up 27% over last year and comp store revenue up 7%.


These results contributed to our improving performance in Greater China. For the first two quarters of fiscal 2017 our YoY comparisons improved significantly over the last two quarters of fiscal 2016.


First half revenue was down 13% YoY about a third of which was attributable to FX (Foreign Exchange). That's in contrast with 32% revenue decline in the second half last year.


Our March quarter result were inline with our expectations and similar to the YoY performance we experienced in the December quarter. We continue to be very enthusiastic about our opportunity in China.




We set a new March quarter record for India where revenue grew by strong double digits. We continue to strengthen our local presence across the entire ecosystem and we're very optimistic about our Future in this remarkable country with its very large young and tech-savy population, fast growing econony and improving 4G infrastructure.


Apple Retail


Apple Retail is in an exciting chapter with new experiences for customers and breathtaking new store designs. With the opening of our newest store in Dubai this past weekend, we now have 495 retail locations worldwide. The new Apple Dubai Mall is a truly international store with employees who collectively speek 45 languages and are already welcoming customers from around the world.


Capital Return Program


As Luca will discuss in a moment, today we're also providing an update to our capital return program. Given our strong confidence in our future, we're increasing the program size by $50 billion bringing the total to $300 billion annually and extending the time frame through March 2019. We're adding to our share repurchase authorization and increasing our dividend for the fifth time in less than five years.


WWDC 2017


We're very excited about our upcoming Worldwide Developers Conference taking place in San Jose next month. The conference is significantly over subscribed and we'll be welcoming thousands of attendees. We look forward to helping them learn about breakthrough technologies across all four of our software platforms: iOS, macOS, watchOS and tvOS that enable developers to create incredible experiences from every aspect of customer's lives and improve the way they manage their homes, cars, health and more.


Environmental Responsibility


I'm very proud to mention that we recently released our tenth annual environmental responsibility report reflecting our amazing progress. In 2016, 96% of the electricity used at Apple's global facilities came from renewable sources of energy reducing our carbon emissions by nearly 585,000 metric tons. We're now 100% renewable in 24 countries including all of Apple's Data Centers. There's much more work to be done, but we're committed to leaving the world better than we found it.


Apple Park


Closer to home, we're excited about moving into our new corporate headquarters, Apple Park, our new center for innovation. The main building on Apple Park is designed to house 13,000 employees under one roof in an environment that fosters even greater collaboration among our incredibly talented teams.


Investing in America


We have many more ongoing investments in the United States economy since Apple is a company that could only have only been created in America. Through our innovative products, and the success of our business we're incredibly proud to support more than two million jobs in all 50 States and we expect to create even more.


Last fiscal year, we spent more than $50 billion in the United States with American suppliers, developers and partners and we continue to invest confindently in our future.


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