Notes of interest from Apple's Q4 2018 earnings report and conference call

Posted:
in AAPL Investors edited November 1
Apple set a new high for the September quarter that is continuing to be supported by a premium-priced iPhone lineup, as well as continued growth in the services segment. Following the publication of its fourth fiscal quarter 2018 results, the company provided additional detail on the record-breaking performance in an earnings conference call.

Apple CEO Tim Cook and CFO Luca Maestri
Apple CEO Tim Cook and CFO Luca Maestri


The numbers: Apple's revenue for the fourth quarter of the fiscal year 2018 hit a record $62.9 billion for the September quarter, with 46.9 million iPhones, 9.7 million iPads, and 5.3 million Macs sold.

Participating in Thursday's call were Apple Chief Executive Tim Cook and Chief Financial Officer Luca Maestri.

Highlights

  • "We're thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018, the year in which we shipped our 2 billionth iOS device, celebrated the 10th anniversary of the App Store and achieved the strongest revenue and earnings in Apple's history," said Tim Cook, Apple's CEO. "Over the past two months, we've delivered huge advancements for our customers through new versions of iPhone, Apple Watch, iPad and Mac as well as our four operating systems, and we enter the holiday season with our strongest lineup of products and services ever."

  • "We concluded a record year with our best September quarter ever, growing double digits in every geographic segment. We set September quarter revenue records for iPhone and Wearables and all-time quarterly records for Services and Mac," said Luca Maestri, Apple's CFO. "We generated $19.5 billion in operating cash flow and returned over $23 billion to shareholders in dividends and share repurchases in the September quarter, bringing total capital returned in fiscal 2018 to almost $90 billion."

  • Apple's board of directors has declared a cash dividend of $0.73 per share of the Company's common stock. The dividend is payable on November 15, 2018 to shareholders of record as of the close of business on November 12, 2018.

  • Cook reiterating 2 billionth iOS device sold, Apple equivalent growth to a Fortune 100 company in a single year.

  • 41% year-over-year earnings per share gain.

  • Strong double-digit growth in revenue in all segments.

  • "We're not done yet." - Cook, referring to iPhone XR, Mac mini, MacBook Air, iPad Pro

  • iOS 12 installed on more systems in first month than any version of iOS ever.

  • "New iPad Pro unrivaled in versatility and performance"

  • Best quarter of Services revenue ever. 27% growth year-over-year minus one-time payment

  • Triple transaction volume year-over-year for Apple Pay

  • CostCo Apple Pay roll-out completed, Neiman Marcus at 40 stores

  • 60% of all US retail locations support Apple Pay, 71% of top 100 retailers

  • Cook promoting Mini as a professional product, again.

  • Record quarter for wearables, revenue increase of over 50%

  • ECG app available on Apple Watch "later this year"

  • Cook: Apple Watch is "One further example of the kind of contribution we can make in the health space, and we look forward to making more in the future."

  • 74,000 kids hosted at Apple Camp in retail stores

  • Education: more than 5000 schools, colleges now using Everyone Can Code around the world

  • More than 350 schools using Everyone Can Create

  • Aluminum alloy for MacBook Air, iPad Pro "designed by Apple" according to Cook

  • Luca Maestri: US consumers indicate customer satisfaction of 98% for iPhone X, 8, 8 Plus.

  • 80% of business owners plan to purchase iPhones according to same survey

  • Over 330 million paid subscriptions

  • 30,000 third-party subscription apps, largest is 0.3% of total services revenue

  • Mac momentum growing in Latin America, India, Middle East, Africa, Europe

  • Majority of September purchases new to Mac

  • Survey: iPad has 58% of US Market tablet share in the September quarter

  • 96% satisfaction for iPad, iPad Pro

  • 74% of businesses surveyed plan on purchasing iPad

  • 450 airlines, 47 of top 50 have adopted iOS for pilot flight bags

  • 9 of top 10 global retailers use iPads for customer, employee interactions

  • 240 large customers have signed mobile first or iOS deals since Apple partnered with IBM

  • SalesForce redesigning apps for exclusive new features on iOS

  • Plan to reach net-cash neutral position, over time is well underway

  • $90 billion returned to investors over the year between share repurchases and dividends

  • Services and Product revenue being reported slightly differently in next quarter, less than 1 percent of company revenue difference

  • Also starting next quarter, no more unit sales volumes reported for any product category, including iPhone, iPad, and Mac

  • Other products being renamed to "wearables, home, and other accessories"

  • Question and answer session

  • Regarding tariffs and "deceleration" in emerging markets, Cook: "Emerging markets that we're seeing pressure are Turkey, India, Brazil, Russia, markets where currencies have weakened over the recent period in some cases that resulted in us raising prices.

  • Business in India in Q4 was flat, Brazil was down YOY

  • "each one of the emerging markets has a bit of a different story, and I don't see it as some sort of issue that is common between those for the most part."

  • China: "I would not put China in that category." 16% growth in China, driven by iPhone double-digit growth.

  • App store in China: slowdown or moratorium on new game approvals, because of new regulations "things are not moving the way that they were moving previously"

  • Approvals: "Very far below historic pace."

  • "We don't know when approvals will return to a normal place."

  • AI Observation: Near-immediate $4 per share drop when Apple revealed that it wasn't breaking down sales figures in the next quarter - MW

  • Question about healthcare records -- Cook "Apple has a huge opportunity in health. You can see from our past several years that we have an intense interest in the space and are adding products and non-monetized services so far to that. I don't want to talk about the future, because I don't want to give away what we are doing, but this is an area of major interest to us."

  • Question about revenue range span and variables incorporated -- Maestri cites lineup and services going into holiday season, guidance represents a new quarterly revenue record. Reiterates previous remarks about guidance range, including launch timing of new iPhones reverse order versus 2017.

  • Maestri: "Virtually every foreign currency has depreciated against the dollar in the last 12 months. 200 basis points of headwinds translates into $2 billion of headwind to our revenue."

  • Supply and demand balance of products has yet to be determined.

  • First question about lack of sales volume no longer being reported, analysts are not pleased.

  • Units of sale are no longer relevant, according to Maestri.

  • Maestri notes that top competitors in computer and smartphone sales do not provide unit sales volumes.

  • Question - What impact does the iPhone XS family have on the iPhone XR: Cook has no substantive comment on the matter, "very very little data" with no obvious impact.

  • Question - Any plans to consider diversifying supply chain given geopolitical situation: Cook "If you look at the products that we have created and manufacturing, they are really manufactured everywhere. We have significant content from the US market, to Japan to Korea, and great content from China as well. The vast majority of the R&D is in the United States.

  • "That basic model where you look around the world and find the best in different areas, I don't expect that model to go out of style."

  • "Trade relationships are big and complex."

  • Cook reiterates that he is confident that countries can work together to solve problems from a trade perspective.

  • Question - NAND pricing is falling, why is margin not increasing: Maestri says that there will be some benefits to the commodity pricing, but offset by currency fluctuations.

  • Question - What are India challenges, and reiteration of fear about unit sales volume reporting stop: Cook reiterates previous remarks about India. "productive discussions" with India government. "Fully expect at some point that they will agree to let us bring our stores into the country."

  • Manufacturing in India is going well. Long-term is "very very strong there."

  • Maestri: Gross margins provided for services going forward. Reiterates previous remarks about why Apple will no longer be providing this information.

  • Cook: "our installed base is growing in double-digits, and that's probably a much more significant metric from an ecosystem point of view. This is a little but like if you go to the market and you push your cart up to the cashier and they ask 'how many units do you have in there'."

  • Call is over.
patchythepirate
«1

Comments

  • Reply 1 of 34
    Remind me what the dividend was last quarter. Is $0.73 about the same?  I thought it was higher. 
  • Reply 2 of 34
    JFC_PAJFC_PA Posts: 227member
    Remind me what the dividend was last quarter. Is $0.73 about the same?  I thought it was higher. 

    https://m.nasdaq.com/symbol/aapl/dividend-history

    The same.  Similar pattern as the past. They stay the same for multiple quarters. Up 27% YoY. 
    edited November 1
  • Reply 3 of 34
    eightzeroeightzero Posts: 2,199member
    Tim says that they could not be more bullish on Apple's future. I would expect them to be more bullish without the pending and likely tariffs that are coming to tax consumers on all Apple's products. 
  • Reply 4 of 34
    Nothing about further international Apple Pay roll-out or Apple Pay Cash?
  • Reply 5 of 34
    irelandireland Posts: 17,470member
    Greed.
  • Reply 6 of 34
    JFC_PAJFC_PA Posts: 227member
    eightzero said:
    Tim says that they could not be more bullish on Apple's future. I would expect them to be more bullish without the pending and likely tariffs that are coming to tax consumers on all Apple's products. 
    Consumers within the U. S. Significant of course but not “all”. 
    baconstang
  • Reply 7 of 34
    And here's your reward for massive sales and earnings:
    https://www.cnbc.com/2018/11/01/apple-earnings-q4-2018.html
    JFC_PA
  • Reply 8 of 34
    asciiascii Posts: 5,941member
    "We're not done yet," -- does that mean one more product release before end of year? iMac?
    jony0
  • Reply 9 of 34
    Luca just said Apple will no longer be providing unit sales data for iPhone, iPad and Mac. Finallly! Wall Street not happy. Stock down 7% now.
    edited November 1 patchythepirate
  • Reply 10 of 34
    ireland said:
    Greed.
    Envy.
    dick applebaumpatchythepiratejony0
  • Reply 11 of 34
    The most interesting aspect ....

    Apple said on its earnings call that starting next quarter, the company would no longer break out individual sales numbers for the iPhone, iPad and Mac.”


    Wall Street will not like that. 

  • Reply 12 of 34
    eightzeroeightzero Posts: 2,199member


    lewchenko said:
    The most interesting aspect ....

    ”Apple said on its earnings call that starting next quarter, the company would no longer break out individual sales numbers for the iPhone, iPad and Mac.”


    Wall Street will not like that. 

    ...and will seek to punish them accordingly.

    AppleInsider said:
    • AI Observation: Near-immediate $4 per share drop when Apple revealed that it wasn't breaking down sales figures in the next quarter - MW
    edited November 1
  • Reply 13 of 34
    ireland said:
    Greed.
    Envy.
    Lust.
  • Reply 14 of 34
    Market Cap under $1T now. Curious to see where it ends up tomorrow when the news of no longer reporting unit sales sinks in.
  • Reply 15 of 34
    k2kwk2kw Posts: 1,393member
    Luca just said Apple will no longer be providing unit sales data for iPhone, iPad and Mac. Finallly! Wall Street not happy. Stock down 7% now.
    What was the profit margin on the phones?   I would think it was real high since they ditched the QualComm modems.   It’s not like they reduced the price of the new iPhones for the cheaper modems.
  • Reply 16 of 34
    Market Cap under $1T now. Curious to see where it ends up tomorrow when the news of no longer reporting unit sales sinks in.
    How many other major tech companies give out official unit sales numbers?
  • Reply 17 of 34
    Time for Apple to do a mass buyback with stock down.
  • Reply 18 of 34
    bayside said:
    Market Cap under $1T now. Curious to see where it ends up tomorrow when the news of no longer reporting unit sales sinks in.
    How many other major tech companies give out official unit sales numbers?

    None.
  • Reply 19 of 34
    MisterKit said:
    Time for Apple to do a mass buyback with stock down.
    It's not down that much. If it fell 10% or more, sure.
  • Reply 20 of 34
    eightzeroeightzero Posts: 2,199member
    ireland said:
    Greed.
    Envy.
    Lust.
    Pride.
    dick applebaum
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