Notes of interest from Apple's Q4 2019 earnings report and conference call

AppleInsiderAppleInsider
Posted:
in AAPL Investors edited December 2019
Following the publication of its final fiscal quarter of 2019 results, encompassing July through September, Apple provided additional detail surrounding the particulars of the report during an hour-long conference call.

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


The numbers:

Apple's fourth fiscal quarter earnings

Apple reported revenue of $64 billion, with a profit of $13.69 billion. Specifically, $33.36 billion came from the iPhone, $6.99 billion came from the Mac, and $4.66 billion came from the iPad. Apple also reported $12.5 billion in services revenue, with an additional $6.52 billion coming from accessories, home, and wearables.

"We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad," Apple CEO Tim Cook said in a statement. "With customers and reviewers raving about the new generation of iPhones, today's debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we're very optimistic about what the holiday quarter has in store."

2019 Q4 Apple quarterly revenue and net profit
2019 Q4 Apple quarterly revenue and net profit


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

Refresh this page frequently for the most up-to-date information.

Highlights from the earnings report, and the conference call

  • Apple is predicting revenue in the holiday quarter of between $85.5 billion and $89.5 billion

  • Gross margin for the first fiscal quarter of 2020 is expected to be between 375% and 38.5%

  • Apple executed $18 billion in share repurchases, and doled out $3.5 billion in dividends

  • For reference, Apple reported $84.3 billion in the first quarter of fiscal year 2019 -- after it revised downward - MW

  • Tim Cook: Greater improvement in revenue trends in Greater China

  • Massive growth in Apple Pay, with greater growth rate versus PayPal

  • Starting later this year, customers can pay for an iPhone directly from Apple Card over 24 months

  • Q4 revenue records for wearables in every tracked market

  • 17% growth in iPad Pro, ongoing momentum of lineup

  • Tough compare to last year's fourth quarter because of release cycle, but highest annual revenue from Macs ever over fiscal year

  • No new info on Mac Pro release

  • Overall success with annual revenue records in US, Germany, Poland, Canada, Korea, Philippines, Vietnam, and more

  • Luca Maestri: Foreign exchange negatively impacted revenue by $2 billion

  • Year over year in China has become more favorable in every quarter in FY19, 19% in first quarter to 2% in fourth quarter

  • Services gross margin, 61.4%

  • Active installed base of iPhone all-time high in each geographical segment

  • Business buyers - 83% plan to buy iPhones

  • All markets Services grew double-digit percentages

  • Services is 20% of the revenue mix, 33% of gross margin mix

  • Double-digit growth of paid Services accounts in every market in the quarter, 450M accounts, versus 330M year-ago-quarter

  • More than 35,000 subscription apps, largest is 0.25% of total services revenue

  • Best quarter ever for AppleCare

  • Over 5000 authorized service centers (including BestBuy)

  • MacBook Air best product in the quarter for revenue.

  • More than half Mac purchasers new to Mac

  • Active install base of Mac at an all-time high

  • Same for iPad with more than half new to iPad

  • Wearables, etc grown by AirPods, Beats, Apple Watch

  • Record revenue in every tracked market

  • More than 5x the iPhone trade-in volume versus 2018

  • At 5:29 PM Eastern Time, AAPL is up $4.33 per share after-hours - MW

  • Apple products being used for the US census with CDW

  • Over $1B negative headwind in foreign exchange predicted for holiday quarter and incorporated in estimates

  • Nancy Paxton is retiring after 93 earnings calls, over 30 years with Apple

  • Questions and answer time!

  • Katy Huberty: Talk about drivers that will allow to return iPhone to growth

  • Cook: Thrilled with iPhone 11 family. "Early, but the trends look very good"

  • Current thinking is in guidance, says Cook.

  • Huberty: Lots of headwinds, including trade war possibility

  • Maestri: Higher mix of product revenue main driver of holiday revenue, better commodity pricing, guidance incorporates existing threats

  • Mike Olson - Piper Jaffray: Is health-related features a primary driver of wearables growth?

  • Cook: "Acceleration further from the previous quarter, we're thrilled with the results."

  • Cook: "Totality" of wearables is about what's driving growth. Use-cases vary.

  • Cook: "There will be a day in the future where we look back and Apple's greatest contribution will be to users' health."

  • Olson: Why give away Apple TV+?

  • Cook: "Gift to the users" - allows Apple to focus on maximizing subscribers in the early-going

  • Amit Daryanani - Evercore: Opportunities for product growth?

  • Cook: Opportunities abound, make customers happy

  • Daryanani - Attach rate for AirPods and whatnot to iPhone?

  • Cook: Not releasing attach numbers. "Nice try to get me to say that."

  • Cook: About 3/4 of Apple Watch buyers are new to Apple Watch

  • Cook: "AirPods just keep hitting new highs"

  • Shannon Cross - Cross research: China, trends & receptions?

  • Cook: "Very good September." The reception is good for iPhone 11 family

  • Cook: Significant improvement in China as the year has progressed.

  • Cook: Combination of things that have turned things around. Trade tension is less, looks positive

  • Cook: Not all about iPhone in China. Services grew double-digits, key gaming approvals have started

  • Cross: Operating expense growth faster than revenue?

  • Maestri: OpEx cyclical. Approach not changing.

  • Tony Sacconaghi - Bernstein: Why is guidance not stronger for the holiday quarter?

  • Maestri: Guidance implies an acceleration of growth, reiterates Forex negative headwind

  • Maestri: Launch timing of iPad Pro, Mac different on a year-over-year basis.

  • Sacconaghi: Will Apple hardware ever be included in a bundle? How will the free offer be accounted for?

  • Maestri: The Accounting math on the "take rate" is complex and will not be shared.

  • Cook: "We look at each service and determine what's best for it and us." Reiterates "gift for users."

  • Cook: "Not part of a broader pattern" but won't rule out a future free offering.

  • Cook: Some customers view hardware as a subscription now. It will grow disproportionately. Apple making it simpler to get on financing

  • Chris Caso - Raymond James: Will you be aggressive on iPhone pricing in the holiday season for elasticity?

  • Cook: Product is most important, and we like the pricing

  • Cook: Product first, prices fall out of that. We did decide to be more aggressive in the iPhone 11 pricing

  • Caso: Tariff impact on Apple pricing?

  • Cook: We're paying some now.

  • Cook: "My view is very positive in how things are going, and that positive view is factored into our guidance as well."

  • Samik Chatterjee - JP Morgan: Engagement on Apple Arcade? Guidance on subscribers?

  • Cook: Nope, no guidance on conversion rate. "Really pleased with the number of people that entered the trial"

  • Chatterjee: Upgrade rates on Apple Watch and wearables?

  • Cook: "We haven't seen enough upgrade cycles to establish a pattern."

  • Cook: Suspect that the AirPods Pro are a prime target for people that want a second pair

  • Call ends. So long, Nancy Paxton!
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Comments

  • Reply 1 of 31
    iOS_Guy80iOS_Guy80 Posts: 814member
    👏👍to that you analysts.
    AppleExposedlkruppcornchipMisterKitbshankwatto_cobra
  • Reply 2 of 31
    avon b7avon b7 Posts: 7,696member
    Isn't that guidance way below guidance for the same period last year? I know it was missed spectacularly but this year's offering is a lot better than last year's and services should grow by a couple of billion.
    lkruppmuthuk_vanalingam
  • Reply 3 of 31
    sacto joesacto joe Posts: 895member
    $64 B is an all time high for this quarter. It’s also right at the absolute high end of Apple’s guidance a quarter ago.

    Not dead yet....
    cornchiptmayramanpfaffbshankSpamSandwichwatto_cobra
  • Reply 4 of 31
    AppleExposedAppleExposed Posts: 1,805unconfirmed, member
    Services will skyrocket as Arcade and TV+ enter next quarter. Is guidance for next quarter also a record?
    watto_cobra
  • Reply 5 of 31
    lkrupplkrupp Posts: 10,557member
    avon b7 said:
    Isn't that guidance way below guidance for the same period last year? I know it was missed spectacularly but this year's offering is a lot better than last year's and services should grow by a couple of billion.
    Yeah, we know, we know, you keep reminding us that Apple is failing and their apparent success is an illusion. Thanks for pointing out the negative in everything.
    cornchipSoliJWSCStrangeDaysmwhitethtAppleExposedbshanklolliverwatto_cobra
  • Reply 6 of 31
    SoliSoli Posts: 10,035member
    lkrupp said:
    avon b7 said:
    Isn't that guidance way below guidance for the same period last year? I know it was missed spectacularly but this year's offering is a lot better than last year's and services should grow by a couple of billion.
    Yeah, we know, we know, you keep reminding us that Apple is failing and their apparent success is an illusion. Thanks for pointing out the negative in everything.
    He said that iOS for iPad is kinda-sorta decent and isn't completely shit… which shows that he's credible and objective in his Apple bashing. LOL
    lkruppmwhiteAppleExposedlolliverwatto_cobra
  • Reply 7 of 31
    lkrupplkrupp Posts: 10,557member
    iOS_Guy80 said:
    👏👍to that you analysts.
    AAPL up $4.09 in after hours trading. Should break $250 tomorrow. And my financial advisor just added some more AAPL to my portfolio.
    radarthekatramanpfaffAppleExposedwatto_cobra
  • Reply 8 of 31
    apple ][apple ][ Posts: 9,233member
    Apple is doing great.

    Anybody who doubts Apple is bluntly speaking a verifiable fool. 


    radarthekatAppleExposedbshanklolliverwatto_cobra
  • Reply 9 of 31
    sflocalsflocal Posts: 6,096member
    $64B is just insane.  Where are those bedwetters that have been clamoring for Tim Cook's termination?
    JWSCStrangeDayslkrupptmaymwhiteAppleExposedlolliverwatto_cobrazhiro
  • Reply 10 of 31
    matrix077matrix077 Posts: 868member
    From negative 15% the past 3 quarters to negative 9% this quarter of iPhone sale just show how much impactful iPhone 11 is. Next quarter will be awesome. 
    And next quarter wearables will be through the roof.  :o
    radarthekatAppleExposedbshanklolliverwatto_cobra
  • Reply 11 of 31
    radarthekatradarthekat Posts: 3,843moderator
    86 million shares retired through open market repurchases at $209.30 per share.  That’s a pretty good use of cash if you ask this long-term shareholder.
    JWSCWgkruegerbshankSpamSandwichlolliverwatto_cobrazhiro
  • Reply 12 of 31
    entropysentropys Posts: 4,168member
    Awesome figures. Probably explains why we haven’t seen macs with the latest CPUs and GPUs yet. Apple can take its time.
    bshankwatto_cobra
  • Reply 13 of 31
    entropysentropys Posts: 4,168member
    • Massive growth in Apple Pay, with greater growth rate versus PayPal
    • Starting later this year, customers can pay for an iPhone directly from Apple Card over 24 months
    Those two strategies are giant moves. encourage people to get an Apple Card, make it easier to choose iPhone, and no doubt increase ASP of iPhones.
    caladaniantmayWgkruegerAppleExposedlolliverwatto_cobra
  • Reply 14 of 31
    radarthekatradarthekat Posts: 3,843moderator
    sflocal said:
    $64B is just insane.  Where are those bedwetters that have been clamoring for Tim Cook's termination?
    https://fortune.com/2013/03/07/lets-revisit-ed-zabitskys-270-per-share-apple-price-target/

    Ed Zabitsky may eventually be proved correct on his $270 call on Apple.  Except...  he made that call before the 7:1 split.  Hahaha. 

     He’s already correct about going down in flames.  Except...  it’s he who went down in flames, not Apple.
    edited October 2019 mwhiteAppleExposedbshanklolliverwatto_cobra
  • Reply 15 of 31
    maestro64maestro64 Posts: 5,043member
    radarthekat said:
    86 million shares retired through open market repurchases at $209.30 per share.  That’s a pretty good use of cash if you ask this long-term shareholder.
    Yep, i plan to be last man standing with my shares, Those who hold will be rewarded.
    bshanklolliverwatto_cobra
  • Reply 16 of 31
    lkrupplkrupp Posts: 10,557member
    So Tim must be doing something right, eh, but fire him anyway.  Don't you just love the tools who repeat this bullshit ad infinitum? 
    mwhiteAppleExposedbshanklolliverwatto_cobra
  • Reply 17 of 31
    tmaytmay Posts: 6,342member
    Soli said:
    lkrupp said:
    avon b7 said:
    Isn't that guidance way below guidance for the same period last year? I know it was missed spectacularly but this year's offering is a lot better than last year's and services should grow by a couple of billion.
    Yeah, we know, we know, you keep reminding us that Apple is failing and their apparent success is an illusion. Thanks for pointing out the negative in everything.
    He said that iOS for iPad is kinda-sorta decent and isn't completely shit… which shows that he's credible and objective in his Apple bashing. LOL
    Avon b7 must not realize that iPad has its own OS.

    I certainly am not the one to post a massive retort about Huawei's margins, nor Huawei's ASP compared to Apple's margins and ASP respectively for iPhones.

    Hint: Huawei compares very unfavorably.
    SoliAppleExposedlolliverwatto_cobra
  • Reply 18 of 31
    tzeshantzeshan Posts: 2,351member
    Apple could be banned in China if FCC decided to ban Huawei smartphones in US on Nov 17. 
  • Reply 19 of 31
    avon b7avon b7 Posts: 7,696member
    lkrupp said:
    avon b7 said:
    Isn't that guidance way below guidance for the same period last year? I know it was missed spectacularly but this year's offering is a lot better than last year's and services should grow by a couple of billion.
    Yeah, we know, we know, you keep reminding us that Apple is failing and their apparent success is an illusion. Thanks for pointing out the negative in everything.
    That's a skewed way of seeing things if ever there was one.

    The comment was actually a positive! LOL.

    A year ago, Apple was giving upper end guidance of around $93B IIRC. The lineup was far, far worse than this year's lineup.

    This year we have far better hardware.
    The hardware has caught up the competition in some key areas.
    Prices have been shaken down hard.
    Services is growing
    New services are coming online for this quarter.
    There are supposedly millions of people with older phones ripe for upgrade.

    In my book that leads to far more optimism when compared directly to the same period just a year ago. However, in spite of all that, guidance is off last year's guidance.

    Apple being conservative? Or is there something else weighing the guidance down?

    So, let me ask you, where was the negative in my comment?

    Didn't you ask yourself the same question?
    edited October 2019 muthuk_vanalingam
  • Reply 20 of 31
    WgkruegerWgkrueger Posts: 352member
    maestro64 said:
    radarthekat said:
    86 million shares retired through open market repurchases at $209.30 per share.  That’s a pretty good use of cash if you ask this long-term shareholder.
    Yep, i plan to be last man standing with my shares, Those who hold will be rewarded.
    Just don’t be greedy. Many times I waited for the final outcome only to end up with a loss. 
    watto_cobrazhiro
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