MacDailyNews presents live notes from Apple’s Q421 conference call

MacDailyNews presents live notes from Apple’s Q421 Conference Call with analysts starting at 5pm EDT / 2pm PDT today, October 28, 2021.

Apple today will provide live audio streaming of its Q421 Results Conference Call. This stream is best experienced on an iPhone 7 or later, iPad (5th generation or later), or iPod touch (7th generation) using Safari on iOS 12 or later; or a Mac using Safari on macOS Mojave 10.14 or later. Streaming to your TV requires an AirPlay 2–capable device, or via AirPlay to an Apple TV (2nd generation or later) with the latest Apple TV software or tvOS. Other platforms may also be able to access the stream using recent versions of Chrome, Firefox, or Microsoft Edge (MSE, H.264, and AAC required).

Apple’s live conference call webcast will begin at 5pm EDT / 2pm PDT today here.

Apple today posted a September quarter revenue record of $83.360 billion (vs. $64.698 billion YOY), up 29 percent year over year, and quarterly earnings per diluted share of $1.24 (vs. $0.73 YOY).

For the quarter, analysts’ consensus estimates expected Apple to post revenue of $84.85 billion with earnings per share (EPS) of $1.24.

Live notes from Apple’s Q321 Conference Call in reverse chronological order:

• AAPL After hours: $146.96 -$5.61 (-3.68%) @ 06:00PM EDT

• End of conference call.

• Cook: We look at a number of things internally that we don’t share externally or on an individual service basis (for example, Apple TV+ paid subscriptions)
• Q: New services color?

• Luca: Dec. quarter is the holiday season, so the percentage of products is higher than in the Sept. quarter. (Services have higher margins than products)
• Luca: We always make our products better, so costs are usually higher, so you see margin compression
• Q: Costs for new products?

• Cook: I wouldn’t rule anything out
• Cook: We look for those with differentiation; in Apple Silicon, for example, we could not buy that off the shelf
• Q: Acquisitions; internal development?

• Cook: It’s too early to know the mix
• Q: iPhone mix?

• Cook: I think there are some products that people buy as gifts that, if it’s not there, the sale is perishable, but Apple has a lot of products that people will wait for.
• Q: Can you recapture sales not met due to supply issue in Q122, in Q222?

• 745 million paid subscriptions, an increase of 160 million YOY; Apple has a lot of momentum in Services: $68 billion revenue in the last 12 months)
• Services?

• Cook: The amount of supply is growing dramatically, but the demand is so robust, the nominal amount of supply constraints for Q122 will be larger than $6 billion
• Q: Supply constraints cost?

• Cook: We are seeing a significant increase on freight costs, inflation, we expect other companies are seeing the same cost increases
• Q: Inflation?

• Cook: I would characterize iPhone demand we are seeing currently as “robust”
• Cook: Too early to talk about iPhone 13, but going into the cycle, results from last quarter, Apple grew on iPhone upgraders and switcher in strong double-digits
• Q: iPhone 13 upgrades, switchers?

• Cook: It’s very difficult to measure; a policy to restrict kids below a certain age to one hour on Fri, Sat, Sun – it’s very difficult ot see the impact on the App Store at this point.
• Q: Government action to limit time playing games affect Apple?

• Cook: We want users to decide whether to share data
• Cook: “Privacy is a basic human right”
• Cook: Customer satisfaction is high
• Q: App Tracking Transparency?

• Cook: The partnership between Apple and the carriers has never been stronger; on very solid footing
• Cook: 5G transition is a multi-year transition; customer benefits greatly from 5G
• Q: Carriers?

• Cook: We support the Chips Act
• Cook: The pandemic caused high demand, but initially orders were pulled, so now the supply chain is trying to recover from the COVID disruption
• Cook: I don’t see a fundamental error that we’ve made
• Q: Need to recalibrate supply chain?

• Cook: Side-loading apps would open iPhone/iPad to unreviewed apps and thwart privacy of the App Store; discussing with regulators and legislators
• Cook: We are keeping our focus on privacy and security
• Q: App Store changes due to legal rulings?

• Cook: We use multiple data point for demand and “we fell very very good on deamnd and are working feverishly on supply”
• Cook: Channel inventory is constrained, ended below and is currently below the targeted range
• Q: iPhone 13 demand?

• Luca: We launch a lot of new products into the holiday quarter, which result in higher costs, impacting margins (YOY, margins expected to be higher)
• Q: Gross margins to stay flat in December (holiday) quarter?

• Cook: Our operational team in world-class; working on the supply issues
• Cook: Chip supply crunch affect legacy nodes. On leading edge nodes, Apple does not have supply issues
• Cook: We’ve made great progress on COVID-related disruptions; better today than in September and first weeks of October
• Q: Is demand getting deferred or destroyed (going somewhere else)?

• Cook: You will see Apple do more and more things like that (flexibility on paying monthly or outright)
• Cook: iPhone was the first product to be sold on a monthly basis
• Q: Subscription bundles?

• Cook: Chip shortage remains an issue for Q122 (holiday quarter); Apple believes that the constraints will be larger than the $6 billion experienced in Q421
• Cook: If you look at Q421, Apple had about $6 billion in supply constraints (iPhone, iPad, Mac) due to chip shortages and COVID-related disruptions in S.E. Asia.
• Q: Supply chain issues?

• The dividend is payable on November 11, 2021 to shareholders of record as of the close of business on November 8, 2021
• Apple’s board of directors has declared a cash dividend of $0.22 per share of the Company’s common stock
• Apple expects tax rate of around 16%
• Apple expects 41.5 – 42.5% gross margin
• Apple expects iPad to decline YOY due to supply constraints
• Apple expects to set a new revenue record for the December quarter
• No guidance due to COVID
• Returned $24 billion to shareholders in quarter; $3.6B in dividends, $20 billion in buybacks of 137 million shares plus retired 5 million shares during quarter
• $66 billion in net cash
• Apple ends quarter with total debt of $125 billion

• Every product category in every geographic record set a new all-time record
• Over 745 million paid subscriptions across Services, up 160 million from last year
• Apple paid accounts grew double-digits and hit new all-time records in each geography
• Services: $18.277 billion – new all-time quarterly record
• Wearables, Home, and Accessories: $8.785 billion – new all-time quarterly record
• Luca covers strong response of enterprise to Apple products

• Around 50% of customers purchasing Mac nad ipad are new to the products; 97% customer satisfaction for each
• iPad demand is also very strong
• M1 MacBook Air drove strong Mac demand
• U.S. consumers iPhone customer satisfaction 98%
• iPhone 13 family seeing strong demand

• $1.24 diluted EPS, a quarterly record
• Services set all-time quarterly in Q421
• Strong double-digit growth in every geography
• Apple CFO Luca Maestri: Please to support very strong, record earnings for the quarter

• Apple is proud of product lineup and encouraged by customer response

• Apple is working on removing all plastic from packaging by 2025
• iPad and iPad mini now come with 100% recycled enclosures
• Cook touts work towards “carbon neutrality”
• Cook touts “racial justice and equity” programs; HSBU programs
• Cook touts Apple education programs as a “great equalizing force”

• All Apple Stores are open worldwide and have been for several weeks
• Apple opened several new retail stores around the world during the quarter
• Apple Card won JD Power award for customer satisfaction
• Cook touts Fitness+ additions
• Cook congratulates Apple TV+ on multiple Emmy and other awards wins

• Cook reviews recent product, software, and services releases
• Introduced the extraordinary M1 Pro and M1 Max SoCs
• iPhone 13 lineup is setting a new standard

• Cook: We see strong demand and are optimistic for the future

• iPhone: $38.868 billion (vs. $41.2 billion consensus estimate vs. $26.444 YOY)
• Mac: $9.178 billion (vs. $9.1 billion consensus estimate vs. $9.032 YOY)
• iPad: $8.252 billion (vs. $8.8 billion consensus estimate vs. 6.797 YOY)
• Wearables, Home, and Accessories: $8.785 billion (vs. $9.4 billion consensus estimate vs. $7.876 YOY)
• Services: $18.277 billion (vs. $17.7 billion consensus estimate vs. $14.549 YOY)

• Apple posted a September quarter revenue record of $83.4 billion, up 29 percent year over year, and quarterly earnings per diluted share of $1.24.
• $366 billion in annual revenue, 33% annual growth, with more than 20% product growth across all categories and in all geographic regions
• We are encouraged with our operations around the world amid COVID-19 response uncertainty
• Apple CEO Tim Cook: Good afternoon.

• Start of call

• AAPL After hours: $146.96 -$5.61 (-3.68%) @ 04:59PM EDT
• Note: In the holiday quarter ended December 29, 2018, Apple posted quarterly revenue of $84.3 billion.
• AAPL After hours: $147.20 -$5.37 (-3.52%) @ 04:53PM EDT
• AAPL After Hours: $146.60 -$5.97 (-3.91%) @ 04:47PM EDT