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