Sean D. Emory
APPLE EARNINGS Q3 2018
Apple just reported and the overall figures are extremely healthy.
Here's a company and a CEO which for years have taken heat for the lack of absolute growth. Our stance has been clear. Apple maintains a loyal user base of over 1B installed devices, an abundance of cash to carefully move into growth areas, and well positioned globally to capture meaningful share of content, new technologies (AR/VR, AI, Cloud, gaming, etc), wearables, health, and we believe they will eventually move into a form of construction.
Here's the key data points on the quarter.
Apple is growing
Total revenue hit $53B during the quarter, which is 17% year over year.
On a trailing 12 month basis they saw $255B in revenue, which was 3.2% quarter to quarter.
The average iPhone price was up year over year to $724.
Apple has pockets of outsized growth
Services is now a $38B run rate and growing 31% year over year
Services is now 17.9% of revenue
Apple saw 4 of their 5 geographies grow by double digits year over year.
Margins are stable
Gross margin has been stable at 38.3%
Apple saw $73.6B in operating cash flow over the last 12 months
Apple is investing for the future & distributing cash
Apple now has $244B cash, which is a good starting point.
Apple returned about $25B to investors in the quarter alone.
Apple is still committed to getting to net debt neutral (Debt - Cash = 0)
InnovationHere's one stat you probably won't see in any other piece. Apple is now spending 6.9% of their revenue on R&D. This is the highest percent since June of 2003. Much of Apple's meaningful products came during this period. The key difference however was that the 7.8% R&D budget in 2003 was $~120M, today their 6.9% R&D spend is $3.70 billion.
Also, during the earnings call Tim Cook dropped this statement,
"Working on a product that we’re not ready to share all the details yet, but I couldn’t be more excited” — Tim Cook
This statement seemed like some sort of TV Subscription. We shall see overtime.
Regardless of this statement, Tim Cook deserves a great deal of credit for the company he has managed.
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Sean D. Emory
Avory & Co. Founder & Chief Investment Officer
Disclaimer: This is not a recommendation for purchase or sale of any securities. Avory is a shareholder of Apple at the time of this writing, but this can change at anytime
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