• 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)


Innovation

Here'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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