This is a summary of the fourth quarter fiscal 2008 earnings call conducted by Apple, Inc. (AAPL) October 21, 2008.
Management:
-
Senior Director, IR and Corporate Finance: Nancy Paxton
-
CFO, Senior VP: Peter Oppenheimer
-
CEO, Director: Steven P. Jobs
-
Chief Operating Officer: Timothy D. Cook
-
Treasurer: Gary Wipfler
Key Investor Issues:
- Apple''s profit rose to $1.14 billion, or $1.26 per share, from $904 million, or $1.01 per share in the same period a year ago.
- Sales climbed 27% to $7.9 billion from $6.22 billion in the year-ago quarter.
- Apple sold 6.9 million iPhone 3Gs in the quarter, up from the 6.1 million total first-generation iPhones sold. Apple also sold 2.6 million Macs and 11.1 million iPods.
- For the current quarter, Apple expects to earn $1.06 to $1.35 per share on sales from $9 billion to $10 billion.
Fourth Quarter Highlights:
September quarter results were record-breaking on a number of fronts:
- The company sold more Macs than in any other quarter in its history.
- Apple sold more iPhones in the quarter than in all previous quarters combined.
- The company sold more iPods than in any prior non-holiday quarter
- Apple generated more revenue and earnings than in any previous September quarter in its history.
Revenue for the quarter was $7.9 billion, representing 27% growth and an increase of $1.68 billion over the previous September quarter’s revenue of $6.22 billion.
- Operating margin for the quarter was better than expected at 18.3%, due to higher-than-anticipated gross margin.
- Net income was $1.14 billion, which was up 26% over the prior September quarter’s results and translated to earnings per share of $1.26.
iPhone unit sales grew significantly in the September quarter, resulting in a material increase in the amount of iPhone revenue and product costs that had been deferred for recognition in future periods. Specifically, deferred revenue from iPhone and Apple TV sales grew to $5.8 billion at the end of the September quarter, an increase of nearly $3.8 billion from the end of the June quarter. If iPhone revenue was not deferred, iPhone would have represented 39% of Apple''s revenue in the September quarter.
The company uses a non-GAAP measure that is called adjusted sales to provide more information regarding the underlying sales trends and to evaluate the sales dollars of products sold in the period. The company calculated adjusted sales by backing out the September quarter’s amortization of deferred revenue from iPhone and Apple TV sales and adding back all amounts generally due at the time of sale for iPhones and Apple TVs shipped in the September quarter.
Adjusted sales totaled $11.7 billion, which was about $3.8 billion higher than the reported revenue of $7.9 billion.
The company uses a non-GAAP measure called adjusted cost of sales that corresponds to adjusted sales. Apple calculated adjusted cost of sales by backing out the September quarter’s amortization of deferred costs related to iPhone and Apple TV and adding back the total cost of the iPhones and Apple TVs shipped in the September quarter. The company also used an estimate of the total future warranty expense related to the iPhones and Apple TVs sold in the September quarter rather than reflecting the actual iPhone and Apple TV warranty expenses incurred during the September quarter.
Aplle then calculated the non-GAAP measure of adjusted gross margin by subtracting adjusted cost of sales from adjusted sales. For the September quarter, adjusted gross margin was $4.6 billion, which was $1.8 billion higher than recorded gross margin.
The company used the non-GAAP measure of adjusted net income to evaluate its performance based on the current period iPhone and Apple TV sales and to facilitate ongoing operating decisions.
For the September quarter, adjusted net income was $2.4 billion, which was $1.3 billion higher than reported net income.
iPhone had a breakout quarter, thanks to the July 11th launch of the iPhone 3G.
The company sold nearly 6.9 million iPhones during the September quarter, exceeding the 6.1 million units shipped over the entire lifetime of the first generation iPhone. And with more than two months to go in the calendar year, the company has already surpassed its goal of 10 million iPhone sales in calendar 2008.
Recognized revenue from iPhone handset sales, iPhone accessories, and carrier payments totaled $806 million during the quarter.
The company dramatically expanded iPhone distribution in the last quarter. Apple increased the number of countries where it is selling iPhone from six to 51, and expects to be in more than 70 countries by the end of the December quarter.
With the addition of Best Buy, the company has over 3,100 points of iPhone distribution in the U.S. and with its international expansion, the company currently has over 30,000 points of distribution around the world.
The company has shipped over 2.6 million Macs, which was a new company record for any quarter.
This represents 21% year-over-year growth and is higher than the overall PC market rate of growth for the September quarter based on the latest estimate published by IDC. Although Mac sales grew faster than the market, Mac growth was impacted by purchase delays based on speculation about the new launch of the portables and budgetary constraints affecting education institution purchases.
The new MacBook and MacBook Pro redefined notebook design while dramatically lowering the entry price for advanced notebook features, including all metal enclosures, pro performance notebook graphics, brilliant instant on LED backlit displays, and new large glass multi-touch track-pads. The company began and ended the quarter with between three and four weeks of Mac channel inventory.
The company sold 11 million iPods, a new record for a non-holiday quarter and an increase of 8% over the year-ago quarter.
