Apple Earnings: Guidance, Cash, FX, Headwinds, Revenue, and the Customer

Guidance:

"Given the continued uncertainty around the world in the near term, we are not providing revenue guidance but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter."

"Overall, we believe our year-over-year revenue growth will accelerate during the September quarter compared to the June quarter despite approximately 600 basis points of negative year-over-year impact from foreign exchange. On the product side, we expect supply constraints to be lower than what we experienced during the June quarter. Specifically related to Services, we expect revenue to grow but decelerate from the June quarter due to macroeconomic factors and foreign exchange."

"We expect gross margin to be between 41.5% and 42.5%. We expect OpEx to be between $12.9 billion and $13.1 billion. We expect OI&E to be around negative (inaudible) impact from the mark-to-market of minority investments and our tax rate to be around 16%."

Cash Position: 

"We ended the quarter with $179 billion in cash and marketable securities. We repaid $3 billion in maturing debt while increasing commercial paper by $4 billion, leaving us with total debt of $120 billion. As a result, net cash was nearly $60 billion at the end of the quarter. We returned over $28 billion to shareholders during the June quarter. This included $3.8 billion in dividends and equivalents and $21.7 billion through open market repurchases of 143 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time."

FX Headwinds: 

"We're guiding 41.5% to 42.5%. On a sequential basis, the decline is expected to be driven by, as you mentioned, foreign exchange but also mix, which will be partially offset by better leverage. We expect foreign exchange impact on a sequential basis to be 50 basis points."

"If you look at it from a year-over-year standpoint, we are in the ballpark of a year ago in spite of the fact that foreign exchange is going to be 130 basis points negative to a year ago. So clearly, foreign exchange is something that is affecting us but we think we're navigating that fairly well."

"Company gross margin was 43.3%, down 40 basis points from last quarter as seasonal loss of leverage and unfavorable foreign exchange were partially offset by favorable mix. Products gross margin was 34.5%, down 190 basis points sequentially, mainly driven by seasonal loss of leverage, mix and FX. Services gross margin was 71.5%, down 110 basis points sequentially due to a different mix and foreign exchange." 

"Wearables, Home and Accessories revenue was $8.1 billion, down 8% year-over-year as we faced foreign exchange headwinds, different launch timing for Home and Accessories products and supply constraints as well as the overall macroeconomic environment."

Product Revenue:

"..Revenue was $63.4 billion with a June quarter revenue record for iPhone. During the quarter, our installed base of active devices continue to grow well, thanks to our unmatched levels of customer satisfaction and loyalty and reached an all-time high for all major product categories and geographic segments. Our Services set a June quarter revenue record of $19.6 billion, up 12% over a year ago, with all-time revenue records in the Americas and the rest of Asia Pacific and June quarter records in Europe and Greater China."

Customer Engagement:

“The first one is installed base. Installed base is the engine for our company and it continues to grow. As I mentioned, it has reached an all-time high across every geographic segment, across every product category. And so that's very important.”

“Then the second lever is the customer engagement. And we know that our customers are getting more and more engaged over time. Transacting accounts, paid accounts, paid subscriptions are growing, so the level of engagement continues to grow.”

“We also saw increased customer engagement with our Services during the quarter. Our transacting accounts, paid accounts and accounts with paid subscriptions all grew double digits year-over-year.”

*All statements from Apple CFO Luca Maestri.

Tim Cook on Privacy:

"..We view privacy as a fundamental human right. And so what we try to do with all of our features on privacy is put the decision back at the user where we believe it belongs as to whether they want to share their data or not. And so that was what was behind application tracking transparency and a number of other features. We're trying to empower the user to own their data and make their own choices."

"In terms of us selling ads, we have a search ad business across the App Store that we believe represents a great way for discovery for small and large developers. And so I see that we play a role in that."

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