Apple Posts Q1 2019 Results

Back on January 2nd, I wrote a post about Apple revising its guidance for the first quarter of 2019. Today Apple announced their results.

Apple posted quarterly revenue of $84.3 billion, this is a decline of 5 percent from Q1 2018. Even with revenue being own, the earnings per share is up 7.5 percent, as compared to a year ago, to $4.18 per share

The iPhone’s revenue declined 15 percent, which is why Apple provided the revised guidance earlier this month. However, the revenue from the remaining products were up 19 percent. Services, which is one of the areas that Apple has wanted to highlight is up to $10.9 billion, or 19 percent. Revenue for the Mac was up 9 percent, while Wearables is up 33 percent.

The Wearables revenue is likely primarily driven by two products, the Apple Watch and AirPods. Additional wearables include the Beats headphone line and the HomePod.

Other Tidbits

There are some other tidbits from Apple’s condensed statement.
  • Revenue in America is up about $1.75 billion, or about 5 percent.
  • Revenue in Europe, China, and Japan is down, $691 million, $4.78 billion, and $327 million respectively. This translate to 3.39 percent, 36.3 percent, and 4.73 percent respectively.
  • Revenue in the rest of Asia, outside of Greater China and Japan, is up $75 million, or about 1/10 of a percent.

Q2 2019 Guidance

As with all previous quarters, Apple has provided some guidance for Q2 2019. The guidance provided is:

  • revenue between $55 billion and $59 billion
  • gross margin between 37 percent and 38 percent
  • operating expenses between $8.5 billion and $8.6 billion
  • other income/(expense) of $300 million

Closing Thoughts

Even though Apple had to restate some of its guidance, Apple is on a solid footing for its overall business.

Source: Apple


Apple Provides Q1 2019 Guidance Revision

Today Tim Cook sent a letter to investors. The letter contains some adjustment to their first quarter guidance for 2019. At the last investor call, in October, Apple issued guidance of $89 to $93 billion in revenue and grow margins of between 38 and 38.5 percent. This has been reduced to $84 billion in revenue, with gross margins of approximately 38 percent.

The adjustment is $5 billion less than the low end of their projection, and a full $9 billion below the high-end of their estimate. This range is 5.6% to 9.6% less than the overall guidance. There is no doubt about it, it is bad news. How bad this will ultimately be, will only be told in time.

This is not the first time that Apple has issued this type of guidance, but it is not done often. The last time this type of guidance was given was in June 2002.

In 2002, Apple’s reduction was given at $1.4 billion to $1.45 billion. This was down from $1.6 billion. This was a reduction of 9.38% to 12.5%. So, on the bright side, this year’s revenue reduction is actually better, even though the revenue is more than 50 times greater. Let us look at the reasons for this decline.

The Reasons

Apple provided a few reasons as to why they believe their initial guidance was off.

Staggered iPhone Launches

The iPhone X came out later than the iPhone XS and iPhone XS Max, so Apple indicates that it was difficult to determine how much of an impact this would have on quarterly revenue.

Foreign Exchange rates

A stronger U.S. Dollar means that devices purchases are more expensive in other countries, which will impact revenue.

The larger number of new products

Apple has indicated that the larger number products to sell lead to supply constraints for some products, like the Apple Watch Series 4 and the iPad Pro. Along with these, the AirPods and MacBook Air were also constrained. A supply constraint means that Apple could not sell more of the products, because they could not manufacture enough to meet demand. These supply constraints were throughout the quarter. The AirPods and Apple Watch are still supply constrained.

Emerging Market Sales

According to Apple, this is the biggest factor. In particular, revenue Greater China. To quote the letter

In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.

In Q1 2018, revenue was $88.3 Billion. The revised guidance given is $84 billion in revenue. The difference between these two is $4.3 billion. So the statement above, to me, reads that Apple lost more than $4.3 billion in revenue in Greater China. The reasons provided are that China’s Gross Domestic Product, or GDP, has had its lowest growth in quite a while.

Positives

Not all of the information in the investor note is doom and gloom. The install base of Apple devices is 100 million more than in 2018, meaning it is currently 1.4 billion devices, because the install base in Q1 2018 was 1.3 billion.

Another positive is that revenue outside of iPhone is up 19%, which is definitely a good thing as Apple tries to become a services company. Speaking of services, services alone generated $10.8 billion in revenue, and all regions saw growth. Wearable revenue grew 50%. This is fueled by Apple Watch and AirPods.

Closing Thoughts

There will likely be a lot of takes from this investor note. It is not surprising that Apple would add some positivity to the note, in addition to the reduced guidance provided. A single quarter where guidance is reduced will not break Apple. Apple has over $130 billion of cash on hand, so Apple will be fine overall.

There is one thing to keep in mind. As stated within the letter,

While it will be a number of weeks before we complete and report our final results, we wanted to get some preliminary information to you now. Our final results may differ somewhat from these preliminary estimates.

This means that we could see better, or worse, results when Apple provides its final results at their quarterly conference call. The conference call will be on January 29th, 2019. As one last note, starting with this quarter, Apple will not be providing unit numbers for any of their products.

Source: apple.com

Daily Run Down: 06/16/2013: Historical Edition

Here is Today’s Historical Daily Run Down.

  • In 1139, Emperor Konoe of Japan is born.
  • In 1487, The Battle of Stoke Field, the final engagement of the War of the Roses, begins.
  • In 1514, English Scholar John Cheke is born.
  • In 1644, Princess Henrietta of England is born.
  • In 1723, Scottish Philosopher and economist, Adam Smith, is born.
  • In 1745, British troops take Cape Breton Island.
  • In 1749, Italian Salt Trader Johann Baptista Ruffini dies.
  • In 1774, Harrodsburg, Kentucky is founded.
  • In 1795, The First Battle of Groix, also known as ‘Cornwallis’ Retreat’ begins.
  • In 1813, German archaeologist, Otto Jahn is born.
  • In 1829, Native American leader Geronimo is born.
  • In 1836, The formation of the London Working Men’s Association occurs.
  • In 1858, Abraham Lincoln delivers his House Divided speech.
  • In 1883, The Victoria Hall Theatre panic occurs killing 183 children.
  • In 1888, Russian physicist and mathematician Alexander Friedmann is born.
  • In 1891, John Abbott becomes Canada’s third Prime Minister.
  • In 1903, The Ford Motor Company is incorporated.
  • In 1911, The Computing-Tabulating-Recording Company, later known as IBM, is founded.
  • In 1933, The National Industrial Recovery Act is passed.
  • In 1970, English mathematician and geophysicist Sydney Chapman dies.
  • In 1977, German-American rocket scientist Werner von Braun dies.
  • In 1994, American singer-songwriter, and part of the “27 Club”, Kristen Pfaff dies.
  • In 2010, Bhutan becomes the first country to institute a total ban on tobacco.
  • In 2012, American financial journalist Dan Dorfman dies.
 

Look for current news later tonight and another historical daily run down next week.

There are 24 stories this week.

Daily Run Down 06/14/2013: Morning Edition

Here is this morning’s Daily Run Down.

Social Issues/Human Interest

General News

International

Politics

Obits

Health

Olympics

Science/Space

Financial

Tips and Tricks

Gaming

Gadgets

Reviews

Law

Patents

Internet

Social Networking

Mobile

Rumors

Software/Apps

London/Britain/UK

Personal

Odd

Funny

Chicagoland

Total Number of stories: 66

Look for more news stories this evening.

Daily Run Down 06/09/2013: Evening Edition

Here is this evening’s Daily Run Down.

Big News

Social

General News

International

Politics

Obits

Health

Science/Space

Financial

Historical

Tips and Tricks

Gaming

Gadgets

Reviews

Technology

Internet

Social Networking

Mobile

Rumors

Software/Apps

Security

London/Britain/UK

Personal

Funny

Chicagoland

Total Number of stories: 115

Look for more stories tomorrow.