During quarterly earnings calls, executives often use language designed to exaggerate, excuse, or obfuscate the company's recent performance. The goal is to make investors gasp with glee at the implied future success. And ultimately to give the company more money. always. more. money.
But when it comes to Apple, with its incredible market capitalization and seemingly endless supply of hit products, including continued service growth, there's usually no need to make hopeful but inconsequential statements or dodge questions. Designed to help you get the final result.
Apple's next earnings call is this afternoon. CEO Tim Cook and CFO Luca Maestri will report on all the numbers. Analysts expect sales to be similar to the last quarter of last year, but earnings per share for the quarter are expected to increase significantly. Although this quarter is the fourth calendar quarter, Apple's first quarter is because the fiscal year begins during the holiday season.
In any case, Apple's phone is likely to be no exception to the earnings-making rule of financial grandeur and exaggerated success. If you are not a professional investor, the financial terminology and jargon presented by Cook and Maestri may be confusing.
so cult of mac We've attempted to demystify some of the common earnings report jargon below.
Apple earnings announcement on February 1, 2024
First, a little background. Apple's earnings call will follow the publication of the company's quarterly earnings report, which is all about the hard numbers. During the earnings call, Cook and Maestri will read prepared statements and take questions from Wall Street analysts. This is all an attempt to put the exact numbers in an earnings report into context for investors.
Cupertino may not have as much trouble as some companies to justify its recent numbers. After all, it is a money-making machine. (Look at your last quarterly call records.)
Apple, the world's most profitable company, is worth well over $2 trillion, roughly the gross domestic product (GDP) of South Korea. But as financial advisors often warn investors, past performance is not an indicator of future success.
If you want to hear it, Apple's earnings call is scheduled for Thursday at 2 PM Pacific Time. If this is your first time, be sure to read the glossary before calling.
Revenue Call Glossary
ASP
In Apple earnings calls, Maestri regularly refers to ASP without specifying that ASP refers to the average selling price of a product (also known as average selling price). This is often mentioned in relation to fluctuations in overall sales. Both move up and down.
ARPU (average revenue per unit/user)
Sometimes analysts refer to the term ARPU as “ar-poo”, as in recent earnings calls. Abbreviation for ‘average revenue per unit (or user).’ Total revenue divided by the number of users or subscribers of your product or service.
Benchmark
Basis points are a measure used by financial professionals to account for a percentage change in the value of an item, such as a company's gross margin or the effect of an interest rate change on a financial product such as an index fund. One basis point is equal to 0.01% (one-hundredth of a percent). This is a small soundbite used to explain big things, like Apple's profit growth.
CAPEX
This refers to capital expenditures, or the money Apple spends on “property, plant, and equipment” (PP&E). This is considered a long-term cost. operating costOr operating expenses similar to day-to-day expenses (salaries, rent, marketing, etc.).
The company increased its CAPEX spending significantly to $3.5 billion in 2021 after sharply reducing it over the past few years.
Although this is only three months' worth, on an annual basis it is equivalent to Cambodia's GDP.
a challenging comparison
Maestri and Cook sometimes refer to “challenging comparisons” or “difficult comparisons” when the previous quarter's tremendous success makes the current quarter seem weaker than it actually is. “This time last year we launched the redesigned M1 MacBook Pro so successfully that comparisons were difficult,” Cook said on the February 2023 earnings call.
channel inventory
Manufacturers like Apple sell many of their products to customers through retail stores. When Apple sells in bulk to a retailer like Target or Amazon, but the retailer has not yet sold the product to consumers at an increased price, the product is considered “channel inventory.” This is also called a “sale,” and the inventory that the retailer later sells is called a “sale.”
Unless retailers report sales, manufacturers may not know exactly how much inventory they have in their channel. Think of retailers as channels.
Constant currency standard
In their February 2023 earnings call, Cook and Maestri repeatedly mentioned revenue figures taking into account a 'constant currency basis' against strong foreign exchange headwinds.
A “constant currency” is a fixed exchange rate used to eliminate the impact of exchange rate fluctuations on the financial performance figures required for financial statements. Eliminates fluctuations.
Companies with large international operations, such as Apple, tend to use constant currency figures to apply different interpretations to the more difficult figures they must report.
Constrained
The word can be used for a variety of purposes, but one thing to note is that it is used to refer to supply chain constraints, resulting in long wait times due to a lack of products available to ship to buyers. For example, on a November 2023 call, when an analyst asked about the possibility of restrictions being eased in the next quarter, Maestri acknowledged, “We are constrained by the iPhone.”
diluted liquor
Stocks of a company are all shares held by all shareholders. Diluted shares are the total number of shares if the company exercises all of its convertible shares. (Convertible stocks refer to newly issued stocks, stock options, stock warrants, convertible bonds, etc.)
A good rule of thumb is to look at the underlying stock value to see how the company is currently performing. Diluted stock value tells you what a company would do in a crisis if it had to issue all of its pledged shares. On both measures, Apple is doing quite well.
dividends
When money is available, companies typically set the amount they want to pay out to shareholders on a regular basis, usually quarterly. This is called a dividend. Apple has been criticized for paying irregularly over the years, which has been a bit annoying. However, Apple recently began paying regular dividends again.
income
Income is the net profit of a business's operations that is subject to tax. A company's stock price is determined by its profits. Therefore, earnings per share is a good way to value a company's stock.
The quarter from October to December last year was Apple's largest quarter ever. But don't get your hopes up. At least don't do that. crazy high consolation. Cupertino's quarterly profits often break records, but that doesn't seem likely this quarter. And analysts will find reasons for Apple to make up for its losses.
fiscal year
For most businesses, the first quarter of the year actually ends the last week of December. Yes, for you and me it is the end of the previous year. For businesses, this explains a typical first quarter holiday sales increase. The fourth quarter is given up at the end of September.
gross profit
Gross margin is gross profit compared to net sales. When expressed as a percentage, it means net sales minus the cost of goods sold. It is calculated by subtracting production costs from the selling price of the item (but does not include indirect fixed costs such as administrative costs). The classic formula is that gross margin is equal to revenue minus cost of goods sold.
contrary wind
Sailing into a headwind will slow you down. “Headwinds” is a financial analyst’s term for problems that could hamper profits, whether it’s a decline in sales related to new taxation, market overcrowding or anything else. covid-19? confident.
In addition to the pandemic, “headwinds” headlines over the past few years have cited the Biden administration's proposed tax changes that would offset tax cuts from years ago and eat into Apple's profits.
vacation season
For most retailers, that means late December. For Apple, that seems to mean roughly from January 1st to December 31st, with a bump at the end. In any case, this is usually reflected in the first quarter earnings of the following year.
I don't know what your salary is, but Apple makes a billion dollars a year. afternoon First quarter of 2021, including year-end and New Year holidays.
legacy node
These are older microchips and components of hardware that help run processes (such as driving displays or wireless communications). It's not an exciting new GPU/CPU chip that could be included in an iPhone or other devices, but it's still important and supply chain issues could have an impact.
mix
When Maestri refers to a “strong mix” or “different mix” that influences the numbers, he is usually referring to the product mix. This means that every Apple product can be sold in a given period of time, taking into account new launches, delayed launches, and the occasional empty shelves.
revenue
Revenue, typically defined in a quarterly report's income statement (not to be confused with the balance sheet or statement of cash flows), is simply all the income a company earns from all sources, such as sales of products and services.
It can be evaluated under this canopy. operating profit (Revenue minus direct costs) and net profit (AKA the “bottom line,” which additionally accounts for interest earned or paid and, of course, taxes, etc.)
This post was originally published on April 27, 2021 and also on July 27, 2021, October 28, 2021, January 27, 2022, April 28, 2022, July 28, 2022, 2022 October 27, Updated February 2, 2023, May. April 4, 2023, August 3, 2023, November 2, 2023, February 1, 2024.