I think I’ve listened to the content provided in the quarterly conference calls with analysts at least in part since the calls have been made available over the Web. We have a number of AAPL veterans in this forum and I’d like to get on the table for the benefit of our members those numbers we believe are most important. The numbers come fast and the conversations with the analysts who participate can move quite quickly.

What numbers on Tuesday are the most important ones to hear and provide the best gauge of the company’s performance moving forward?

I’ll start:

One of the most important numbers IMHO is the net pick-up in cash exclusive of deferred revenue liabilities. Net income and EPS is impacted by a number of non-cash expenses including depreciation and amortization. How much net cash exclusive of deferred revenue and other liabilities flowed to the balance sheet?

Earnings on the cash pile? How much did Apple earn on its cash and equivalents during the quarter? It increases earnings and cash assets and doesn’t require a single unit of product to be sold.

Gross margins: How much of each sales dollar flowed to cover operating costs and to the bottom line after manufacturing costs? Volume is nice. But high-margin volume is better.

An important number for FQ1 -How much did Apple receive from iPhone service partners from monthly service contracts? Over the two-year contract period, Apple will make more on monthly service revenue than the company made on the sale of the phone.

There’s more I want to to know, but I’ll stop here for now.

What numbers will you be listening for on Tuesday?

Edited to change topic type to normal.

Forward guidance. Because overly-conservative guidance that underpromises can offset even outstanding actual numbers from the prior quarter—especially in the current market environment.

I think forward guidance can be decent, for as Steve jobs said recently, Apple hasn’t been seeing the “recession” conscious cuts backs that other parts of the economy have.

Forward guidance will be key.

I take it as a given earnings numbers will meet or exceed expectations. If they can do at least $1.80 EPS they should be OK. Anecdotal signs over the past couple of weeks such as: Intel/AMD reporting they’re not seeing any slowdown in orders as well as IBM/GE showing strong international demand are encouraging.

I am somewhat concerned about the retail sales reported recently that were overwhelmingly disappointing. If I try to decipher from SJ’s post-keynote interviews, I don’t see a slowdown just yet. Of course, that was Tuesday and markets have shown slight weakness since then

While 1.80 eps is certainly decent and at the whisper, or at east one whisper, I sense that it would receive a negative spin stating that this, Apple’s strongest quarter, with its best line-up, grew the least YOY at 58%, compared to past year.

AAPL’s previous 4 quarters YOY growth averages 73%.

With non-cautious guidance, we might be ok, who knows in this mkt.

An eps of $1.94 maintains the earnings growth consistency, and as an investor, it’s what I want to see as a minimum; or I too will start to realize that Apple is not sufficiently immune to the times.

Re: Conference Call Guide For AFB Members

[quote author=“DawnTreader”]
One of the most important numbers IMHO is the net pick-up in cash exclusive of deferred revenue liabilities. Net income and EPS is impacted by a number of non-cash expenses including depreciation and amortization. How much net cash exclusive of deferred revenue and other liabilities flowed to the balance sheet?

DT: On the 10K, deferred revenue is $2.24B.  Some of this is iPhone; how much? What is the rest of it?  And for it to be meaningful, don’t we have to match it up with the asset account where the deferred cost of goods is recorded?

And to answer your question in the topic:  The number that means the most to me will be Mac shipments.  2nd most important iPod touch shipments, but they won’t break that out for us, so iPod total will have to do.  iPhone numbers not so important this time around, because we already know them.

Re: Conference Call Guide For AFB Members

[quote author=“capablanca”]
DT: On the 10K, deferred revenue is $2.24B.  Some of this is iPhone; how much? What is the rest of it?  And for it to be meaningful, don’t we have to match it up with the asset account where the deferred cost of goods is recorded?

1. don’t confuse this with iPhone revenue sharing, which is not deferred. 2. The deferred revenue I am aware of comprises: Apple TV sales (spread over 2 years, as is cost of sales); iPhone sales (ditto); component of equipment sales allocated to warranty fulfilment (spread over 1 year, usually); Applecare sales (spread over the life of the Applecare warranty (3 years macs, 2 years iPod/iPhone).

To figure out how much is iPhone really requires a complete business model and some best guesses (such as actual gross margin on the iPhones already sold).

I don’t know if there is a separate deferred costs account, or if that’s built in to the deferred revenue account.

Edit: iTunes prepurchases (gift cards) are of course deferred too, but that is presumably accounted as a prepayment rather than deferred revenue.

Re: Conference Call Guide For AFB Members

[quote author=“sleepygeek”][quote author=“capablanca”]
DT: On the 10K, deferred revenue is $2.24B.  Some of this is iPhone; how much? What is the rest of it?  And for it to be meaningful, don’t we have to match it up with the asset account where the deferred cost of goods is recorded?

1. don’t confuse this with iPhone revenue sharing, which is not deferred. 2. The deferred revenue I am aware of comprises: Apple TV sales (spread over 2 years, as is cost of sales); iPhone sales (ditto); component of equipment sales allocated to warranty fulfilment (spread over 1 year, usually); Applecare sales (spread over the life of the Applecare warranty (3 years macs, 2 years iPod/iPhone).

To figure out how much is iPhone really requires a complete business model and some best guesses (such as actual gross margin on the iPhones already sold).

I don’t know if there is a separate deferred costs account, or if that’s built in to the deferred revenue account.

Edit: iTunes prepurchases (gift cards) are of course deferred too, but that is presumably accounted as a prepayment rather than deferred revenue.

I believe the 10K on one of the supporting pages details the AppleCare defereed revenue component. I’m assuming (until I reread the 10K) the sum includes AppleCare, .Mac subscriptions, gift card balances and deferred revenue on the iPhone and Apple TV. How much of that deferred revenue is from the iPhone?

Very roughly I’d say between $400 million and $450 million. Again, that’s a very rough guess based on an assumed ASP and the number of units sold as of the end of the September quarter using a straight line amortization over eight quarters.

Remember, though, costs will be amortized against revenue as the deferred revenue on the iPhone is realized.

Again, I’d have to reread the 10K. I’m not sure how much detailed information concerning iPhone deferred revenue accounting Apple must disclose.

I would like to hear this

We are raising our iphone goal by P

15mil iphones total sold by Dec 31st 2008

ps I dont think there is even a chance they would do this but I would love the fu to the street :_)

Re: I would like to hear this

[quote author=“macboy2010”]We are raising our iphone goal by P
15mil iphones total sold by Dec 31st 2008
ps I dont think there is even a chance they would do this but I would love the fu to the street :_)

I will be very surprised if Apple haven’t sold 15M iPhones by the end of 2008.

Anyhoo, on the subject of the conference call, I’m less obsessed with the precise Mac or iPod or iPhone unit sales number as I am with maintaining the trend of outlandish sales growth relative to the PC market, gross margins being maintained, and a decent Q2 outlook. It is blatantly obvious that the iPhone is an outstanding success, and that the Mac is experiencing widespread adoption on an unprecedented scale.

I’m still expecting EPS of $2.25 with an outside chance of something more akin to $2.50 (possible in the event of a “perfect storm” of 30M iPods+iPhones combined, 2.5M Macs, and gross margins of around 36% or higher). I’ve elaborated on this several times so I won’t bother doing so again in this topic.

With regard to one of the most pressing questions - will Apple management refer to the possibility of an upcoming economic slowdown - I do not think they will do so, and if pressed, I expect them to say that while an economic slowdown may affect them (as it would affect any and all companies, to some degree), they see no sign of one in their own business at present.

Steve Jobs said this almost verbatim to Jim Goldman at the recent Macworld expo. I wouldn’t expect Peter Oppenheimer to contradict him on the CC.

As far as I’m concerned, thanks to the roaring sales growth in all of Apple’s product lines, and its international roll-out with the increasing number of non-US Apple Stores opening, “any recession stops at the door to the Apple Store”. While I don’t expect Peter Oppenheimer to use this phrase, he will likely say something along similar lines if pressed, and refer to Apple’s increasing global strength and growth as a tangible risk offset to any US economic slow down. The Mac is the powerhouse driving Apple’s surging success and its increasing exponential adoption both in the US and abroad guarantees that Apple will continue to experience growth way above expectations even in the environment of a slowing economy - and yes, even a recession, as users continue to switch from PCs to Macs.

Listen carefully for the analysts to try and trip up Apple management into making cautious statements about sales growth, margins, and the broader economy (especially from the likes of idiots like Bernstein’s Toni Sacconaghi). Its their spin on whatever Apple says that matters in the short-term, and the headlines from the call will dictate the share price AH and the following day, but longer term, frankly, you can ignore any numbers Peter Oppenheimer gives you - because you know they’ll be 30-40% too low. The CC has entertainment value for me, but I am largely disinterested in any guidance given by Apple. Over the last 16 quarters, I have fortunately been more accurate with my own forecasts than Apple’s guidance, or any Street analysts, and I continue to trust my own insight more than theirs. The CC is largely a waste of time - it won’t offer anything useful, and is largely just an opportunity for embarrassed Wall Street analysts to fire questions at Apple to find out how they could have gotten their own earnings estimates so wrong, yet again. Its a melting pot of headline-making material which will be used by analysts both bullish and bearish to talk up their books - long or short.

The one thing that does fascinate me and which I really do what to find out more about is the magnitude of iPhone subscriber revenue sharing, and the accumulation of iPhone deferred sales revenue. After this earnings call, we should see analysts start to value Apple far more on the notion of free cash flow and less on its quarterly earnings. That’s going to mark an important transition, and leave room for the possibility of significant PE expansion.

AFB has proven a far more accurate and useful resource than anything said on an Apple conference call in a long time

Just a reminder. This is where to go to listen to the call:

link

Philip Elmer-DeWitt summarizes this thread

I have created a spreadsheet showing Apple’s Revenue and Profit for each quarter from 1999, from information available on their site.  If I knew how, I would post the graph here, but I don’t.  The file can be found for downloading here:

http://homepage.mac.com/jonathandunne/FileSharing31.html

Blowout Quarter here we come!

Re: I would like to hear this

[quote author=“Tommo_UK”]AFB has proven a far more accurate and useful resource than anything said on an Apple conference call in a long time

That’s why I read here constantly! 

[quote author=“gatesofhell”]I have created a spreadsheet showing Apple’s Revenue and Profit for each quarter from 1999, from information available on their site.  If I knew how, I would post the graph here, but I don’t.  The file can be found for downloading here:

http://homepage.mac.com/jonathandunne/FileSharing31.html

Blowout Quarter here we come!

Thanks for taking the time to do that work! I remember FQ1 2001. It was ugly!  :o

[quote author=“gatesofhell”]I have created a spreadsheet showing Apple’s Revenue and Profit for each quarter from 1999, from information available on their site.  If I knew how, I would post the graph here, but I don’t.  The file can be found for downloading here:

http://homepage.mac.com/jonathandunne/FileSharing31.html

Blowout Quarter here we come!

Cool, thanks for sharing that link.  I see where he mentions an earnings growth trend continuation leading to an eps of $1.94, which I’ve stated a few times here.  He did so based upon 73% earnings growth over the past 4 quarters though.  An eps of $1.94 is 70% (from Q1 2007’s $1.14).  I used 70% as I included an additional 5th quarter as well.  To maintain 73%, that would equate to $1.97.  Either way, it’s neat to see direct and indirect references to the AFB.

gatesofhell, thanks for the spreadsheet.  Based upon that data, I found that the revenue from Q4 to Q1 grew 49%, 56% and 47% the last 3 times.  Extrapolating to this current quarter:

48% = $9.21B
50% = $9.33B
52% = $9.45B
55% = $9.64B
58% = $9.83B