Apple (NASDAQ: AAPL) analyzing from the 2024 Form10-K
Apple Inc. has released its Annual Report on Form 10-K for the fiscal year ended September 28, 2024. This article summarizes Apple's current status ...
Apple Inc. has released its Annual Report on Form 10-K for the fiscal year ended September 28, 2024. This article summarizes Apple’s current status throughout the earnings release.
Apple designs, manufactures and markets smartphones, personal computers, tablets, wearable devices and accessories, and provides a variety of related services. Its main product lines include iPhone, Mac, iPad, wearables, home and accessories. The company also offers a wide range of services including advertising, AppleCare, cloud services, digital content, and payment services.
Products and Services
iPhone: The latest iPhone models include iPhone 16 Pro, iPhone 16, iPhone 15, iPhone 14, and iPhone SE.
Mac: A variety of personal computers including MacBook Air, MacBook Pro, iMac, Mac mini, Mac Studio, and Mac Pro.
iPad: Tablet products including iPad Pro, iPad Air, iPad, and iPad mini.
Wearables, Home, and Accessories: Apple Watch series, AirPods, Beats products, Apple Vision Pro™, and more.
Services: Subscription services such as Apple Music, Apple TV+, Apple Arcade, and Apple Fitness+, as well as enhanced payment services such as Apple Pay and Apple Card.
Markets and Distribution
Apple’s business is managed primarily by geography, divided into the Americas, Europe, Greater China, Japan, and Asia Pacific. Products are sold through direct and indirect sales channels, with direct sales accounting for 38% of total sales and indirect sales 62% in FY2024.
Competition
Apple’s market is highly competitive, with constant price competition and technological innovation. Major competitors have strong resources in technology, marketing, and distribution, and are threatening Apple’s market share by adopting low-cost strategies. It continues to be particularly difficult for Apple to gain market share in the smartphone, personal computer, and tablet markets.
Risk Factors
Apple’s business is exposed to a wide variety of risks. The main risks include the following
Macroeconomic and industry risks: fluctuations in global economic conditions, trade friction, natural disasters, and pandemics could impact sales and supply chains.
Competitive risks: delays in new product development, imitation by competitors, infringement of intellectual property rights, etc.
Supply chain risk: dependence on specific parts and manufacturing partners, supply shortages and price volatility can impact business performance.
Legal and Regulatory Risk: Legal issues, such as EU investigations under the Digital Markets Act (DMA) and antitrust lawsuits by the U.S. Department of Justice, could impact business operations.
Financial Risk: Foreign exchange rate fluctuations, changes in the value of the investment portfolio, and seasonal fluctuations in sales may affect the company’s financial condition.
Cyber Security Risk: Vulnerability to cyber attacks such as data breaches and system intrusions.
Legal Proceedings
Apple was initiated two non-compliance investigations under the EU Digital Markets Act on March 25, 2024. In addition, an antitrust lawsuit was filed by the U.S. Department of Justice and several state attorneys general on March 21, 2024. In addition, in the lawsuit with Epic Games, the California District Court found Apple in violation of unfair competition laws regarding its App Store operations and ordered certain actions. It has not yet been determined how these legal proceedings will affect Apple’s performance and financial situation, but the company reports that it could be fined up to 10% of its annual sales.
Stock Market and Shareholder Information
Apple’s common stock trades on the NASDAQ under the symbol “AAPL” and had 23,301 shareholders of record as of October 18, 2024. 8.9 billion.
Sales and Segment Performance
Total sales for FY2024 were $391 billion, a 2% increase over the same period last year. By segment, sales were $167 billion in the US, $101.3 billion in Europe, $66.9 billion in mainland China, $25 billion in Japan, and $30.6 billion in Asia Pacific and others. The increase was driven by the services sector and iPhone sales growth in the US and Europe, while mainland China was impacted by declining iPhone and iPad sales.
Product and Services Performance
iPhone: Sales were almost flat YoY at $201.2 billion.
Mac: $29.9 billion, up 2% YoY, with particularly strong laptop sales.
iPad: $26.7 billion, down 6% YoY, impacted by lower sales of the iPad Pro and entry-level models.
Wearables, Home, and Accessories: $37 billion, down 7%.
Services: $96.1 billion, up 13%. Advertising, App Store, and cloud services performed well.
Profitability and Costs
Gross profit was $180.7 billion, up 6% YoY, with gross margin reaching 46.2%. Profitability in the products segment rose to 37.2%, while the services segment remained high at 73.9%. Meanwhile, R&D expenses totaled $31.3 billion, up 5% from the previous year, and selling, general, and administrative expenses totaled $26.1 billion, also up 5%.
Tax and Legal Issues
Apple is facing an investigation under the EU’s Digital Markets Act (DMA) and an antitrust lawsuit by the US Department of Justice. In particular, in a lawsuit with Epic Games, a California court found unfair competition in the operation of the App Store and ordered certain measures. This resulted in a one-time tax charge of $10.2 billion in FY2024.
Liquidity and Capital Resources
Cash and cash equivalents and market security totaling $140.9 billion are expected to fully fund cash needs and capital return programs over the next 12 months. On the debt side, a total of $97.3 billion in bonds have been issued, of which $10.9 billion will be paid within one year. In addition, there is $10 billion in short-term debt in the form of commercial notes.
Dividends and Stock Buybacks
In FY2024, Apple approved $100 billion for a stock buyback program and used an additional $41 billion from its existing program. Dividends will be increased to $0.25 per share on an annual basis; $95 billion in share repurchases and $15.2 billion in dividend payments were made in 2024.
Financial Statements and Accounting Policies
Apple’s financial statements are in accordance with GAAP and employ significant accounting policies, including revenue recognition, stock-based compensation, and tax treatment. In particular, disclosures regarding complex tax positions and derivative transactions are a significant part of the financial statements.
Audit Report
Ernst & Young LLP, independent auditors, expressed the opinion that Apple’s financial statements are fairly presented in conformity with GAAP and that internal controls are operating effectively.
Corporate Governance and Insider Trading Policies
Apple has established an insider trading policy that applies to all parties, including directors, officers, and employees. The policy governs the purchase, sale, and other disposition of securities and is designed to ensure compliance with laws, regulations, and exchange standards. Stock repurchase procedures are also governed by this policy. Detailed policy content is described in EXHIBIT 19.1 of the Form 10-K. Other information regarding executive compensation and director independence will be included in the Proxy Statement for the 2025 Annual Meeting of Shareholders and is omitted from this report.
Security Ownership and Related Transactions
Information regarding the securities ownership of certain major shareholders and members of management, as well as information regarding director independence, will likewise be included in the Proxy Statement. Principal accountant fees and audit-related information will also be included in the report, but will be disclosed in more detail at a later date.
Securities Description
Apple’s securities include Common Stock and several Notes. The Common Stock is traded on the NASDAQ market as “AAPL” and has voting and dividend rights per share. The total number of shares outstanding is 50.4 billion.
Details of the bonds
Apple issues corporate bonds with various interest rates and maturity dates. Examples include: 0.000% notes due 2025, 0.875% notes due 2025, 1.625% notes due 2026, 2.000% notes due 2027, 1.375% notes due 2029, 3.050% notes due 2029, 0.500% notes due 2031 notes, and 3.600% notes due 2042. These bonds are issued as Senior Unsecured Notes and contain details regarding the redemption and interest payment terms and event of default for each note. In particular, additional tax-related payment obligations and redemption options are clearly defined.
