Apple (NasdaqGS:AAPL) Q1 2026 Earnings call January 29, 2026 05:00 PM ET Speaker12Good afternoon, and welcome to the Apple Q1 Fiscal Year 2026 earnings conference call. My name is Suhasini Chandramouli, Director of Investor Relations. Today's call is being recorded. Speaking first today is Apple CEO, Tim Cook, and he'll be followed by CFO, Kevan Parekh. After that, we'll open the call to questions from analysts. Please note that some of the information you'll hear during our discussion today will consist of ...

Financial Data and Key Metrics Changes - The company generated $1.6 billion of net loan growth quarter-over-quarter, with a 19 basis point increase in net interest margin [4][5] - Net interest income was $331.6 million for the quarter, up approximately $41 million or 14% linked quarter [5] - Net income was approximately $128.4 million, up 22.6% from $104.7 million in the prior year's second quarter [8] - Diluted earnings per share increased to $2.22, representing a 23.3% year-over-year increase [8] Business Line Data and Key Metrics Changes - Total originations for investments, excluding single-family warehouse lending, were $5.6 billion, representing a 35% increase linked quarter [8] - Non-interest income increased by approximately $21 million quarter-over-quarter, driven by higher banking service fees and broker-dealer fee income [6] - Non-interest income from Verdant was approximately $18.9 million in the quarter [6] Market Data and Key Metrics Changes - Ending deposit balances were $23.2 billion, up 44.3% linked quarter and 16.5% year-over-year [9] - Average non-interest-bearing deposits were approximately $3.5 billion, compared to $3 billion in the prior quarter [10] - Total assets under custody or administration increased from $43 billion to $44.4 billion [17] Company Strategy and Development Direction - The company aims to generate loan growth in the low to mid-teens on an annual basis, with a focus on deepening relationships with existing vendors and accelerating growth in previously constrained verticals [12][20] - The integration of artificial intelligence across various business units is expected to enhance operational efficiency and innovation [18][19] - The acquisition of Verdant is seen as a strategic fit, contributing to the company's commercial lending franchise and expected to achieve EPS accretion [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong loan growth despite anticipated declines in net interest margin due to robust loan demand [27][28] - The company does not anticipate material losses from loans currently classified as non-performing [17] - Management highlighted the importance of a balanced growth strategy across various business lines to sustain long-term performance [35] Other Important Information - Non-interest expenses were approximately $184.6 million, with Verdant contributing $7.8 million in salaries and benefits expenses [23] - Provisions for credit losses increased to $25 million, driven by robust loan growth in commercial lending categories [25] - The company is focused on maintaining salaries and benefits expense growth at 30% of revenue growth or lower on an annual basis [23] Q&A Session Summary Question: What is the outlook for net interest margin? - Management confirmed a normalized level of 4.72% and expects a 5-6 basis point decline due to robust loan demand [27][28] Question: Can you discuss the pipeline for team liftouts? - Management indicated that they have successfully completed several team liftouts and are focused on developing those teams further [29] Question: What is the growth outlook for Verdant? - Management expects Verdant to achieve growth of approximately $150 million per quarter, with strong integration and cultural fit enhancing performance [52] Question: How is the company managing deposit growth? - Management noted that deposit growth was primarily driven by specialty deposits and commercial segments, with a balanced approach across various areas [41]

Financial Data and Key Metrics Changes - FinWise Bancorp reported a net income of $3.9 million for Q4 2025, with diluted earnings per share of $0.27, reflecting a 26% year-over-year growth in net income [4][16] - Net interest income increased to $24.6 million from $18.6 million in the prior quarter, driven by growth in credit-enhanced balances [17][18] - The net interest margin rose to 11.42% compared to 9.01% in the previous quarter, primarily due to the growth in the credit-enhanced loan portfolio [18] - Non-interest income was $22.3 million, up from $18 million in the prior quarter, mainly due to increases in credit enhancement income [19] Business Line Data and Key Metrics Changes - Loan originations totaled $1.6 billion in Q4, exceeding guidance of $1.4 billion, bringing full-year originations to $6.1 billion, a 22% increase year-over-year [4][5] - The credit-enhanced product saw balances of $118 million, surpassing the $115 million outlook [5] - Quarterly net charge-offs were $6.7 million, up from $3.1 million in the prior quarter, influenced by updated servicing standards [11] Market Data and Key Metrics Changes - The SBA loan originations decreased quarter-over-quarter due to processing delays from staffing cuts at the SBA and the government shutdown [13][15] - The total non-performing loan (NPL) balance was $43.7 million at the end of the quarter, with a modest increase of less than $1 million [12] Company Strategy and Development Direction - The company is focused on building durable, long-term growth by pursuing opportunities that enhance future value, including strategic partnerships and the integration of AI technologies [8][9] - FinWise aims to expand its credit-enhanced loan portfolio while managing risk through disciplined approaches to expense management and operational efficiency [4][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook ahead, emphasizing the stability of credit trends and the potential for continued growth in loan originations [10][22] - The company anticipates a gradual moderation in NPL migration and expects to maintain a stable SBA portfolio while continuing to grow the credit-enhanced segment [22][56] Other Important Information - The company is actively exploring AI opportunities to drive efficiency and automation across various functions, including compliance and operations [8][66] - The efficiency ratio for the quarter was reported at 50.5%, compared to 47.6% in the prior quarter, indicating a focus on sustainable operating leverage [20] Q&A Session Summary Question: Opportunities to lower CD funding costs - Management indicated that CD funding costs are tied to wholesale funding rates, which may decrease gradually as the Fed lowers interest rates [25] Question: Progression of MoneyRails and BIN Sponsorship potential - Management remains confident in the BIN payments strategy, although the timing may extend beyond initial expectations [26] Question: SBA business outlook and originations - Management noted solid demand for SBA loans, with a slight decrease in originations due to timing delays rather than demand issues [28] Question: Surge in non-interest-bearing deposits - The increase in deposits was attributed to strategic partners preparing for higher student loan volumes, which are expected to decrease as origination volumes normalize [34] Question: Recontracting process with partners - Management reported a historically positive recontracting process, with no significant concerns regarding upcoming contract renewals [39] Question: Impact of fintech obtaining bank charters - Management believes that not all fintechs will benefit from obtaining a bank charter, as it may not align with their business models [41] Question: Cross-selling products with existing partners - Management highlighted the potential for cross-selling products to existing partners, which does not require the same scale as standalone products [45]

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $248 million, a 22% year-over-year increase, while full-year revenue was $951 million, representing 20% year-over-year growth [4][15] - Non-GAAP operating margin for the fourth quarter was 24.9%, compared to 20.2% last year, and for the full year, it was 24.7%, down from 25.2% last year [17] - Core revenue, now referred to as subscription services revenue, was $56 million in the fourth quarter, a 17% year-over-year increase [15][16] Business Line Data and Key Metrics Changes - Subscription services revenue for the full year was $211 million, representing 17% growth year-over-year [16] - Fourth quarter revenue from value-added services grew 20% year-over-year to $185 million, reflecting greater adoption of various services [16][17] - Full-year value-added services revenue was $722 million, representing 19% growth year-over-year [17] Market Data and Key Metrics Changes - The company managed approximately 9.4 million units from 22,096 customers, compared to 8.7 million units from 20,784 customers a year ago, representing an 8% increase in units and a 6% increase in customers [16] - Adoption of premium tiers, Plus and Max, exceeded 25%, indicating success with both SMB and upmarket customers [10] Company Strategy and Development Direction - The company focuses on three strategic pillars: Differentiate to Win, Deliver Performance Efficiently, and Great People and Culture [6][11] - The introduction of AI-native features aims to transform property management into performance management, enhancing customer operations [6][9] - The company is positioned to lead the transition towards a unified platform that reduces fragmentation and enhances customer experience [5][10] Management's Comments on Operating Environment and Future Outlook - Management noted that while 81% of managers feel positive about the market, rising operating costs and pressure on occupancy rates remain challenges [5] - The 2026 guidance for annual revenue is projected to be between $1.1 billion and $1.12 billion, with a midpoint growth rate of 17% [19] - Management emphasized the importance of innovation and execution in achieving customer performance and business growth [20] Other Important Information - The company has been recognized on Forbes' America's Most Successful Midcap Companies and Time Magazine's America's Growth Leaders, validating its strategy and momentum [4] - The company ended 2025 with 1,702 employees, reflecting a 4% increase from the previous year, indicating growth in various functional areas [18] Q&A Session Summary - No specific questions and answers were provided in the content, thus this section is not applicable.

Financial Data and Key Metrics Changes - The company reported growth in adjusted earnings per share despite declines in loan performance and loan volume [14] - Loan unit volume improved to a decline of 9.1% this quarter, compared to a decline of 16.5% last quarter, while loan dollar volume improved to a decline of 11.3% this quarter, versus a decline of 19.4% last quarter [16] - Changes to the forecast of future net cash flows improved, with the rate of decline narrowing from $58.6 million (0.5%) in Q3 2025 to $34.2 million (0.3%) in Q4 2025 [16] Business Line Data and Key Metrics Changes - The company financed nearly 72,000 contracts for dealers and consumers, collecting $1.3 billion overall [14] - The underperformance of the 2024 vintage was primarily related to loans originated prior to the scorecard change during Q3 2024 [15] - The number of active dealers declined by 2.8% year over year, and the average unit volume per active dealer declined by 6.4% year over year [17] Market Data and Key Metrics Changes - The company's market share in the core segment of used vehicles financed by subprime consumers was 4.5% for the first two months of Q4, down from 5.4% for the same period in 2024 [17] - The loan portfolio increased by 1% year over year on an adjusted basis [17] Company Strategy and Development Direction - The company aims to deepen relationships within its dealer network, support dealers in acquiring new consumers, and leverage data-driven insights [8] - The strategic objectives include generating dealer and consumer demand, empowering dealers through preferred channels, and delivering world-class servicing and processing [9] - The company is investing in artificial intelligence to enhance customer service and improve efficiency [9] Management's Comments on Operating Environment and Future Outlook - The CEO emphasized a long-term conservative approach to lending and credit scoring, focusing on improving customer experience [20] - The management believes the company is well-positioned to serve subprime customers and will continue to focus on making the experience frictionless [37] - The CEO expressed excitement about building a customer-obsessed company while maintaining a disciplined approach to capital allocation [13] Other Important Information - The company was named one of America's top 100 Most Loved Workplaces for the second consecutive year, ranking number 6 [12] - The new contract origination experience was rolled out to better meet the needs of franchise and large independent dealers [10] Q&A Session Summary Question: How will the new CEO manage credit lending and underwriting? - The CEO stated that the approach towards lending and credit scoring will be conservative and long-term focused, with ongoing improvements to credit scoring models [20] Question: What drove the increase in provision for new originations? - The CFO explained that the provision is influenced by the mix between the portfolio and purchase program, with the purchase program having a higher initial provision [22][23] Question: What is the competitive environment like, given the decline in market share? - The CEO noted that the competitive environment is evolving, and the company is focused on being customer-centric rather than competitive-centric [26] Question: How does the company view affordability issues and high used car prices? - The CEO mentioned that the company is well-positioned to serve subprime customers and will continue to take a conservative approach regardless of economic cycles [36] Question: Will there be any changes in capital returns or buyback strategies? - The CEO confirmed that the company will stay the course regarding capital allocation and buyback strategies [38]

Financial Data and Key Metrics Changes - PennyMac Financial Services Inc. reported a net income of $107 million, or $1.97 per share, for Q4 2025, resulting in a 10% annualized return on equity (ROE) [2][12] - For the full year 2025, pretax income increased by 38%, and net income rose by 61% compared to 2024, with a 12% return on equity and an 11% growth in book value per share [4][12] - The company generated a 10% annualized return on equity in Q4, down from an 18% annualized return in Q3 due to competitive dynamics affecting production margins [2][3] Business Segment Data and Key Metrics Changes - In the production segment, total volumes increased by 25%, leading to a 19% increase in pretax income [4] - The servicing segment saw a 10% growth in the total unpaid principal balance (UPB) of its portfolio, contributing to a 58% increase in pretax income from the previous year [4] - Total acquisition and origination volumes in Q4 were $42 billion in UPB, up 16% from the prior quarter, with total lock volumes at $47 billion, an 8% increase [12][13] Market Data and Key Metrics Changes - The company serviced a combined $312 billion in UPB of loans with note rates above 5%, indicating significant refinancing opportunities as mortgage rates decline [6] - The correspondent channel margins decreased to 25 basis points from 30 basis points in the previous quarter due to increased competition [13] - The number of brokers approved to do business with PennyMac grew to nearly 5,300, reflecting a 17% increase from year-end 2024 [15] Company Strategy and Development Direction - The company is focusing on enhancing its consumer direct channel and leveraging technology investments, particularly in AI, to improve recapture rates and operational efficiency [6][10] - The transition to the Vesta loan origination system is expected to be completed in Q1 2026, which will enhance operational efficiency and scalability [8][10] - PennyMac aims to achieve mid to high teens ROEs later in the year by improving production income and maintaining a disciplined approach to market share [11][28] Management's Comments on Operating Environment and Future Outlook - Management noted that competitive dynamics in the origination market limited expected production margin increases, despite a favorable interest rate environment [3][25] - The company anticipates that the realization of cash flows will remain consistent with Q4 levels, with expectations for continued efficiency gains in servicing [29][65] - Management expressed confidence in the company's ability to adapt to market conditions and capitalize on refinancing opportunities as rates decline [26][52] Other Important Information - The company declared a fourth-quarter common share dividend of $0.30 per share [12] - Total debt to equity at year-end was 3.6 times, with non-funding debt to equity at 1.5 times, both within targeted levels [20] - The company ended the quarter with $4.6 billion in total liquidity, providing significant resources for opportunistic deployment [20] Q&A Session Summary Question: Discussion on increasing capacity in Consumer Direct - Management acknowledged that while they had anticipated increased capacity, the competitive environment was stronger than expected, impacting margins [24][25] Question: Insights on prepayment speeds and market response - Management noted that prepayment speeds were higher than forecasted, driven by competitive dynamics across various loan types [32][35] Question: Structural changes in the industry regarding runoff and originations - Management did not declare a structural change but noted that increased capacity across the industry has affected margins [40][41] Question: Impact of G-fees and loan-level pricing on mortgage rates - Management indicated that while G-fees may not decrease significantly, they are prepared to manage various outcomes and maintain capacity [55][56] Question: First-quarter activity and near-term ROEs - Management reported a good production month in January, with expectations for recapture rates to improve as the year progresses [60][63] Question: FHA delinquencies and their impact - Management explained that the increase in FHA delinquencies was primarily due to policy changes and expected to be a temporary lag [70][72] Question: Buyback authorization status - Management confirmed that there is over $200 million available for buybacks, which they consider as part of their capital allocation strategy [92]

Financial Data and Key Metrics Changes - Total revenue for Q3 2026 was $3.2 billion, a decline of 4.3% year-over-year, consistent with guidance [15] - Adjusted EBIT margin was 8.2%, slightly above the high end of guidance, but down 70 basis points year-over-year [16][17] - Non-GAAP EPS was $0.96, up from $0.92 in the same quarter last year, driven by a lower share count and net interest expense [17] Business Line Data and Key Metrics Changes - CES revenues, representing 40% of total revenue, declined 3.6% year-over-year, with a book-to-bill ratio of 1.2 [17][18] - GIS, which accounts for 50% of total revenue, saw a decline of 6.2% year-over-year, with a book-to-bill ratio of 1.09 [18] - Insurance revenue, making up 10% of total revenue, grew 3.2% year-over-year, primarily due to growth in the software business [18][19] Market Data and Key Metrics Changes - The U.S. market experienced declining performance, while the rest of the world showed improvement [15][18] - The company noted a pronounced difference in performance between the U.S. and other regions, with Europe and APAC on an improving trajectory [85] Company Strategy and Development Direction - The company is pursuing a dual-track strategy to stabilize heritage businesses while building new AI-native revenue streams [4] - Fast-Track initiatives are focused on AI-infused solutions and are expected to achieve 10% of run rate revenue by the end of Q2 Fiscal 2029 [11] - The strategy emphasizes connecting legacy systems to AI rather than replacing them, allowing for faster deployment and innovation [10][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for Q4, driven by corporate spinouts and restructurings [46] - The company anticipates total organic revenue to decline by 4%-5% in Q4, with CES and GIS revenues expected to decline at similar rates [22][23] - Management highlighted the importance of AI in driving future growth and operational efficiency [12][41] Other Important Information - Free cash flow for Q3 was $266 million, bringing the year-to-date total to $603 million, on track to meet the full-year guidance of approximately $650 million [19][21] - The company repurchased $190 million worth of shares year-to-date, with plans to repurchase an additional $60 million in Q4 [20][21] Q&A Session Questions and Answers Question: Insights on Fast-Track attributes and services - Management discussed the importance of leveraging existing value in legacy systems like Hogan to create new, scalable offerings [28][29] Question: Drivers and assumptions behind growth rates in segments - Management noted strong bookings in CES for long-term projects but delays in short-term project bookings impacted revenue expectations [38][39] Question: Pricing environment across business segments - Pricing dynamics vary by segment, with stable pricing observed across GIS, CES, and insurance [63] Question: Capital allocation priorities and M&A considerations - The company remains open to accretive acquisitions that align with business goals while prioritizing internal growth investments [76][77]

Financial Data and Key Metrics Changes - The company reported a quarterly revenue increase of 21% year-over-year, with net interest income growing by 30% year-over-year [5][21] - Adjusted total revenue for Q4 2025 was $42.1 million, reflecting a 21% increase over Q4 2024 [21] - Net interest margin improved to 2.22%, up 55 basis points year-over-year [22] - Net income for Q4 2025 was $5.3 million, or $0.60 per diluted share, with adjusted net income of $5.6 million, or $0.64 per diluted share [21] Business Line Data and Key Metrics Changes - The banking-as-a-service (BaaS) initiatives generated over $1.3 billion in new deposits for 2025, more than tripling from the previous year [6] - The SBA business maintained a strong position with nearly $580 million in funded originations during 2025, despite industry challenges [7] - The company processed over $165 billion in payments volume, an increase of over 225% from 2024 [6] Market Data and Key Metrics Changes - Total loans as of December 31, 2025, were $3.7 billion, a 4% increase from the linked quarter but a 10% decrease from the previous year [26] - Total deposits as of December 31, 2025, were $4.8 billion, representing a 2% decrease compared to both September 30, 2025, and December 31, 2024 [26] Company Strategy and Development Direction - The company is focused on a digital-first banking model, emphasizing operational efficiency and disciplined expense management [5] - Strategic sale of approximately $850 million in single-tenant lease financing loans to Blackstone improved capital position and reduced exposure to lower-yielding assets [6] - The company aims to enhance credit quality by prioritizing higher credit quality borrowers in its SBA production, projecting a more measured production of approximately $500 million for 2026 [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong financial performance while building long-term shareholder value [11] - The company anticipates continued loan growth of 15%-17% in 2026, driven by strong pipelines across commercial lending verticals [27] - Management expects credit conditions to stabilize as problem loans are resolved and enhanced underwriting standards take effect [10] Other Important Information - The company recognized a provision for credit losses of $12 million in Q4 2025, primarily due to net charge-offs [25] - Non-performing loans increased to $58.5 million, with a ratio of 1.56% of total loans, primarily related to SBA guaranteed balances [25] Q&A Session Summary Question: What is the expected yield on SBA loans retained on the balance sheet? - Management indicated that they expect to hold an additional $94 million of guaranteed SBA loans on the balance sheet, priced at prime plus 1.5 [42] Question: What are the expectations for deposit repricing in the first half of the year? - Management expects continued decreases in deposit costs, particularly in the first quarter, due to maturing CDs and lower market rates [39][40] Question: What is the outlook for net charge-offs relative to the provision guidance? - Management indicated that approximately half of the provision guidance would be for charge-offs, with expectations for elevated levels in the first half of the year [60][61]

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