UPDATED 4/22/14: The RGB of ESP: Revisiting Deferred Revenue at the Individual Product Line Level (With a Possible Surprise Lying in Wait)

(Please refer to the raft of cautions and caveats in the previous deferred revenue article. You can also click the link for background in case you missed it. Also: UPDATED commentary at the end of the fifth chart.)

Don’t blame me – (faded) red, blue and green are the default colors Excel chose.

I just decided to run with it. 😀

We conclude our home gamer’s look at “ESP revenue” and the AAPL earnings preview series in general by drilling down just one more level – breaking out and visualizing estimated deferrals per product family (which of course are iPhone, iPad and Mac). Looking at the data in one or two more ways than the last time. Still, it’s a reasonably quick trip through the charts this time around.

Will there be any new insights from looking at the data in more detail? Care to join me for one last trip down the rabbit hole for this fiscal quarter?

First, the basic estimated cumulative ESP deferral chart:

aapl-esp-deferral-cumulative-breakout

Nothing too surprising when you visualize iPhone, iPad and Mac separately. Deferrals look to be more or less increasing steadily, though maybe not as much for iPad or Mac. We’ll see about the next several quarters.

Second, per-quarter estimated ESP deferral:

aapl-esp-deferral-perqtr-breakout

iPhone ESP deferral looked a bit “seasonal”, iPad a bit unpredictable since fiscal 2012, increased deferrals made quite the difference for Q1 2014 if my estimates are in the ballpark. If you find anything else interesting in this chart, great. Moving on.

Third, net deferred iPhone/iPad/Mac ESP revenue per quarter (which is incorporated within the previously mentioned “Footnote (b)”):

aapl-esp-deferral-perqtr-netdeferral

Wait, negative bars?

Yep (again, assuming the estimates are at least correct as to the trend). Fiscal Q3 2010 is easy to explain – that quarter, ESP deferral for iPhone dropped dramatically, from $25 to $10 per unit.  For fiscal Q3 and Q4 2013, negative and zero GAAP sell-in unit growth (respectively) for iPad created the phenomenon of low new ESP iPad revenue deferral and a lower “rolling average” deferral. The apparent result: Two quarters where iPad amortization outweighed deferral – and in Apple’s “slow” fiscal Q3 2013, net deferral was actually slightly lower than it was in fiscal Q4 2010.

Will fiscal 2014 see net deferrals patterned more like fiscal 2012? Fiscal 2013? Neither? Next quarter brings the next fragment of a clue.

Fourth, a breakout of the “rolling deferral balance” chart.

aapl-esp-deferral-cumulative-deferralbalance

For the time being, the amount of ESP revenue still to be recognized is back on the rise after a three-quarter period where it seemed to be plateauing. Assuming constant deferral rates, that’ll be a good thing for Apple to maintain.

Oh, I’m sorry, did you get the feeling I was maybe going through the charts a bit “out of order”? Well, I was. 😀

So without further delay, the fifth and final chart, which may very well surprise you – a breakout of cumulative ESP amortization for iPhone, iPad, and Mac (running total of all ESP revenue amortized so far).

aapl-esp-deferral-cumulative-amortization

Whoa. (UPDATE: It’s a nice way of putting the “lagging” contribution of no-longer-deferred ESP revenue into context, if nothing else.

I’ve been told this is just kind of way data looks when graphing running averages. But still, sure is aesthetically superior to the other graphs.)

* * * * * * * * * * * * * * * * * * * *

You know what, I might make this a new section of the earnings preview series going forward, now that most of the harder work has been put in. We’ll see. It’s a lot of charts, and there’s so many more asterisks to append.

Time to sit back and wait until earnings in about two days. Best of luck to all, and we’ll kick off the June quarter earnings preview before long!

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