Apple Reports Record Q3 Results, $49.6b revenue, $10.7b profit

iPhone, Apple Watch, Mac & App Store Drive Revenue Growth of 33%

Apple today announced financial results for its fiscal 2015 third quarter ended June 27, 2015. The Company posted quarterly revenue of $49.6 billion and quarterly net profit of $10.7 billion, or $1.85 per diluted share. These results compare to revenue of $37.4 billion and net profit of $7.7 billion, or $1.28 per diluted share, in the year-ago quarter. Gross margin was 39.7 percent compared to 39.4 percent in the year-ago quarter. International sales accounted for 64 percent of the quarter’s revenue.

The growth was fueled by record third quarter sales of iPhone® and Mac®, all-time record revenue from services and the successful launch of Apple Watch™.

“We had an amazing quarter, with iPhone revenue up 59 percent over last year, strong sales of Mac, all-time record revenue from services, driven by the App Store, and a great start for Apple Watch,” said Tim Cook, Apple’s CEO.

“The excitement for Apple Music has been incredible, and we’re looking forward to releasing iOS 9, OS X El Capitan and watchOS 2 to customers in the fall.”

Luca Maestri, Apple’s CFO said,

“In the third quarter our year-over-year growth rate accelerated from the first half of fiscal 2015, with revenue up 33 percent and earnings per share up 45 percent,”

“We generated very strong operating cash flow of $15 billion, and we returned over $13 billion to shareholders through our capital return program.”

Apple is providing the following guidance for its fiscal 2015 fourth quarter:

  • revenue between $49 billion and $51 billion
  • gross margin between 38.5 percent and 39.5 percent
  • operating expenses between $5.85 billion and $5.95 billion
  • other income/(expense) of $400 million
  • tax rate of 26.3 percent

Apple’s board of directors has declared a cash dividend of $.52 per share of the Company’s common stock. The dividend is payable on August 13, 2015, to shareholders of record as of the close of business on August 10, 2015.

Apple will provide live streaming of its Q3 2015 financial results conference call beginning at 2:00 p.m. PDT on July 21, 2015 at apple.com/quicktime/qtv/earningsq315. This webcast will also be available for replay for approximately two weeks thereafter.
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Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except number of shares which are reflected in thousands and per share amounts)

Three Months Ended

Nine Months Ended

June 27,
2015

June 28,
2014

June 27,
2015

June 28,
2014

Net sales $ 49,605 $ 37,432 $ 182,214 $ 140,672
Cost of sales (1) 29,924 22,697 109,136 86,144
Gross margin 19,681 14,735 73,078 54,528
Operating expenses:
Research and development (1) 2,034 1,603 5,847 4,355
Selling, general and administrative (1) 3,564 2,850 10,624 8,835
Total operating expenses 5,598 4,453 16,471 13,190
Operating income 14,083 10,282 56,607 41,338
Other income/(expense), net 390 202 846 673
Income before provision for income taxes 14,473 10,484 57,453 42,011
Provision for income taxes 3,796 2,736 15,183 10,968
Net income $ 10,677 $ 7,748 $ 42,270 $ 31,043
Earnings per share:
Basic $ 1.86 $ 1.29 $ 7.30 $ 5.06
Diluted $ 1.85 $ 1.28 $ 7.25 $ 5.03
Shares used in computing earnings per share:
Basic 5,729,886 6,012,635 5,788,922 6,136,147
Diluted 5,773,099 6,051,711 5,829,920 6,172,857
Cash dividends declared per share $ 0.52 $ 0.47 $ 1.46 $ 1.35
(1) Includes share-based compensation expense as follows:
Cost of sales $ 148 $ 115 $ 430 $ 334
Research and development $ 388 $ 313 $ 1,146 $ 902
Selling, general and administrative $ 320 $ 296 $ 1,095 $ 865

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Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except number of shares which are reflected in thousands and par value)

June 27,
2015

September 27,
2014

ASSETS:
Current assets:
Cash and cash equivalents $ 15,319 $ 13,844
Short-term marketable securities 19,384 11,233
Accounts receivable, less allowances of $83 and $86, respectively 10,370 17,460
Inventories 2,042 2,111
Deferred tax assets 5,010 4,318
Vendor non-trade receivables 9,537 9,759
Other current assets 9,291 9,806
Total current assets 70,953 68,531
Long-term marketable securities 168,145 130,162
Property, plant and equipment, net 21,149 20,624
Goodwill 5,044 4,616
Acquired intangible assets, net 3,779 4,142
Other assets 4,081 3,764
Total assets $ 273,151 $ 231,839
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable $ 26,474 $ 30,196
Accrued expenses 22,724 18,453
Deferred revenue 9,088 8,491
Commercial paper 4,499 6,308
Current portion of long-term debt 2,500 0
Total current liabilities 65,285 63,448
Deferred revenue, non-current 3,474 3,031
Long-term debt 47,419 28,987
Other non-current liabilities 31,296 24,826
Total liabilities 147,474 120,292
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,705,400 and 5,866,161 shares issued and outstanding, respectively 26,327 23,313
Retained earnings 98,252 87,152
Accumulated other comprehensive income 1,098 1,082
Total shareholders’ equity 125,677 111,547
Total liabilities and shareholders’ equity $ 273,151 $ 231,839

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Nine Months Ended
June 27, 2015 June 28, 2014
Cash and cash equivalents, beginning of the period $ 13,844 $ 14,259
Operating activities:
Net income 42,270 31,043
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization 8,138 5,977
Share-based compensation expense 2,671 2,101
Deferred income tax expense 2,820 3,154
Changes in operating assets and liabilities:
Accounts receivable, net 7,090 2,314
Inventories 69 170
Vendor non-trade receivables 222 1,486
Other current and non-current assets 2,286 931
Accounts payable (3,263) (2,531)
Deferred revenue 1,040 1,394
Other current and non-current liabilities 4,448 424
Cash generated by operating activities 67,791 46,463
Investing activities:
Purchases of marketable securities (137,524) (160,662)
Proceeds from maturities of marketable securities 9,916 15,111
Proceeds from sales of marketable securities 80,635 126,827
Payments made in connection with business acquisitions, net (230) (898)
Payments for acquisition of property, plant and equipment (7,629) (5,745)
Payments for acquisition of intangible assets (201) (216)
Other 134 7
Cash used in investing activities (54,899) (25,576)
Financing activities:
Proceeds from issuance of common stock 324 435
Excess tax benefits from equity awards 684 562
Taxes paid related to net share settlement of equity awards (1,332) (839)
Dividends and dividend equivalents paid (8,597) (8,297)
Repurchase of common stock (22,000) (28,000)
Proceeds from issuance of long-term debt, net 21,312 11,960
Change in commercial paper, net (1,808) 2,010
Cash used in financing activities (11,417) (22,169)
Increase/(decrease) in cash and cash equivalents 1,475 (1,282)
Cash and cash equivalents, end of the period $ 15,319 $ 12,977
Supplemental cash flow disclosure:
Cash paid for income taxes, net $ 10,604 $ 8,013
Cash paid for interest $ 427 $ 322

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Apple Inc.
Q3 2015 Unaudited Summary Data
(Units in thousands, Revenue in millions)
Q3 2015 Q2 2015 Q3 2014 Sequential Change Year/Year Change
Operating Segments Revenue Revenue Revenue Revenue Revenue
Americas $20,209 $21,316 $17,574 – 5% 15%
Europe 10,342 12,204 8,659 – 15% 19%
Greater China 13,230 16,823 6,230 – 21% 112%
Japan 2,872 3,457 2,627 – 17% 9%
Rest of Asia Pacific 2,952 4,210 2,342 – 30% 26%
Total Apple $49,605 $58,010

$37,432

– 14% 33%
Q3 2015 Q2 2015 Q3 2014 Sequential Change Year/Year Change
Product Summary Units Revenue Units Revenue Units Revenue Units Revenue Units Revenue
iPhone (1) 47,534 $31,368 61,170 $40,282 35,203 $19,751 – 22% – 22% 35% 59%
iPad (1) 10,931 4,538 12,623 5,428 13,276 5,889 – 13% – 16% – 18% – 23%
Mac (1) 4,796 6,030 4,563 5,615 4,413 5,540 5% 7% 9% 9%
Services (2) 5,028 4,996 4,485 1% 12%
Other Products (1)(3) 2,641 1,689 1,767 56% 49%
Total Apple $49,605 $58,010 $37,432 – 14% 33%

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(1)

Includes deferrals and amortization of related non-software services and software upgrade rights.

(2)

Includes revenue from iTunes, AppleCare, Apple Pay, licensing and other services.

(3)

Includes sales of Apple TV, Apple Watch, Beats Electronics, iPod and Apple-branded and third-party accessories.

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