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

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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)29,92422,697109,13686,144
Gross margin19,68114,73573,07854,528
Operating expenses:
Research and development (1)2,0341,6035,8474,355
Selling, general and administrative (1)3,5642,85010,6248,835
Total operating expenses5,5984,45316,47113,190
Operating income14,08310,28256,60741,338
Other income/(expense), net390202846673
Income before provision for income taxes14,47310,48457,45342,011
Provision for income taxes3,7962,73615,18310,968
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:
Basic5,729,8866,012,6355,788,9226,136,147
Diluted5,773,0996,051,7115,829,9206,172,857
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 securities19,38411,233
Accounts receivable, less allowances of $83 and $86, respectively10,37017,460
Inventories2,0422,111
Deferred tax assets5,0104,318
Vendor non-trade receivables9,5379,759
Other current assets9,2919,806
Total current assets70,95368,531
Long-term marketable securities168,145130,162
Property, plant and equipment, net21,14920,624
Goodwill5,0444,616
Acquired intangible assets, net3,7794,142
Other assets4,0813,764
Total assets$273,151$231,839
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable$26,474$30,196
Accrued expenses22,72418,453
Deferred revenue9,0888,491
Commercial paper4,4996,308
Current portion of long-term debt2,5000
Total current liabilities65,28563,448
Deferred revenue, non-current3,4743,031
Long-term debt47,41928,987
Other non-current liabilities31,29624,826
Total liabilities147,474120,292
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, respectively26,32723,313
Retained earnings98,25287,152
Accumulated other comprehensive income1,0981,082
Total shareholders’ equity125,677111,547
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, 2015June 28, 2014
Cash and cash equivalents, beginning of the period$13,844$14,259
Operating activities:
Net income42,27031,043
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization8,1385,977
Share-based compensation expense2,6712,101
Deferred income tax expense2,8203,154
Changes in operating assets and liabilities:
Accounts receivable, net7,0902,314
Inventories69170
Vendor non-trade receivables2221,486
Other current and non-current assets2,286931
Accounts payable(3,263)(2,531)
Deferred revenue1,0401,394
Other current and non-current liabilities4,448424
Cash generated by operating activities67,79146,463
Investing activities:
Purchases of marketable securities(137,524)(160,662)
Proceeds from maturities of marketable securities9,91615,111
Proceeds from sales of marketable securities80,635126,827
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)
Other1347
Cash used in investing activities(54,899)(25,576)
Financing activities:
Proceeds from issuance of common stock324435
Excess tax benefits from equity awards684562
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, net21,31211,960
Change in commercial paper, net(1,808)2,010
Cash used in financing activities(11,417)(22,169)
Increase/(decrease) in cash and cash equivalents1,475(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 2015Q2 2015Q3 2014Sequential ChangeYear/Year Change
Operating SegmentsRevenueRevenueRevenueRevenueRevenue
Americas$20,209$21,316$17,574– 5%15%
Europe10,34212,2048,659– 15%19%
Greater China13,23016,8236,230– 21%112%
Japan2,8723,4572,627– 17%9%
Rest of Asia Pacific2,9524,2102,342– 30%26%
Total Apple$49,605$58,010

$37,432

– 14%33%
Q3 2015Q2 2015Q3 2014Sequential ChangeYear/Year Change
Product SummaryUnitsRevenueUnitsRevenueUnitsRevenueUnitsRevenueUnitsRevenue
iPhone (1)47,534$31,36861,170$40,28235,203$19,751– 22%– 22%35%59%
iPad (1)10,9314,53812,6235,42813,2765,889– 13%– 16%– 18%– 23%
Mac (1)4,7966,0304,5635,6154,4135,5405%7%9%9%
Services (2)5,0284,9964,4851%12%
Other Products (1)(3)2,6411,6891,76756%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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