AAPL Apple Inc

Strong performance of iPhone, Mac & App Store drives 27% revenue growth & 40% EPS growth, setting new second quarter records

Apple® today announced financial results for its fiscal 2015 second quarter ended March 28, 2015. The Company posted quarterly revenue of $58 billion and quarterly net profit of $13.6 billion, or $2.33 per diluted share. These results compare to revenue of $45.6 billion and net profit of $10.2 billion, or $1.66 per diluted share, in the year-ago quarter. Gross margin was 40.8 percent compared to 39.3 percent in the year-ago quarter. International sales accounted for 69 percent of the quarter’s revenue.

The growth was fueled by record second quarter sales of iPhone® and Mac® and all-time record performance of the App Store℠.

“We are thrilled by the continued strength of iPhone, Mac and the App Store, which drove our best March quarter results ever,” said Tim Cook, Apple’s CEO. “We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles, and we’re off to an exciting start to the June quarter with the launch of Apple Watch.”

“The tremendous customer demand for our products and services in the March quarter drove revenue growth of 27 percent and EPS growth of 40 percent,” said Luca Maestri, Apple’s CFO. “Cash flow from operations was also outstanding at $19.1 billion.”

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

• revenue between $46 billion and $48 billion

• gross margin between 38.5 percent and 39.5 percent

• operating expenses between $5.65 billion and $5.75 billion

• other income/(expense) of $350 million

• tax rate of 26.3 percent

Apple will provide live streaming of its Q2 2015 financial results conference call beginning at 2:00 p.m. PDT on April 27, 2015 at www.apple.com/quicktime/qtv/earningsq215. This webcast will also be available for replay for approximately two weeks thereafter.

This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue, gross margin, operating expenses, other income/(expense), and tax rate. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company’s reaction to those factors, on consumer and business buying decisions with respect to the Company’s products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company’s gross margin; the inventory risk associated with the Company’s need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company’s business currently obtained by the Company from sole or limited sources; the effect that the Company’s dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company’s international operations; the Company’s reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company’s dependency on the performance of distributors, carriers and other resellers of the Company’s products; the effect that product and service quality problems could have on the Company’s sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of legal proceedings. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 27, 2014, its Form 10-Q for the fiscal quarter ended December 27, 2014, and its Form 10-Q for the fiscal quarter ended March 28, 2015 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

NOTE TO EDITORS: For additional information visit Apple’s PR website (www.apple.com/pr), or call Apple’s Media Helpline at (408) 974-2042.

© 2015 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS, Macintosh, iPhone and App Store are trademarks of Apple. Other company and product names may be trademarks of their respective owners.

 

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

Six Months Ended

March 28,2015

 

March 29,2014

March 28,2015

 

March 29,2014

  Net sales $ 58,010 $ 45,646 $ 132,609 $ 103,240 Cost of sales (1)   34,354   27,699   79,212   63,447 Gross margin   23,656   17,947   53,397   39,793 Operating expenses: Research and development (1) 1,918 1,422 3,813 2,752 Selling, general and administrative (1)   3,460   2,932   7,060   5,985 Total operating expenses   5,378   4,354   10,873   8,737 Operating income 18,278 13,593 42,524 31,056 Other income/(expense), net   286   225   456   471 Income before provision for income taxes 18,564 13,818 42,980 31,527 Provision for income taxes   4,995   3,595   11,387   8,232 Net income $ 13,569 $ 10,223 $ 31,593 $ 23,295   Earnings per share: Basic $ 2.34 $ 1.67 $ 5.43 $ 3.76 Diluted $ 2.33 $ 1.66 $ 5.39 $ 3.74   Shares used in computing earnings per share: Basic 5,793,799 6,123,302 5,818,411 6,197,903 Diluted 5,834,858 6,156,699 5,858,330 6,233,430   Cash dividends declared per share $ 0.47 $ 0.44 $ 0.94 $ 0.88   (1) Includes share-based compensation expense as follows: Cost of sales $ 142 $ 110 $ 282 $ 219 Research and development $ 384 $ 300 $ 758 $ 589 Selling, general and administrative $ 401 $ 286 $ 775 $ 569  

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

   

 

March 28,2015

September 27,2014

  ASSETS:   Current assets: Cash and cash equivalents $ 14,489 $ 13,844 Short-term marketable securities 18,607 11,233 Accounts receivable, less allowances of $83 and $86, respectively 10,905 17,460 Inventories 2,396 2,111 Deferred tax assets 5,141 4,318 Vendor non-trade receivables 7,259 9,759 Other current assets   9,094   9,806 Total current assets 67,891 68,531   Long-term marketable securities 160,443 130,162 Property, plant and equipment, net 20,151 20,624 Goodwill 4,711 4,616 Acquired intangible assets, net 4,061 4,142 Other assets   3,937   3,764 Total assets $ 261,194 $ 231,839     LIABILITIES AND SHAREHOLDERS’ EQUITY:   Current liabilities: Accounts payable $ 23,159 $ 30,196 Accrued expenses 22,827 18,453 Deferred revenue 8,944 8,491 Commercial paper   3,799   6,308 Total current liabilities 58,729 63,448   Deferred revenue – non-current 3,571 3,031 Long-term debt 40,072 28,987 Other non-current liabilities   29,816   24,826 Total liabilities   132,188   120,292   Commitments and contingencies   Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,762,278 and 5,866,161 shares issued and outstanding, respectively 25,376 23,313 Retained earnings 100,920 87,152 Accumulated other comprehensive income   2,710   1,082 Total shareholders' equity   129,006   111,547 Total liabilities and shareholders' equity $ 261,194 $ 231,839  

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

  Six Months Ended March 28, 2015   March 29, 2014   Cash and cash equivalents, beginning of the period $ 13,844 $ 14,259   Operating activities: Net income 31,593 23,295 Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization 5,054 4,031 Share-based compensation expense 1,815 1,377 Deferred income tax expense 1,879 2,059 Changes in operating assets and liabilities: Accounts receivable, net 6,555 3,401 Inventories (285) (65) Vendor non-trade receivables 2,500 1,419 Other current and non-current assets 2,448 14 Accounts payable (5,428) (2,375) Deferred revenue 993 1,414 Other current and non-current liabilities 5,679   1,638 Cash generated by operating activities 52,803   36,208   Investing activities: Purchases of marketable securities (92,523) (90,360) Proceeds from maturities of marketable securities 5,871 10,869 Proceeds from sales of marketable securities 48,924 80,241 Payments made in connection with business acquisitions, net (115) (559) Payments for acquisition of property, plant and equipment (5,586) (3,367) Payments for acquisition of intangible assets (155) (163) Other 88   (23) Cash used in investing activities (43,496)   (3,362)   Financing activities: Proceeds from issuance of common stock 309 341 Excess tax benefits from equity awards 357 363 Taxes paid related to net share settlement of equity awards (608) (430) Dividends and dividend equivalents paid (5,544) (5,430) Repurchase of common stock (12,000) (23,000) Proceeds from issuance of long-term debt, net 11,332 0 Repayments of commercial paper, net (2,508)   0 Cash used in financing activities (8,662)   (28,156)   Increase in cash and cash equivalents 645   4,690 Cash and cash equivalents, end of the period $ 14,489 $ 18,949   Supplemental cash flow disclosure: Cash paid for income taxes, net $ 7,058 $ 5,369 Cash paid for interest $ 220 $ 161   Apple Inc. Q2 2015 Unaudited Summary Data (Units in thousands, Revenue in millions)                             Q2'15 Q1'15 Q2'14 Sequential Change

Year/Year Change

  Operating Segments Revenue Revenue Revenue Revenue Revenue Americas $21,316 $30,566 $17,982 - 30% 19% Europe 12,204 17,214 10,941 - 29% 12% Greater China 16,823 16,144 9,835 4% 71% Japan 3,457 5,448 4,047 - 37% - 15% Rest of Asia Pacific 4,210 5,227 2,841 - 19% 48% Total Apple     $58,010 $74,599 $45,646 - 22% 27%         Q2'15 Q1'15 Q2'14 Sequential Change Year/Year Change   Product Summary Units Revenue Units Revenue Units Revenue Units Revenue Units Revenue iPhone (1) 61,170 $40,282 74,468 $51,182 43,719 $26,064 - 18% - 21% 40% 55% iPad (1) 12,623 5,428 21,419 8,985 16,350 7,610 - 41% - 40% - 23% - 29% Mac (1) 4,563 5,615 5,519 6,944 4,136 5,519 -17% - 19% 10% 2% Services (2) 4,996 4,799 4,573 4% 9% Other Products (1)(3) 1,689 2,689 1,880 - 37% - 10% Total Apple     $58,010 $74,599 $45,646 - 22% 27%

(1)

 

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

(2)

Includes revenue from the iTunes Store, App Store, Mac App Store, iBooks Store, AppleCare, Apple Pay, licensing and other services.

(3)

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

ApplePress:Josh Rosenstock, 408-974-2414jrosenstock@apple.comorInvestor Relations:Nancy Paxton, 408-974-5420paxton1@apple.comJoan Hoover, 408-974-4570hoover1@apple.com