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Apple q2'15 commentary intro

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Apple managed to follow its record-breaking first quarter with another that managed to stun observers. Wall Street had forecast a strong quarter, with good momentum carried over from the previous period, but the beat was even stronger. The real test will follow in the coming quarters, as the iPhone 6 heads towards the end of its cycle, and competition, most significantly Samsung, ships the new Galaxy 6 series.

Here once again is an introduction to the popular detailed summary of Apple's results, analysing and commenting on all the major metrics, and considering the key questions facing Apple in the coming months. (Not all the colours have successfully uploaded).

If you would like access to the full and detailed slides, with all the correct colours, drop me an email at nick@aquilla-europe.com

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Apple q2'15 commentary intro

  1. 1. Aquilla Apple Results Q2 2015 Summary and Commentary Note: Apple Q2 = Calendar Q1 These data are derived from results published by Apple, Inc., from the published results of other companies, and from assorted independent analysts, as identified in the slides. The opinions are those of the author, and should in no way be interpreted as investment advice.
  2. 2. Aquilla Source: Apple Results Quarterly Revenue Extraordinary Growth •Wall Street was bullish, but revenues of $58.0B left analysts on the earnings call stunned •These numbers are leaving competitors in the dust, as Samsung Electronics saw revenues fall by 12% in Q4 (15% in USD), and Samsung Mobile, which fell by 20% (23% in USD) •Apple’s continued strong growth is all the more remarkable considering the size of the company today - the laws of large numbers do not seem to apply. Comparative Revenues CQ1 2015 SamsungElectronics Microsoft Google SamsungMobile 0% 15% 30% 45% 60% 75% 90% 0 15 30 45 60 75 90 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Revenue Growth (%) Revenue (B$) Apple Revenue Revenue B$ Revenue YoY Growth
  3. 3. Aquilla Source: Apple Results Cash, Investments & Capital Return Capital Return Program Grows •Apple generated $19.1B of cash from operations in the Quarter, another huge jump from the year-ago quarter •The company returned $9.7B to shareholders during the quarter, mostly through Stock Repurchases ($7B), which offer Apple greater flexibility than dividends •Long and short term cash holdings grew by $16B in the quarter, and the company now has over $194B in cash •This is enough to pay off the national debt of Malaysia or Switzerland (and nearly that of Russia), and is more than the GDP of New Zealand •Cash held outside the US, for tax reasons, is increasingly an issue: Apple is borrowing in the US to fund the capital return programme, while the offshore cash approaches 90% of the total ($171B) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 20 40 60 80 100 120 140 160 180 200 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Ex-US(B$) Cash & Capital Return Short Term Cash B$ Long Term Cash B$ Cash Generated B$ Capital Return B$ Non-US Held Cash %
  4. 4. Aquilla Source: Apple Results Revenue Mix by Product Line iPhone dominates •iPhone’s dominance was massive, with 69% of the revenues, and probably nearer 75-80% of the profit in the quarter •10% unit growth for Mac, but declining ASPs saw it gain only 2% in $ to a 9% share of the mix •iPad was the big loser, declining a further 29%, and slipping behind Mac in $ •Services continues to grow (but needs subscription audio) •Other Products declined with iPod, which was about a quarter of this category in Q2 2014 - Beats seems unable to reverse this trend Most recent $ Share $ YoY 3% -10% 9% 9% 10% 2% 9% -29% 69% 55% Services: iTunes, App, Mac App & iBooks Stores, AppleCare, Apple Pay, licensing, other services Other Products: iPod, Apple TV, Beats Electronics and Apple-branded and third-party accessories iPhone M$ iPad M$ Mac M$ Services M$ Other Products M$ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Product Line Revenue Mix
  5. 5. Aquilla Services - Slowing Tracking the trailing 12 months (current and 3 previous Quarters) eliminates seasonality, and gives a better indication of the longer term trends Source: Apple Results Services: iTunes, App, Mac App & iBooks Stores, AppleCare, Apple Pay, licensing, other services 0 4,000 8,000 12,000 16,000 20,000 24,000 0 1,000 2,000 3,000 4,000 5,000 6,000 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Trailing 12m Revenue ($M) Revenue ($M) Services Revenue Services M$ Services Trailing 12m M$
  6. 6. Aquilla Source: Apple Results Geo Revenue and 12m Trailing Americas/China Ticked Up •Trailing 12 months shows clearly where Apple’s growth is coming from - Americas, China and APAC •China was on fire, and also benefitted from the Chinese New Year holiday during the quarter, which is increasingly a sales driver •EMEIA appears to be slowing, reflecting the developed nature of the region and its sluggish economy •Japan was the one weaker region, the causes of which were not touched on during the call. •APAC is still small, but ticking up strongly Tracking the trailing 12 months (current and 3 previous Quarters) eliminates seasonality, and gives a better indication of the longer term trends 0 20,000 40,000 60,000 80,000 100,000 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Revenue $M Geo Revenue and 12m Trailing Revenue Americas EMEIA Greater China Japan APAC Americas 12m Trailing EMEIA 12m Trailing Greater China 12m Trailing Japan 12m Trailing APAC 12m Trailing
  7. 7. Aquilla Source: Apple Results Competitive Landscape - Tablets Apple still leads in declining market •Apple still leads, but lost 6% of share YoY •Cook identified cannibalisation by both Mac and iPhone, and was relaxed about this •The IBM partnership has still to bring a major impact, but remains promising - sales cycles are long. First major such deal (in Japan) just announced (hits Q3 onwards) Q1’15 M Q1’15% Q1’14 M Q1’14% Change Apple 12.6 26.8% 16.4 32.7% -22.9% Samsung 9.0 19.1% 10.8 21.6% -16.7% Lenovo 2.5 5.3% 2.0 4.1% 23.0% ASUS 1.8 3.8% 2.6 5.2% -30.7% LG 1.4 3.1% 0.1 0.2% 1423.7% Others 19.7 41.9% 18.1 36.3% 8.6% Total 47.1 100.0% 50.0 100.0% -5.9% Q1 2015 Tablet Units (IDC) Source: IDCSource: IDC
  8. 8. Aquilla Apple’s Q2 Results Analysis - Full Slide Deck
  9. 9. Aquilla Apple’s Q2 Results Analysis These popular slides cover an in-depth analysis of Apple’s historic record-beating Q2 results The slides shown are an introduction To receive the full set, including charts, commentary, interpretation and outlook plus all slides in full colour contact Aquilla Europe nick@aquilla-europe.com
  10. 10. Aquilla Nick Graves, CEO • nick@aquilla-europe.com • +44 780 225 6536 Aquilla Europe Ltd • Kennett Cottage • OX9 3QS • UK • www.aquilla-europe.com

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