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Apple q3'15 commentary intro

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Apple announced its Q3 results last week, and its momentum continued into this generally quiet quarter, with revenue growth of 33% and Net Income growth of 38% YoY. Both of these were ahead of Q2, of Apple’s guidance, and of Wall Street’s consensus. However the company’s share price promptly dropped 7% on iPhone sales that fell short of Wall Street’s (inflated) expectations, and on lower than anticipated guidance for Q4. Underlying this were concerns about a slowing Chinese economy, and that Apple’s 112% YoY growth in greater China cannot be sustained. Tim Cook did not seem to agree!

There has been the usual flurry of comments in the media, and as before I have gathered the numbers into a more accessible format, with my personal commentary and analysis. The last iteration again proved very popular: this one has a number of new data points, including my take on Apple Watch shipments, which is of course illuminating.

Here you will find a redacted version of the slides as a taster - not all the colours are showing on Slideshare. If you would like access to the full pack, contact me on nick@aquilla-europe.com

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Apple q3'15 commentary intro

  1. 1. Aquilla Apple Results Q3 2015 Summary and Commentary Note: Apple Q3 = Calendar Q2 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 Growth Accelerates •Revenues of $49.6B were another record for the quarter, and exceeded Apple’s guidance from April •Growth accelerated, tipping 33% YoY, which for a company of Apple’s size remains remarkable •Channel inventories were down by 1M units, without which revenues would probably have topped $50B •These numbers dwarf those of Google and Microsoft. Samsung has not yet reported its CQ2, but seems unlikely to catch Apple •However guidance midpoint for Q4 ($50B) suggests slowing growth (YoY 19%) Comparative Revenues CQ2 2015 SamsungElectronics(CQ1) Microsoft Google SamsungMobile 0% 15% 30% 45% 60% 75% 90% 0 15 30 45 60 75 90 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Revenue Growth (%) Revenue (B$) Apple Revenue Revenue B$ Revenue YoY Growth
  3. 3. Aquilla Source: Apple Results Cash, Investments & Capital Return Capital Return Program Grows •Apple generated $15.0B of cash from operations in the quarter, another huge jump from the year-ago quarter •The company returned $13.1B to shareholders during the quarter, mostly through Stock Repurchases ($10.0B), which offer Apple greater flexibility than dividends •Long and short term cash holdings grew by $9.3B in the quarter, and the company now has over $203B in cash •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 ($181B, 89%) 0% 20% 40% 60% 80% 100% 0 20 40 60 80 100 120 140 160 180 200 220 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Ex-US(B$) 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 slipped sequentially, but gained 10 points YoY to 63% of the revenues in the quarter •Mac increased its share to 12% of the mix, a very healthy result •iPad was the big loser, declining a further 23%, and slipping 4th place in $ share •Services continues to grow, and Apple Music can only add to this •Other Products ticked up, with Apple Watch accounting for all of this (and more) Most recent $ Share $ YoY 5% 49% 10% 12% 12% 9% 9% -23% 63% 59% 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 Q3 '15 Product Line Revenue Mix Services: iTunes, App, Mac App & iBooks Stores, AppleCare, Apple Pay, licensing, other services Other Products: Watch, iPod, Apple TV, Beats Electronics and Apple-branded and third-party accessories
  5. 5. Aquilla Services - Steady Gains (Music to come) 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 and China •China is still on fire, and surged past EMEIA in 12 month trailing revenues, as well as in the quarter •EMEIA returned a strong quarter, and long term trend reflects this, continuing to climb •APAC showed healthy growth, and we can expect to see this reflected in the longer term trends in the coming 1-2 quarters 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 APAC Japan Greater China EMEIA Americas APAC 12m Trailing Japan 12m Trailing Greater China 12m Trailing EMEIA 12m Trailing Americas 12m Trailing
  7. 7. Aquilla Source: Apple Results Competitive Landscape - Tablets Apple still leads in declining market •Apple claimed dominance of the $200+ tablet market in the US - several case studies were referenced, in particular United Airlines, and the IBM partnership talked up again •However the next likelihood of growth will be once the iPhone 6 comps are eliminated, most likely in Q1 2016 (which assumes the iPad was cannibalised by the larger screen iPhones) •Microsoft flagged strong Surface growth, though it remains at less than 20% of iPad revenues •Windows 10 may yet pose a threat to Apple’s enterprise ambitions for iPad, especially as many X86 tablets are subsidised by Intel Source: Company Reports 0 3 6 9 12 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 iPad Surface $B
  8. 8. Aquilla Apple’s Q2 Results Analysis - Full Slide Deck
  9. 9. Aquilla Apple’s Q3 Results Analysis These popular slides cover an in-depth analysis of Apple’s historic record-beating Q3 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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