Apple’s fiscal first quarter earnings for 2009 (the last quarter of 2008 by the calendar) have been announced and Q1 was the first time in the history of Apple that the $10 billion quarterly revenue mark was broken. Here are the key facts and figures you want to know:
Key figures
- record revenue of $10.17 billion (last year’s Q1 was $9.6 million)
- net income of $1.61 billion, $1.78 per diluted share (last year’s Q1 was $1.58 billion, $1.76 per diluted share
- gross margins were 34.7 percent, equal to a year ago
- international sales accounted for 46 percent of revenue in Q1
Sales numbers
- 2, 524, 000 Mac’s sold, a 9 percent increase year-over-year
- 22, 727, 000 iPod’s sold, a 3 percent increase year-over-year
- 4, 363, 000 iPhone’s sold, an 88 percent increase year-over-year
Q2 Guidance
- revenues of $7.6 billion to $8 billion
- $0.90 to $1.00 diluted earnings per share
Comparison to Wall Street
- Street predicted revenues of $9.7 billion for Q1–Apple wins
- Street predicted $1.39 per share–Apple wins
- Mac sales in line with Wall Street–tied
- Street predicted 18.6 million iPod’s sold–Apple wins
- Street predicted 5 million iPhone’s sold–Apple loses
- Street predicted higher revenues in Q2–Apple loses
Apple shares are currently up 8.66 percent, $90, in after hours trading. Check out the full release after the jump.
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Apple Reports First Quarter Results
Wednesday January 21, 4:40 pm ET
Best Quarterly Revenue and Earnings in Apple History
iPod Sales Set New Record
CUPERTINO, Calif., Jan. 21 /PRNewswire-FirstCall/ — Apple® today announced financial results for its fiscal 2009 first quarter ended December 27, 2008. The Company posted record revenue of $10.17 billion and record net quarterly profit of $1.61 billion, or $1.78 per diluted share. These results compare to revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share, in the year-ago quarter. Gross margin was 34.7 percent, equal to the year-ago quarter. International sales accounted for 46 percent of the quarter’s revenue.
In accordance with the subscription accounting treatment required by GAAP, the Company recognizes revenue and cost of goods sold for iPhone(TM) and Apple TV® over their economic lives. Adjusting GAAP sales and product costs to eliminate the impact of subscription accounting, the corresponding non-GAAP measures* for the quarter are $11.8 billion of “Adjusted Sales” and $2.3 billion of “Adjusted Net Income.”
Apple sold 2,524,000 Macintosh® computers during the quarter, representing nine percent unit growth over the year-ago quarter. The Company sold a record 22,727,000 iPods during the quarter, representing three percent unit growth over the year-ago quarter. Quarterly iPhone units sold were 4,363,000, representing 88 percent unit growth over the year-ago quarter.
“Even in these economically challenging times, we are incredibly pleased to report our best quarterly revenue and earnings in Apple history — surpassing $10 billion in quarterly revenue for the first time ever,” said Steve Jobs, Apple’s CEO.
“Our outstanding results generated over $3.6 billion in cash during the quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the second fiscal quarter of 2009, we expect revenue in the range of about $7.6 billion to $8 billion and we expect diluted earnings per share in the range of about $.90 to $1.00.”
Apple will provide live streaming of its Q1 2009 financial results conference call utilizing QuickTime®, Apple’s standards-based technology for live and on-demand audio and video streaming. The live webcast will begin at 2:00 p.m. PST on January 21, 2009 at http://www.apple.com/quicktime/qtv/earningsq109/ and will also be available for replay for approximately two weeks thereafter.
*Non-GAAP Financial Measures
During fiscal 2007, the Company began selling the iPhone and Apple TV. Because the Company may provide unspecified features and additional software products to iPhone and Apple TV customers in the future free of charge, in accordance with GAAP the Company recognizes revenue and cost of goods sold for these products on a straight-line basis over their economic lives, with any loss recognized at the time of sale. Currently, the economic lives of these products are estimated to be 24 months. This accounting treatment, referred to as subscription accounting, results in the deferral of almost all of the revenue and cost of goods during the quarter in which the products are sold to the customer. Other costs related to these products, including costs for engineering, sales, marketing and warranty, are expensed as incurred. Further, the costs to develop any future unspecified features and additional software products that may eventually be provided to customers also are expensed as incurred. In contrast, the Company generally recognizes revenue and cost of goods sold for its other products, such as Macs and iPods, at the time of sale, as the Company does not provide future unspecified features or additional software products to those customers free of charge.
In July 2008, the Company began selling iPhone 3G, the second-generation iPhone, and significantly expanded distribution by establishing carrier relationships in over 70 countries. Unit sales of iPhone 3G have been significantly greater than sales of the first-generation iPhone. During the first quarter of iPhone 3G availability ended September 27, 2008, 6.9 million units were sold, exceeding the 6.1 million first-generation iPhone units sold in the prior five quarters combined.
Unit sales of iPhone 3G continued to be significant in the quarter ended December 27, 2008, with 4.4 million iPhones sold. As a result, the amount of revenue and product cost related to those iPhone sales that the Company deferred for recognition in future periods under subscription accounting was substantial. While the GAAP results provide significant insight into the Company’s operations and financial position, management continues to supplement its analysis of the business using financial measures that look at the total sales, related product costs and resulting income for iPhones and Apple TVs sold to customers during the period. The presentation at the end of this press release includes the following non-GAAP measures: “Adjusted Sales,” “Adjusted Cost of Sales,” “Adjusted Gross Margin,” “Adjusted Operating Margin,” “Adjusted Income before Provision for Income Taxes,” “Adjusted Provision for Income Taxes,” “Adjusted Net Income” and “Adjusted Diluted Earnings per Share.” These financial measures are not consistent with GAAP because they do not reflect the deferral of revenue and product costs for recognition in later periods. The Company uses these financial measures, along with other measures discussed below, to provide additional insight into current operating and business trends not readily apparent from the GAAP results.
Management uses Adjusted Sales to evaluate the Company’s growth rate, revenue mix and performance relative to competitors. Given the impact of iPhone unit sales during the quarter ended December 27, 2008, Adjusted Sales provides a meaningful measurement of the Company’s growth by reflecting amounts generally due to Apple at the time of sale related to products sold within the period. Further, eliminating the effects of deferred revenue (current sales deferred to future periods and prior sales being recognized currently) provides more transparency into the Company’s underlying sales trends. Management uses the non-GAAP measures of “Adjusted Cost of Sales,” “Adjusted Gross Margin” and “Adjusted Operating Margin” to measure the Company’s operating performance based on current period iPhone and Apple TV sales and to facilitate ongoing operating decisions. Additionally, because the Company recognizes engineering, sales, and marketing expenses as incurred, including expenses related to iPhone and Apple TV, management uses Adjusted Sales to evaluate returns on those costs, to manage year-over-year operating expense growth, and to budget future expenses. Furthermore, because they are considered meaningful indicators of current business performance, the non-GAAP measures “Adjusted Sales” and “Adjusted Operating Margin” are metrics that will factor into the determination of management compensation beginning in fiscal year 2009. Finally, management uses the non-GAAP measures of “Adjusted Income before Provision for Income Taxes,” “Adjusted Provision for Income Taxes,” “Adjusted Net Income” and “Adjusted Diluted Earnings per Share” to measure the Company’s operating performance based on current period iPhone and Apple TV sales, to facilitate ongoing operating decisions, and compare performance relative to competitors.
Management believes that these non-GAAP financial measures, when taken together with the corresponding consolidated GAAP measures and related segment information, provide incremental insight into the underlying factors and trends affecting both the Company’s performance and its cash generating potential. Management believes these non-GAAP measures increase the transparency of the Company’s current results and enable investors to more fully understand trends in its current and future performance.
Cautions on Use of Non-GAAP Measures
As noted previously, these non-GAAP financial measures are not consistent with GAAP because they do not reflect the deferral of revenue and product costs for recognition in later periods. These non-GAAP financial measures do not adjust for the costs associated with the Company’s intention to provide unspecified new features and software to purchasers of iPhone and Apple TV products. These costs are expensed as incurred under GAAP’s subscription accounting model, and are not adjusted in these non-GAAP financial measures. As such, these non-GAAP financial measures are not intended to reflect in a given period all of the costs of sales made in that period. Rather, the non- GAAP financial measures presented below are intended for the limited purpose of presenting performance measures that include the total sales, related product costs, and resulting income for iPhones and Apple TVs in the period those products are sold to customers.
Management believes investors will benefit from greater transparency in referring to these non-GAAP financial measures when assessing the Company’s operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:
– these non-GAAP financial measures are limited in their usefulness and
should be considered only as a supplement to the Company’s GAAP
financial measures;
– these non-GAAP financial measures should not be considered in isolation
from, or as a substitute for, the Company’s GAAP financial measures;
– these non-GAAP financial measures should not be considered to be
superior to the Company’s GAAP financial measures;
– these non-GAAP financial measures were not prepared in accordance with
GAAP and investors should not assume that the non-GAAP financial
measures presented in this earnings release were prepared under a
comprehensive set of rules or principles;
– these non-GAAP financial measures are not presented with comparable
non-GAAP financial measures for prior periods, although management
intends to continue to track and present these non-GAAP financial
measures for future periods; and
– until management presents comparable non-GAAP financial measures for
additional periods, these non-GAAP financial measures do not provide
any information regarding trends in the Company’s performance and, as
such, investors should not assume that the presentation of these non-
GAAP financial measures reflects any positive or negative trends in the
Company’s performance.
Further, these non-GAAP financial measures may be unique to the Company, as they may be different from non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company’s results to the results of other companies.
A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure or measures appears at the end of this press release.
This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue and earnings per share. 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; potential litigation from the matters investigated by the special committee of the board of directors and the restatement of the Company’s consolidated financial statements; 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 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; the Company’s reliance on the availability of third-party digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the effect that product and service quality problems could have on the Company’s sales and operating profits; the Company’s reliance on sole service providers for iPhone in certain countries; war, terrorism, public health issues, and other circumstances that could disrupt supply, delivery, or demand of products; the continued service and availability of key executives and employees; unfavorable results of other legal proceedings; and the Company’s dependency on the performance of distributors and other resellers of the Company’s products. More information on potential factors that could affect the Company’s financial results is included from time to time in the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 27, 2008 and its Form 10-Q for the quarter ended December 27, 2008, 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 ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award- winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone.
© 2009 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS, Macintosh, iPhone, Apple TV and QuickTime are trademarks of Apple. Other company and product names may be trademarks of their respective owners.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share amounts which are reflected in thousands and per
share amounts)
Three Months Ended
December 27, December 29,
2008 2007
Net sales $10,167 $9,608
Cost of sales (1) 6,635 6,276
Gross margin 3,532 3,332
Operating expenses:
Research and development (1) 315 246
Selling, general, and administrative (1) 1,091 960
Total operating expenses 1,406 1,206
Operating income 2,126 2,126
Other income and expense 158 200
Income before provision for income taxes 2,284 2,326
Provision for income taxes 679 745
Net income $1,605 $1,581
Earnings per common share:
Basic $1.81 $1.81
Diluted $1.78 $1.76
Shares used in computing earnings per share:
Basic 889,142 875,860
Diluted 901,494 900,054
(1) Includes stock-based compensation expense
as follows:
Cost of sales $28 $18
Research and development $60 $39
Selling, general, and administrative $82 $53
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
December 27, September 27,
2008 2008
ASSETS:
Current assets:
Cash and cash equivalents $7,236 $11,875
Short-term marketable securities 18,411 10,236
Accounts receivable, less allowances of
$54 and $47, respectively 2,196 2,422
Inventories 396 509
Deferred tax assets 1,613 1,447
Other current assets 5,311 5,822
Total current assets 35,163 32,311
Long-term marketable securities 2,498 2,379
Property, plant and equipment, net 2,580 2,455
Goodwill 207 207
Acquired intangible assets, net 277 285
Other assets 2,062 1,935
Total assets $42,787 $39,572
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable $4,715 $5,520
Accrued expenses 3,807 3,719
Deferred revenue 6,235 4,853
Total current liabilities 14,757 14,092
Deferred revenue – non-current 3,440 3,029
Other non-current liabilities 1,681 1,421
Total liabilities 19,878 18,542
Commitments and contingencies
Shareholders’ equity:
Common stock, no par value; 1,800,000,000
shares authorized; 890,414,924 and
888,325,973 shares issued and
outstanding, respectively 7,392 7,177
Retained earnings 15,448 13,845
Accumulated other comprehensive income 69 8
Total shareholders’ equity 22,909 21,030
Total liabilities and shareholders’ equity $42,787 $39,572
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Three Months Ended
December 27, December 29,
2008 2007
Cash and cash equivalents, beginning
of the period $11,875 $9,352
Operating Activities:
Net income 1,605 1,581
Adjustments to reconcile net income to
cash generated by operating activities:
Depreciation, amortization, and accretion 158 106
Stock-based compensation expense 170 110
Provision for deferred income taxes (27) 22
Loss on disposition of property, plant,
and equipment 7 14
Changes in operating assets and liabilities:
Accounts receivable, net 226 (302)
Inventories 113 (113)
Other current assets 660 (550)
Other assets (116) (253)
Accounts payable (767) 484
Deferred revenue 1,793 1,048
Other liabilities 116 640
Cash generated by operating activities 3,938 2,787
Investing Activities:
Purchases of marketable securities (13,082) (6,127)
Proceeds from maturities of marketable
securities 2,226 2,129
Proceeds from sales of marketable securities 2,668 758
Purchases of other long-term investments (38) (9)
Payment for acquisition of property, plant,
and equipment (339) (224)
Payment for acquisition of intangible assets (14) (8)
Other (60) 19
Cash used in investing activities (8,639) (3,462)
Financing Activities:
Proceeds from issuance of common stock 77 179
Excess tax benefits from stock-based compensation 19 315
Cash used to net share settle equity awards (34) (9)
Cash generated by financing activities 62 485
Decrease in cash and cash equivalents (4,639) (190)
Cash and cash equivalents, end of the period $7,236 $9,162
Supplemental cash flow disclosure:
Cash paid for income taxes, net $550 $251
UNAUDITED CONSOLIDATED SCHEDULE OF DEFERRED REVENUE
(In millions)
December 27, September 27,
2008 2008
Deferred revenue-current:
iPhone and Apple TV $4,666 $3,518
AppleCare 602 599
Other 967 736
Total deferred revenue-current 6,235 4,853
Deferred revenue-non-current:
iPhone and Apple TV 2,627 2,262
AppleCare 683 651
Other 130 116
Total deferred revenue-non-current 3,440 3,029
Total deferred revenue $9,675 $7,882
UNAUDITED RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS
(In millions, except share amounts which are reflected in thousands and per
share amounts)
Three Months Ended December 27, 2008
Non-GAAP
As Reported Adjustments Non-GAAP
Net sales $10,167 $1,632 (a) $11,799
Cost of sales 6,635 637 (b) 7,272
Gross margin 3,532 995 (c) 4,527
Operating expenses 1,406 – 1,406
Operating income 2,126 995 (c) 3,121
Other income and expense 158 – 158
Income before provision
for income taxes 2,284 995 (c) 3,279
Provision for income taxes 679 296 (d) 975
Net income $ 1,605 $699 (e) $2,304
Earnings per diluted
common share $1.78 $.78 (f) $2.56
Shares used in computing
diluted earnings per share 901,494 901,494
Footnotes:
(a) Non-GAAP adjustment to net sales reflect (i) the reversal of the
current period’s amortization of deferred revenue derived from iPhone
handsets and Apple TV units shipped in current and prior periods and
(ii) the inclusion of amounts generally due to Apple at the time of
sale related to iPhone handsets and Apple TV units shipped in the
current period.
(b) Non-GAAP adjustment to cost of sales reflect (i) the reversal of the
current period’s amortization of deferred cost related to iPhone
handsets and Apple TV units shipped in current and prior periods and
(ii) the inclusion of the total cost of iPhone handsets and Apple TV
units shipped in the current period. In addition, the non-GAAP
adjustment to cost of sales reflects the estimate of the warranty
expense in the period when the related product is sold, rather than
when the expense is incurred. The non-GAAP adjustment to cost of sales
does not reflect the cost of providing unspecified additional software
products and upgrades.
(c) Non-GAAP adjustments to gross margin, operating income and income
before provision for income taxes are the difference between non-GAAP
adjustments to net sales and non-GAAP adjustments to cost of sales
[(a) - (b)].
(d) Represents the application of the period’s effective tax rate to the
non-GAAP adjustments to income before provision for income taxes.
(e) Represents the after-tax effect of the non-GAAP adjustments to gross
margin, operating income and income before provision for income taxes.
(f) Represents the per share impact of the non-GAAP adjustments to net
income.
Apple Inc.
Q1 2009 Unaudited Summary Data
Q4 2008 Q1 2008 Q1 2009
CPU Revenue CPU Revenue CPU Revenue
Operating Segments Units K $M Units K $M Units K $M
Americas 1,121 $3,572 841 $4,298 912 $4,501
Europe 611 1,723 705 2,471 795 2,771
Japan 78 320 91 400 99 481
Retail 596 1,718 504 1,701 515 1,740
Other Segments (1) 205 562 178 738 203 674
Total Operating Segments 2,611 $7,895 2,319 $9,608 2,524 $10,167
Revenue Revenue Revenue
Product Summary Units K $M Units K $M Units K $M
Desktops (2) 936 $1,363 977 $1,515 728 $1,043
Portables (3) 1,675 2,257 1,342 2,037 1,796 2,511
Subtotal CPUs 2,611 3,620 2,319 3,552 2,524 3,554
iPod 11,052 1,660 22,121 3,997 22,727 3,371
Other Music Related
Products and
Services(4) 832 808 1,011
iPhone and Related
Products &
Services (5) 6,892 806 2,315 241 4,363 1,247
Peripherals and Other
Hardware 428 382 378
Software, Service and
Other Sales 549 628 606
Total Apple $7,895 $9,608 $10,167
Sequential Change Year/Year Change
Operating Segments CPU Units Revenue CPU Units Revenue
Americas – 19% 26% 8% 5%
Europe 30% 61% 13% 12%
Japan 27% 50% 9% 20%
Retail – 14% 1% 2% 2%
Other Segments (1) – 1% 20% 14% – 9%
Total Operating Segments – 3% 29% 9% 6%
Sequential Change Year/Year Change
Product Summary Units Revenue Units Revenue
Desktops (2) – 22% – 23% – 25% – 31%
Portables (3) 7% 11% 34% 23%
Subtotal CPUs – 3% – 2% 9% 0%
iPod 106% 103% 3% – 16%
Other Music Related Products and
Services (4) 22% 25%
iPhone and Related Products &
Services (5) – 37% 55% 88% 417%
Peripherals and Other Hardware – 12% – 1%
Software, Service and Other Sales 10% – 4%
Total Apple 29% 6%
(1) Other Segments include Asia Pacific and FileMaker.
(2) Includes iMac, Mac mini, Mac Pro and Xserve product lines.
(3) Includes MacBook, MacBook Air and MacBook Pro product lines.
(4) Consists of iTunes Store sales, iPod services, and Apple-branded and
third-party iPod accessories.
(5) Units consist of iPhone handset sales; Revenue is derived from handset
sales, carrier agreements, and Apple-branded and third-party iPhone
accessories.
K = Units in thousands $M = Amounts in millions
