AAPL Apple Inc

Services Revenue Grows 24% to All-Time Quarterly Record of $6.3 Billion

Apple® today announced financial results for its fiscal 2016 fourth quarter ended September 24, 2016. The Company posted quarterly revenue of $46.9 billion and quarterly net income of $9 billion, or $1.67 per diluted share. These results compare to revenue of $51.5 billion and net income of $11.1 billion, or $1.96 per diluted share, in the year-ago quarter. Gross margin was 38 percent compared to 39.9 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter’s revenue.

“Our strong September quarter results cap a very successful fiscal 2016 for Apple,” said Tim Cook, Apple’s CEO. “We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our Services business, where revenue grew 24 percent to set another all-time record.”

“We are pleased to have generated $16.1 billion in operating cash flow, a new record for the September quarter,” said Luca Maestri, Apple’s CFO. “We also returned $9.3 billion to investors through dividends and share repurchases during the quarter and have now completed over $186 billion of our capital return program.”

Apple is providing the following guidance for its fiscal 2017 first quarter:• revenue between $76 billion and $78 billion• gross margin between 38 percent and 38.5 percent• operating expenses between $6.9 billion and $7 billion• other income/(expense) of $400 million• tax rate of 26 percent

Apple’s board of directors has declared a cash dividend of $0.57 per share of the Company’s common stock. The dividend is payable on November 10, 2016 to shareholders of record as of the close of business on November 7, 2016.

Apple will provide live streaming of its Q4 2016 financial results conference call beginning at 2:00 p.m. PDT on October 25, 2016 at www.apple.com/investor/earnings-call/. 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 26, 2015, its Form 10-Q for the fiscal quarter ended December 26, 2015, its Form 10-Q for the fiscal quarter ended March 26, 2016, its Form 10-Q for the fiscal quarter ended June 25, 2016, and its Form 10-K for the fiscal year ended September 24, 2016 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 revolutionized personal technology with the introduction of the Macintosh in 1984. Today, Apple leads the world in innovation with iPhone, iPad, Mac, Apple Watch and Apple TV. Apple’s four software platforms — iOS, macOS, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services including the App Store, Apple Music, Apple Pay and iCloud. Apple’s more than 100,000 employees are dedicated to making the best products on earth, and to leaving the world better than we found it.

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.

© 2016 Apple Inc. All rights reserved. Apple and the Apple logo 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 Twelve Months Ended September 24, 2016   September 26, 2015 September 24, 2016   September 26, 2015 Net sales $ 46,852 $ 51,501 $ 215,639 $ 233,715 Cost of sales (1) 29,039   30,953   131,376   140,089 Gross margin 17,813   20,548   84,263   93,626   Operating expenses: Research and development (1) 2,570 2,220 10,045 8,067 Selling, general and administrative (1) 3,482   3,705   14,194   14,329 Total operating expenses 6,052   5,925   24,239   22,396   Operating income 11,761 14,623 60,024 71,230 Other income/(expense), net 427   439   1,348   1,285 Income before provision for income taxes 12,188 15,062 61,372 72,515 Provision for income taxes 3,174   3,938   15,685   19,121 Net income $ 9,014   $ 11,124   $ 45,687   $ 53,394   Earnings per share: Basic $ 1.68 $ 1.97 $ 8.35 $ 9.28 Diluted $ 1.67 $ 1.96 $ 8.31 $ 9.22   Shares used in computing earnings per share: Basic 5,366,912 5,646,916 5,470,820 5,753,421 Diluted 5,393,333 5,682,519 5,500,281 5,793,069   Cash dividends declared per share $ 0.57 $ 0.52 $ 2.18 $ 1.98   (1) Includes share-based compensation expense as follows: Cost of sales $ 186 $ 145 $ 769 $ 575 Research and development $ 476 $ 390 $ 1,889 $ 1,536 Selling, general and administrative $ 368 $ 380 $ 1,552 $ 1,475  

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

    September 24, 2016 September 26, 2015 ASSETS: Current assets: Cash and cash equivalents $ 20,484 $ 21,120 Short-term marketable securities 46,671 20,481 Accounts receivable, less allowances of $53 and $63, respectively 15,754 16,849 Inventories 2,132 2,349 Vendor non-trade receivables 13,545 13,494 Other current assets 8,283   15,085   Total current assets 106,869 89,378   Long-term marketable securities 170,430 164,065 Property, plant and equipment, net 27,010 22,471 Goodwill 5,414 5,116 Acquired intangible assets, net 3,206 3,893 Other non-current assets 8,757   5,422   Total assets $ 321,686   $ 290,345     LIABILITIES AND SHAREHOLDERS’ EQUITY: Current liabilities: Accounts payable $ 37,294 $ 35,490 Accrued expenses 22,027 25,181 Deferred revenue 8,080 8,940 Commercial paper 8,105 8,499 Current portion of long-term debt 3,500   2,500   Total current liabilities 79,006 80,610   Deferred revenue, non-current 2,930 3,624 Long-term debt 75,427 53,329 Other non-current liabilities 36,074   33,427   Total liabilities 193,437   170,990     Commitments and contingencies   Shareholders’ equity: Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,336,166 and 5,578,753 shares issued and outstanding, respectively 31,251 27,416 Retained earnings 96,364 92,284 Accumulated other comprehensive income/(loss) 634   (345 ) Total shareholders’ equity 128,249   119,355   Total liabilities and shareholders’ equity $ 321,686   $ 290,345    

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

  Twelve Months Ended September 24, 2016   September 26, 2015 Cash and cash equivalents, beginning of the period $ 21,120   $ 13,844     Operating activities: Net income 45,687 53,394 Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization 10,505 11,257 Share-based compensation expense 4,210 3,586 Deferred income tax expense 4,938 1,382 Changes in operating assets and liabilities: Accounts receivable, net 1,095 611 Inventories 217 (238 ) Vendor non-trade receivables (51 ) (3,735 ) Other current and non-current assets 1,090 (179 ) Accounts payable 1,791 5,400 Deferred revenue (1,554 ) 1,042 Other current and non-current liabilities (2,104 ) 8,746   Cash generated by operating activities 65,824   81,266     Investing activities: Purchases of marketable securities (142,428 ) (166,402 ) Proceeds from maturities of marketable securities 21,258 14,538 Proceeds from sales of marketable securities 90,536 107,447 Payments made in connection with business acquisitions, net (297 ) (343 ) Payments for acquisition of property, plant and equipment (12,734 ) (11,247 ) Payments for acquisition of intangible assets (814 ) (241 ) Payments for strategic investments (1,388 ) — Other (110 ) (26 ) Cash used in investing activities (45,977 ) (56,274 )   Financing activities: Proceeds from issuance of common stock 495 543 Excess tax benefits from equity awards 407 749 Payments for taxes related to net share settlement of equity awards (1,570 ) (1,499 ) Payments for dividends and dividend equivalents (12,150 ) (11,561 ) Repurchases of common stock (29,722 ) (35,253 ) Proceeds from issuance of term debt, net 24,954 27,114 Repayments of term debt (2,500 ) — Change in commercial paper, net (397 ) 2,191   Cash used in financing activities (20,483 ) (17,716 )   Increase/(Decrease) in cash and cash equivalents (636 ) 7,276   Cash and cash equivalents, end of the period $ 20,484   $ 21,120     Supplemental cash flow disclosure: Cash paid for income taxes, net $ 10,444 $ 13,252 Cash paid for interest $ 1,316 $ 514   Apple Inc. Q4 2016 Unaudited Summary Data (Units in thousands, Revenue in millions)                             Q4 2016 Q3 2016 Q4 2015 Sequential Change Year/Year Change   Operating Segments Revenue Revenue Revenue Revenue Revenue Americas $20,229 $17,963 $21,773 13% - 7% Europe 10,842 9,643 10,577 12% 3% Greater China 8,785 8,848 12,518 - 1% - 30% Japan 4,324 3,529 3,929 23% 10% Rest of Asia Pacific 2,672 2,375 2,704 13% - 1% Total Apple     $46,852 $42,358 $51,501 11% - 9%         Q4 2016 Q3 2016 Q4 2015 Sequential Change Year/Year Change   Product Summary Units Revenue Units Revenue Units Revenue Units Revenue Units Revenue iPhone (1) 45,513 $28,160 40,399 $24,048 48,046 $32,209 13% 17% - 5% - 13% iPad (1) 9,267 4,255 9,950 4,876 9,883 4,276 - 7% - 13% - 6% 0% Mac (1) 4,886 5,739 4,252 5,239 5,709 6,882 15% 10% - 14% - 17% Services (2) 6,325 5,976 5,086 6% 24% Other Products (1)(3) 2,373 2,219 3,048 7% - 22% Total Apple     $46,852 $42,358 $51,501 11% - 9%

(1)

 

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

(2)

Includes revenue from Internet Services, AppleCare, Apple Pay, licensing and other services.

(3)

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

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ApplePress:Kristin Huguet, 408-974-2414khuguet@apple.comorInvestor Relations:Nancy Paxton, 408-974-5420paxton1@apple.comJoan Hoover, 408-974-4570hoover1@apple.com