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Amazon Reports 23% Sales Increase, $126 Million Loss

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Amazon Reports 23% Sales Increase, $126 Million Loss
[ Finance]

Amazon just released its earnings report for the second quarter. Net sales were up 23% year over year at $19.34 billion, which is in tune with analysts’ expectations, though earnings per share were – $0.27, which is a greater loss than expected. Stock immediately started going down.

Operating cash flow was up 18% year-over-year at $5.33 billion, while free cash flow was up to $1.04 billion compared to $265 million last year. Operating loss was $15 million, compared to $79 million last year. Net loss was $126 million compared to $7 million last year.

CEO Jeff Bezos said, “We continue working hard on making the Amazon customer experience better and better. We’ve recently introduced Sunday delivery coverage to 25% of the U.S. population, launched European cross-border Two-Day Delivery for Prime, launched Prime Music with over one million songs, created three original kids TV series, added world-class parental controls to Fire TV with FreeTime, and launched Kindle Unlimited, an eBook subscription service. For our AWS customers we launched Amazon Zocalo, T2 instances, an SSD-backed EBS volume, Amazon Cognito, Amazon Mobile Analytics, and the AWS Mobile SDK, and we substantially reduced prices. And today customers all over the U.S. will begin receiving their new Fire phones — including Firefly, Dynamic Perspective, and one full year of Prime — we can’t wait to get them in customers’ hands.”

The company’s guidance has net sales at between $19.7 billion and $21.5 billion for the third quarter, or growing between 15% and 26% year-over-year.

The company said on the conference call that it believes creating value for customers will ultimately create value for shareholders in the long run (or something to that effect).

The Prime price increase hasn’t had a negative effect on subscriptions, according to the company. It points out that subscriptions are growing, and that it had more in Q2 this year than that of last year.

It’s going to be in heavy production on some of its original video pilots in Q3, which will cost over $100 million.

Here’s the release in its entirety:

SEATTLE–(BUSINESS WIRE)–Jul. 24, 2014– Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its second quarter ended June 30, 2014.

Operating cash flow increased 18% to $5.33 billion for the trailing twelve months, compared with $4.53 billion for the trailing twelve months ended June 30, 2013. Free cash flow increased to $1.04 billion for the trailing twelve months, compared with $265 million for the trailing twelve months ended June 30, 2013. Free cash flow for the trailing twelve months ended June 30, 2013, includes cash outflows for purchases of corporate office space and property in Seattle, Washington, of $1.4 billion.

Common shares outstanding plus shares underlying stock-based awards totaled 480 million on June 30, 2014, compared with 474 million one year ago.

Net sales increased 23% to $19.34 billion in the second quarter, compared with $15.70 billion in second quarter 2013. Excluding the $237 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 22% compared with second quarter 2013.

Operating loss was $15 million in the second quarter, compared with operating income of $79 million in second quarter 2013. The favorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating loss was $31 million.

Net loss was $126 million in the second quarter, or $0.27 per diluted share, compared with net loss of $7 million, or $0.02 per diluted share, in second quarter 2013.

“We continue working hard on making the Amazon customer experience better and better,” said Jeff Bezos, founder and CEO ofAmazon.com. “We’ve recently introduced Sunday delivery coverage to 25% of the U.S. population, launched European cross-border Two-Day Delivery for Prime, launched Prime Music with over one million songs, created three original kids TV series, added world-class parental controls to Fire TV with FreeTime, and launched Kindle Unlimited, an eBook subscription service. For our AWS customers we launched Amazon Zocalo, T2 instances, an SSD-backed EBS volume, Amazon Cognito, Amazon Mobile Analytics, and the AWS Mobile SDK, and we substantially reduced prices. And today customers all over the U.S. will begin receiving their new Fire phones — including Firefly, Dynamic Perspective, and one full year of Prime — we can’t wait to get them in customers’ hands.”

Highlights

  • Amazon introduced Fire phone, offering instant access to Amazon’s vast content ecosystem and exclusive features like the Mayday button, ASAP, Second Screen, X-Ray, Dynamic Perspective, Firefly, free unlimited photo storage, and more. Fire phone ships today and is available exclusively on AT&T — the nation’s most reliable 4G LTE network. Customers can order at www.amazon.com/Fire-phone, www.att.com, and in AT&T retail locations nationwide. Fire phone with 32GB is available for $199 with a two-year contract or zero down and $27.09 a month with AT&T Next 18.
  • Fire phone is the only smartphone with Dynamic Perspective and Firefly. Dynamic Perspective uses a new sensor system to respond to the way customers hold, view, and move Fire phone, enabling experiences not possible on other smartphones. Firefly quickly recognizes things in the real world — web and email addresses, phone numbers, QR and bar codes, movies, music, and millions of products, and lets users take action in seconds — all with the simple press of the Firefly button.
  • Amazon launched the Dynamic Perspective SDK and the Firefly SDK. The Dynamic Perspective SDK gives developers access to algorithms that identify the X, Y, and Z coordinates of the user’s head, enabling a whole new class of apps and games. The Firefly SDK allows developers to extend the use of the Firefly button to enable new actions for customers.
  • Amazon announced that Amazon Appstore selection has nearly tripled over the past year and developers continue to report strong monetization from the apps they offer in the store. Since Fire phone launched, the rate of app submissions to the Amazon Appstore has more than doubled as developers have already begun finding innovative uses of the phone’s enhanced carousel, Dynamic Perspective, and Firefly.
  • Amazon Game Studios announced two new games — Saber’s Edge and To-Fu Fury — created exclusively for Amazon’s new Fire phone. Saber’s Edge and To-Fu Fury are co-developed with partners, Hibernum and HotGen as part of Amazon Game Studios’ mission to build fun, immersive games from the ground up for Amazon devices.
  • Amazon FreeTime is now available on Fire TV, bringing revolutionary parental controls that are simple and easy to use. FreeTime gives kids an experience designed just for them, with character search and content all their own. It gives parents peace of mind and control, enabling them to explicitly pick what content is available in FreeTime and set time limits by content type. FreeTime Unlimited brings thousands of apps, games, movies, and TV shows, and removes in-app purchasing and ads.
  • Fire TV sales have significantly exceeded our sales forecast and we are working hard to increase our manufacturing output. Fire TV app selection has more than doubled since launch due to strong engagement from developers. Recent additions include MLB TV Premium, WWE Network, Animal Planet Live, and Grand Theft Auto.
  • Amazon introduced Prime Music, a new service that offers Prime members unlimited, ad-free access to over a million songs at no additional cost to their membership. In the week following its introduction, Prime members streamed tens of millions of songs — that’s millions of hours of music — and added tens of millions of songs and more than a million Prime Playlists to their music libraries, for free.
  • Amazon Studios introduced Amazon’s first two original children’s series: Tumble Leaf and Creative Galaxy, exclusively to Prime Instant Video, and will add a third, Annedroids, tomorrow. The first six episodes of each show are available this summer, with additional episodes to follow later this year. In addition, Amazon Studios has greenlit five additional new pilots — the dramatic thriller Hysteria, dramatic comedy Really, one hour drama Hand of God, and comedies The Cosmopolitans and Red Oaks — as part of its third pilot season debuting next month on Amazon Instant Video.
  • Amazon expanded Whispersync for Voice to include Kindle reading apps for iOS and Android, providing a seamless listening experience for Audible content right inside the Kindle app. Users can switch instantly between reading a Kindle book and listening to the companion audiobook from Audible — all with just one tap, without leaving the book.
  • Amazon introduced Kindle Unlimited — a new subscription service which allows customers to freely read as much as they want from over 600,000 Kindle books, and listen as much as they want to thousands of Audible audiobooks, all for only $9.99 a month. Finding a great book is easy, and there are never any due dates — just look for the Kindle Unlimited logo on eligible titles and click “Read for Free.” Customers can choose from best sellers like The Hunger Games, Diary of a Wimpy Kid, and The Lord of the Rings.
  • More customers are using the Shop by Vehicle feature in the Amazon Automotive store than ever before. Over one million customers added their car, truck, or motorcycle to their Amazon Garage during the quarter to find products specifically designed to fit their vehicle, bringing the total count of active customers with a vehicle in the Amazon Garage to over 14 million.
  • AmazonFresh continued to expand its service in the Los Angeles and San Francisco areas. AmazonFresh customers in Orange County, Berkeley, Oakland, and Silicon Valley now get same-day and early next-day delivery of fresh groceries as well as over 500,000 Amazon.com items.
  • Amazon has expanded Sunday delivery to 18 additional cities since launching in the Los Angeles and New York metro areas. Since Sunday delivery launched, millions of packages have been delivered on Sundays to Amazon customers. Amazon Prime members, who receive unlimited two-day shipping on millions of items, can order as late as Friday and receive their packages on Sunday, for free.
  • Amazon announced enhancements to its European cross border delivery network. Amazon.co.uk and Amazon.de Prime members now have access to free Two-Day Delivery for approximately one million additional products stored in Amazon’s European fulfillment centers located outside their respective countries.
  • Since launching the India marketplace website, Amazon.in, one year ago, Amazon has rapidly expanded selection to serve customers in India, averaging a launch of one new category every 13 days. With Amazon.in customers can shop from India’s largest store with ease and confidence from over 17 million products from a rapidly growing group of small and medium businesses.
  • The AWS team grew by thousands of employees this past year, expanding AWS infrastructure, enterprise and public sector sales capabilities and allowing the team to innovate at an accelerating pace.
  • With 250 significant service and feature releases year-to-date, and substantial price reductions for customers starting in the second quarter (28% to 51% depending on the service), AWS continues to grow strongly, with usage growth close to 90% year-over-year in the second quarter.
  • AWS announced a new general purpose instance type for Amazon Elastic Compute Cloud (EC2). With On Demand Instance prices starting at $0.013 per hour, the new T2 instances are the lowest-cost Amazon EC2 instance option and are ideal for Web servers, developer environments, and small databases.
  • AWS announced several new capabilities to make it easier for developers to build, deploy, and scale mobile applications, including Amazon Cognito for identity management and syncing, Amazon Mobile Analytics to visualize and understand app usage data, and an AWS Mobile SDK, which provides easy, mobile-optimized access to other AWS services to power mobile apps that can scale from tens to hundreds of millions of users.
  • AWS announced Amazon Zocalo, a fully managed, secure enterprise storage and sharing service with strong administrative controls and feedback capabilities that improve user productivity. With Amazon Zocalo, customers can store, share, and gather feedback on documents, spreadsheets, presentations, webpages, images, PDFs, or text files — from the device of their choice.
  • AWS further enhanced its reliable, secure block storage service, Amazon Elastic Block Store (EBS), announcing new encryption capabilities, introducing a new lower-cost SSD-backed EBS volume type, and reducing prices on EBS Provisioned IOPS volumes by 35 percent.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of July 24, 2014, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce, and the various factors detailed below.

Third Quarter 2014 Guidance

  • Net sales are expected to be between $19.7 billion and $21.5 billion, or to grow between 15% and 26% compared with third quarter 2013.
  • Operating loss is expected to be between $810 million and $410 million, compared to $25 million in third quarter 2013.
  • This guidance includes approximately $410 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment and data center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains, and develops commercial agreements, acquisitions and strategic transactions, payments risks, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risks related to new products, services, and technologies, system interruptions, government regulation and taxation, and fraud. In addition, the current global economic climate amplifies many of these risks. More information about factors that potentially could affect Amazon.com’s financial results is included in Amazon.com’s filings with the Securities and Exchange Commission (“SEC”), including its most recent Annual Report on Form 10-K and subsequent filings.

Our investor relations website is www.amazon.com/ir and we encourage investors to use it as a way of easily finding information about us. We promptly make available on this website, free of charge, the reports that we file or furnish with the SEC, corporate governance information (including our Code of Business Conduct and Ethics), and select press releases and social media postings.

About Amazon.com

Amazon opened on the World Wide Web in July 1995. The company is guided by three principles: customer obsession rather than competitor focus, passion for invention, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire phone, Fire tablets, and Fire TV are some of the products and services pioneered by Amazon.

AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
Twelve Months Ended
June 30,
2014 2013 2014 2013 2014 2013
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 5,074 $ 4,481 $ 8,658 $ 8,084 $ 3,704 $ 2,335
OPERATING ACTIVITIES:
Net income (loss) (126 ) (7 ) (18 ) 75 181 (101 )
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation of property and equipment, including internal-use software and website development, and other amortization 1,109 756 2,119 1,457 3,916 2,673
Stock-based compensation 391 298 711 526 1,318 978
Other operating expense (income), net 28 32 62 63 113 139
Losses (gains) on sales of marketable securities, net (1 ) — (1 ) — 1 (6 )
Other expense (income), net (8 ) 42 (57 ) 110 (1 ) 367
Deferred income taxes (49 ) 21 (234 ) (58 ) (332 ) (243 )
Excess tax benefits from stock-based compensation — — (121 ) — (199 ) (304 )
Changes in operating assets and liabilities:
Inventories 92 (30 ) 791 505 (1,124 ) (1,116 )
Accounts receivable, net and other (299 ) (211 ) 428 518 (936 ) (922 )
Accounts payable (344 ) — (5,018 ) (4,187 ) 1,056 1,962
Accrued expenses and other (15 ) (77 ) (746 ) (780 ) 770 728
Additions to unearned revenue 894 516 1,986 1,200 3,477 2,217
Amortization of previously unearned revenue (810 ) (460 ) (1,542 ) (921 ) (2,913 ) (1,840 )
Net cash provided by (used in) operating activities 862 880 (1,640 ) (1,492 ) 5,327 4,532
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software and website development (1,290 ) (855 ) (2,370 ) (1,526 ) (4,288 ) (4,267 )
Acquisitions, net of cash acquired, and other (67 ) (148 ) (66 ) (251 ) (127 ) (323 )
Sales and maturities of marketable securities and other investments 962 696 1,555 1,296 2,565 2,544
Purchases of marketable securities and other investments (336 ) (1,113 ) (773 ) (1,888 ) (1,710 ) (3,774 )
Net cash provided by (used in) investing activities (731 ) (1,420 ) (1,654 ) (2,369 ) (3,560 ) (5,820 )
FINANCING ACTIVITIES:
Excess tax benefits from stock-based compensation — — 121 — 199 304
Proceeds from long-term debt and other 286 81 351 107 627 3,274
Repayments of long-term debt, capital lease, and finance lease obligations (475 ) (290 ) (836 ) (473 ) (1,363 ) (748 )
Net cash provided by (used in) financing activities (189 ) (209 ) (364 ) (366 ) (537 ) 2,830
Foreign-currency effect on cash and cash equivalents 41 (28 ) 57 (153 ) 123 (173 )
Net increase (decrease) in cash and cash equivalents (17 ) (777 ) (3,601 ) (4,380 ) 1,353 1,369
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,057 $ 3,704 $ 5,057 $ 3,704 $ 5,057 $ 3,704
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt $ 31 $ 39 $ 49 $ 52 $ 94 $ 68
Cash paid for income taxes (net of refunds) 71 34 109 120 158 193
Property and equipment acquired under capital leases 920 447 1,636 787 2,716 1,233
Property and equipment acquired under build-to-suit leases 237 244 363 394 846 392
AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
Net product sales $ 15,251 $ 12,752 $ 30,956 $ 26,023
Net services sales 4,089 2,952 8,125 5,751
Total net sales 19,340 15,704 39,081 31,774
Operating expenses (1):
Cost of sales 13,399 11,209 27,453 23,010
Fulfillment 2,382 1,837 4,699 3,633
Marketing 943 675 1,813 1,307
Technology and content 2,226 1,586 4,217 2,969
General and administrative 377 286 704 531
Other operating expense (income), net 28 32 63 64
Total operating expenses 19,355 15,625 38,949 31,514
Income (loss) from operations (15 ) 79 132 260
Interest income 11 9 21 19
Interest expense (45 ) (33 ) (87 ) (66 )
Other income (expense), net 22 (38 ) 27 (115 )
Total non-operating income (expense) (12 ) (62 ) (39 ) (162 )
Income (loss) before income taxes (27 ) 17 93 98
Benefit (provision) for income taxes (94 ) (13 ) (167 ) 6
Equity-method investment activity, net of tax (5 ) (11 ) 56 (29 )
Net income (loss) $ (126 ) $ (7 ) $ (18 ) $ 75
Basic earnings per share $ (0.27 ) $ (0.02 ) $ (0.04 ) $ 0.16
Diluted earnings per share $ (0.27 ) $ (0.02 ) $ (0.04 ) $ 0.16
Weighted average shares used in computation of earnings per share:
Basic 461 456 460 455
Diluted 461 456 460 463
______________________________
(1) Includes stock-based compensation as follows:
Fulfillment $ 104 $ 81 $ 184 $ 142
Marketing 32 24 59 40
Technology and content 206 155 375 274
General and administrative 49 38 93 70
AMAZON.COM, INC.
Consolidated Statements of Comprehensive Income (Loss)
(in millions)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
Net income (loss) $ (126 ) $ (7 ) $ (18 ) $ 75
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $0, $(4), $1 and $(13) 11 7 39 (71 )
Net change in unrealized gains on available-for-sale securities:
Unrealized gains (losses), net of tax of $0, $3, $(1) and $4 3 (7 ) 4 (9 )
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $0, $0 and $0 (1 ) — (1 ) —
Net unrealized gains (losses) on available-for-sale securities 2 (7 ) 3 (9 )
Total other comprehensive income (loss) 13 — 42 (80 )
Comprehensive income (loss) $ (113 ) $ (7 ) $ 24 $ (5 )
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
North America
Net sales $ 11,998 $ 9,495 $ 23,856 $ 18,886
Segment operating expenses (1) 11,560 9,086 22,856 18,020
Segment operating income $ 438 $ 409 $ 1,000 $ 866
International
Net sales $ 7,342 $ 6,209 $ 15,225 $ 12,888
Segment operating expenses (1) 7,376 6,209 15,319 12,904
Segment operating income (loss) $ (34 ) $ — $ (94 ) $ (16 )
Consolidated
Net sales $ 19,340 $ 15,704 $ 39,081 $ 31,774
Segment operating expenses (1) 18,936 15,295 38,175 30,924
Segment operating income 404 409 906 850
Stock-based compensation (391 ) (298 ) (711 ) (526 )
Other operating income (expense), net (28 ) (32 ) (63 ) (64 )
Income (loss) from operations (15 ) 79 132 260
Total non-operating income (expense) (12 ) (62 ) (39 ) (162 )
Benefit (provision) for income taxes (94 ) (13 ) (167 ) 6
Equity-method investment activity, net of tax (5 ) (11 ) 56 (29 )
Net income (loss) $ (126 ) $ (7 ) $ (18 ) $ 75
Segment Highlights:
Y/Y net sales growth:
North America 26 % 30 % 26 % 28 %
International 18 13 18 14
Consolidated 23 22 23 22
Y/Y segment operating income/loss growth (decline):
North America 7 % 19 % 15 % 25 %
International N/A (99 ) 481 (125 )
Consolidated (1 ) 14 7 12
Net sales mix:
North America 62 % 60 % 61 % 59 %
International 38 40 39 41
100 % 100 % 100 % 100 %
______________________________
(1) Represents operating expenses, excluding stock-based compensation and “Other operating expense (income), net,” which are not allocated to segments.
AMAZON.COM, INC.
Supplemental Net Sales Information
(in millions)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
Net Sales:
North America
Media $ 2,464 $ 2,173 $ 5,289 $ 4,686
Electronics and other general merchandise 8,366 6,478 16,196 12,606
Other (1) 1,168 844 2,371 1,594
Total North America $ 11,998 $ 9,495 $ 23,856 $ 18,886
International
Media $ 2,380 $ 2,224 $ 5,022 $ 4,769
Electronics and other general merchandise 4,912 3,937 10,100 8,024
Other (1) 50 48 103 95
Total International $ 7,342 $ 6,209 $ 15,225 $ 12,888
Consolidated
Media $ 4,844 $ 4,397 $ 10,311 $ 9,455
Electronics and other general merchandise 13,278 10,415 26,296 20,629
Other (1) 1,218 892 2,474 1,690
Total consolidated $ 19,340 $ 15,704 $ 39,081 $ 31,774
Year-over-year Percentage Growth:
North America
Media 13 % 16 % 13 % 15 %
Electronics and other general merchandise 29 31 28 30
Other 38 64 49 64
Total North America 26 30 26 28
International
Media 7 % (1) % 5 % — %
Electronics and other general merchandise 25 22 26 25
Other 4 22 8 18
Total International 18 13 18 14
Consolidated
Media 10 % 7 % 9 % 7 %
Electronics and other general merchandise 27 28 27 28
Other 37 61 46 60
Total consolidated 23 22 23 22
Year-over-year Percentage Growth:
Excluding the effect of exchange rates
International
Media 4 % 7 % 4 % 7 %
Electronics and other general merchandise 20 29 23 31
Other (1)   27 5 22
Total International 14 20 16 21
Consolidated
Media 9 % 11 % 8 % 11 %
Electronics and other general merchandise 26 30 27 30
Other 36 61 46 61
Total consolidated 22 25 22 25
Consolidated Net Sales Mix:
Media 25 % 28 % 27 % 30 %
Electronics and other general merchandise 69 66 67 65
Other 6 6 6 5
Total consolidated 100 % 100 % 100 % 100 %
______________________________
(1) Includes sales from non-retail activities, such as AWS sales, which are included in the North America segment, and advertising services and our co-branded credit card agreements, which are included in both segments.
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
June 30, 2014 December 31, 2013
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,057 $ 8,658
Marketable securities 2,929 3,789
Inventories 6,644 7,411
Accounts receivable, net and other 4,125 4,767
Total current assets 18,755 24,625
Property and equipment, net 14,089 10,949
Goodwill 2,677 2,655
Other assets 2,377 1,930
Total assets $ 37,898 $ 40,159
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 10,457 $ 15,133
Accrued expenses and other 6,688 6,688
Unearned revenue 1,606 1,159
Total current liabilities 18,751 22,980
Long-term debt 3,119 3,191
Other long-term liabilities 5,426 4,242
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares — 500
Issued and outstanding shares — none — —
Common stock, $0.01 par value:
Authorized shares — 5,000
Issued shares — 486 and 483
Outstanding shares — 462 and 459 5 5
Treasury stock, at cost (1,837 ) (1,837 )
Additional paid-in capital 10,405 9,573
Accumulated other comprehensive loss (143 ) (185 )
Retained earnings 2,172 2,190
Total stockholders’ equity 10,602 9,746
Total liabilities and stockholders’ equity $ 37,898 $ 40,159
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except per share data)
(unaudited)
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Y/Y %
Change
Cash Flows and Shares
Operating cash flow — trailing twelve months (TTM) $ 4,532 $ 4,977 $ 5,475 $ 5,345 $ 5,327 18 %
Purchases of property and equipment (incl. internal-use software & website development) — TTM $ 4,267 $ 4,589 $ 3,444 $ 3,854 $ 4,288 1 %
Free cash flow (operating cash flow less purchases of property and equipment) — TTM $ 265 $ 388 $ 2,031 $ 1,491 $ 1,039 292 %
Free cash flow — TTM Y/Y growth (decline) (76 )% (63 )% 414 % 744 % 292 % N/A
Invested capital (1) $ 13,115 $ 14,306 $ 15,749 $ 16,681 $ 17,743 35 %
Return on invested capital (2) 2 % 3 % 13 % 9 % 6 % N/A
Common shares and stock-based awards outstanding 474 475 476 476 480 1 %
Common shares outstanding 457 458 459 460 462 1 %
Stock awards outstanding 17 17 17 16 18 4 %
Stock awards outstanding — % of common shares outstanding 3.8 % 3.8 % 3.6 % 3.5 % 3.9 % N/A
Results of Operations
Worldwide (WW) net sales $ 15,704 $ 17,092 $ 25,587 $ 19,741 $ 19,340 23 %
WW net sales — Y/Y growth, excluding F/X 25 % 26 % 22 % 23 % 22 % N/A
WW net sales — TTM $ 66,848 $ 70,133 $ 74,452 $ 78,124 $ 81,759 22 %
WW net sales — TTM Y/Y growth, excluding F/X 25 % 25 % 24 % 24 % 23 % N/A
Operating income (loss) $ 79 $ (25 ) $ 510 $ 146 $ (15 ) (118 )%
Operating income/loss — Y/Y growth (decline), excluding F/X (9 )% (33 )% 24 % (29 )% (158 )% N/A
Operating margin — % of WW net sales 0.5 % (0.1 )% 2.0 % 0.7 % (0.1 )% N/A
Operating income — TTM $ 637 $ 640 $ 745 $ 710 $ 617 (3 )%
Operating income — TTM Y/Y growth, excluding F/X 3 % 27 % 14 % 7 % (11 )% N/A
Operating margin — TTM % of WW net sales 1.0 % 0.9 % 1.0 % 0.9 % 0.8 % N/A
Net income (loss) $ (7 ) $ (41 ) $ 239 $ 108 $ (126 ) N/A
Net income (loss) per diluted share $ (0.02 ) $ (0.09 ) $ 0.51 $ 0.23 $ (0.27 ) N/A
Net income (loss) — TTM $ (101 ) $ 132 $ 274 $ 299 $ 181 N/A
Net income (loss) per diluted share — TTM $ (0.22 ) $ 0.28 $ 0.59 $ 0.64 $ 0.39 N/A
Segments
North America Segment:
Net sales $ 9,495 $ 10,301 $ 15,331 $ 11,858 $ 11,998 26 %
Net sales — Y/Y growth, excluding F/X 30 % 31 % 26 % 26 % 26 % N/A
Net sales — TTM $ 38,945 $ 41,361 $ 44,517 $ 46,984 $ 49,487 27 %
Operating income $ 409 $ 295 $ 725 $ 562 $ 438 7 %
Operating margin — % of North America net sales 4.3 % 2.9 % 4.7 % 4.7 % 3.7 % N/A
Operating income — TTM $ 1,766 $ 1,770 $ 1,886 $ 1,992 $ 2,020 14 %
Operating income — TTM Y/Y growth, excluding F/X 58 % 40 % 18 % 17 % 14 % N/A
Operating margin — TTM % of North America net sales 4.5 % 4.3 % 4.2 % 4.2 % 4.1 % N/A
International Segment:
Net sales $ 6,209 $ 6,791 $ 10,256 $ 7,883 $ 7,342 18 %
Net sales — Y/Y growth, excluding F/X 20 % 20 % 15 % 18 % 14 % N/A
Net sales — TTM $ 27,903 $ 28,772 $ 29,935 $ 31,140 $ 32,272 16 %
Net sales — TTM % of WW net sales 42 % 41 % 40 % 40 % 39 % N/A
Operating income (loss) $ — $ (28 ) $ 151 $ (60 ) $ (34 ) N/A
Operating margin — % of International net sales — % (0.4 )% 1.5 % (0.8 )% (0.5 )% N/A
Operating income (loss) — TTM $ (6 ) $ 25 $ 107 $ 63 $ 29 N/A
Operating income/loss — TTM Y/Y growth (decline), excluding F/X (82 )% (56 )% 106 % 770 % N/A N/A
Operating margin — TTM % of International net sales — % 0.1 % 0.4 % 0.2 % 0.1 % N/A
Consolidated Segments:
Operating expenses (3) $ 15,295 $ 16,825 $ 24,711 $ 19,239 $ 18,936 24 %
Operating expenses — TTM (3) $ 65,087 $ 68,338 $ 72,459 $ 76,069 $ 79,710 22 %
Operating income $ 409 $ 267 $ 876 $ 502 $ 404 (1 )%
Operating margin — % of Consolidated net sales 2.6 % 1.6 % 3.4 % 2.5 % 2.1 % N/A
Operating income — TTM $ 1,760 $ 1,795 $ 1,993 $ 2,055 $ 2,049 16 %
Operating income — TTM Y/Y growth, excluding F/X 21 % 26 % 21 % 20 % 14 % N/A
Operating margin — TTM % of Consolidated net sales 2.6 % 2.6 % 2.7 % 2.6 % 2.5 % N/A
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except inventory turnover, accounts payable days and employee data)
(unaudited)
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Y/Y %
Change
Supplemental
Supplemental North America Segment Net Sales:
Media $ 2,173 $ 2,609 $ 3,513 $ 2,825 $ 2,464 13 %
Media — Y/Y growth, excluding F/X 16 % 18 % 21 % 13 % 14 % N/A
Media — TTM $ 9,805 $ 10,199 $ 10,809 $ 11,121 $ 11,411 16 %
Electronics and other general merchandise $ 6,478 $ 6,732 $ 10,648 $ 7,829 $ 8,366 29 %
Electronics and other general merchandise — Y/Y growth, excluding F/X 31 % 33 % 25 % 28 % 29 % N/A
Electronics and other general merchandise — TTM $ 26,169 $ 27,840 $ 29,985 $ 31,686 $ 33,575 28 %
Electronics and other general merchandise — TTM % of North America net sales 67 % 67 % 67 % 67 % 68 % N/A
Other $ 844 $ 960 $ 1,170 $ 1,204 $ 1,168 38 %
Other — TTM $ 2,971 $ 3,322 $ 3,723 $ 4,177 $ 4,501 51 %
Supplemental International Segment Net Sales:
Media $ 2,224 $ 2,424 $ 3,714 $ 2,642 $ 2,380 7 %
Media — Y/Y growth, excluding F/X 7 % 9 % 6 % 4 % 4 % N/A
Media — TTM $ 10,764 $ 10,803 $ 10,907 $ 11,004 $ 11,160 4 %
Electronics and other general merchandise $ 3,937 $ 4,316 $ 6,478 $ 5,188 $ 4,912 25 %
Electronics and other general merchandise — Y/Y growth, excluding F/X 29 % 28 % 21 % 26 % 20 % N/A
Electronics and other general merchandise — TTM $ 16,952 $ 17,771 $ 18,817 $ 19,919 $ 20,894 23 %
Electronics and other general merchandise — TTM % of International net sales 61 % 62 % 63 % 64 % 65 % N/A
Other $ 48 $ 51 $ 64 $ 53 $ 50 4 %
Other — TTM $ 187 $ 198 $ 211 $ 217 $ 218 17 %
Supplemental Worldwide Net Sales:
Media $ 4,397 $ 5,033 $ 7,227 $ 5,467 $ 4,844 10 %
Media — Y/Y growth, excluding F/X 11 % 13 % 13 % 8 % 9 % N/A
Media — TTM $ 20,569 $ 21,002 $ 21,716 $ 22,125 $ 22,571 10 %
Electronics and other general merchandise $ 10,415 $ 11,048 $ 17,126 $ 13,017 $ 13,278 27 %
Electronics and other general merchandise — Y/Y growth, excluding F/X 30 % 31 % 24 % 27 % 26 % N/A
Electronics and other general merchandise — TTM $ 43,121 $ 45,611 $ 48,802 $ 51,605 $ 54,469 26 %
Electronics and other general merchandise — TTM % of WW net sales 65 % 65 % 66 % 66 % 67 % N/A
Other $ 892 $ 1,011 $ 1,234 $ 1,257 $ 1,218 37 %
Other — TTM $ 3,158 $ 3,520 $ 3,934 $ 4,394 $ 4,719 49 %
Balance Sheet
Cash and marketable securities $ 7,463 $ 7,689 $ 12,447 $ 8,666 $ 7,986 7 %
Inventory, net — ending $ 5,420 $ 6,068 $ 7,411 $ 6,716 $ 6,644 23 %
Inventory turnover, average — TTM 9.4 9.2 8.9 9.1 9.1 (3 )%
Property and equipment, net $ 8,789 $ 9,991 $ 10,949 $ 12,267 $ 14,089 60 %
Accounts payable — ending $ 8,990 $ 10,037 $ 15,133 $ 10,590 $ 10,457 16 %
Accounts payable days — ending 73 75 74 68 71 (3 )%
Other
WW shipping revenue $ 646 $ 721 $ 1,137 $ 849 $ 889 38 %
WW shipping costs $ 1,364 $ 1,532 $ 2,344 $ 1,829 $ 1,812 33 %
WW net shipping costs $ 718 $ 811 $ 1,207 $ 980 $ 923 29 %
WW net shipping costs — % of WW net sales 4.6 % 4.7 % 4.7 % 5.0 % 4.8 % N/A
Employees (full-time and part-time; excludes contractors & temporary personnel) 97,000 109,800 117,300 124,600 132,600 37 %
______________________________
(1) Average Total Assets minus Current Liabilities (excluding current portion of Long-Term Debt) over five quarter ends.
(2) TTM Free Cash Flow divided by Invested Capital.
(3) Represents cost of sales, fulfillment, marketing, technology and content, and general and administrative operating expenses, excluding stock-based compensation.

Amazon.com, Inc.
Certain Definitions

Customer Accounts

  • References to customers mean customer accounts, which are unique e-mail addresses, established either when a customer places an order or when a customer orders from other sellers on our websites. Customer accounts exclude certain customers, including customers associated with certain of our acquisitions, Amazon Payments customers, Amazon Web Services customers, and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. Customers are considered active when they have placed an order during the preceding twelve-month period.

Seller Accounts

  • References to sellers means seller accounts, which are established when a seller receives an order from a customer account. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.

Registered Developers

  • References to registered developers mean cumulative registered developer accounts, which are established when potential developers enroll with Amazon Web Services and receive a developer access key.

Units

 

Source: Amazon.com, Inc.

 

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Amazon Reports 23% Sales Increase, $126 Million Loss
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