Revenues up 22% to $16 Billion at Amazon in First Quarter

Amazon-logoSales at Amazon rose sharply in the first quarter of 2013, growing 22% to $16.07 billion at the world’s largest bookseller, besting the company’s $13.18 billion in sales in the first quarter of 2011. In early after-hours trading, Amazon’s share price is basically flat as the company beat analyst expectations.

Operating income, closely watched at the company that has become infamous on Wall Street for its razor-thin profit margins, decreased 6% to $181 million in the first quarter, compared with $192 million in same period of 2012. Net income decreased 37% to $82 million in the first quarter, compared with $130 million in the same period of 2012.

In the second quarter of 2013, Amazon expects sales between $14.5 billion and $16.2 billion — growth between 13% and 26% compared to the same period last year. The company is again projecting thin margins: between a loss of $340 million and profit of $10 million.

Related: Amazon Full-Year 2012 Results

Unlike recent Amazon earnings announcements, CEO Jeff Bezos did not highlight ebooks or digital publishing in his short statement accompanying the earnings announcement. Instead, he touted the company’s video content creation gains.

“Amazon Studios is working on a new way to greenlight TV shows. The pilots are out in the open where everyone can have a say,” he said in the statement (below). “I have my personal picks and so do members of the Amazon Studios team, but the exciting thing about our approach is that our opinions don’t matter. Our customers will determine what goes into full-season production. We hope Amazon Originals can become yet another way for us to create value for Prime members.”

When asked about the growth of the Kindle ecosystem on the earnings call for the first quarter, chief financial officer Tom Szkutak didn’t offer analysts listening in much to go on beyond what was already disclosed in the release (below) and that the company continues to invest in Kindle.

“We’re very pleased with our Kindle and digital business,” he said. “We certainly are investing — and you’re seeing that reflected.”

As for Amazon Prime, Szkutak defended that its customers are more attached to Amazon as a whole.

“We are seeing the customers engaging with free content but the are purchasing content, too,” he said, adding that Prime customers do a lot more shopping than other customers.

Amazon media sales worldwide (including ebooks, books, DVDs, CDs, music and more) grew modestly in the first quarter to about $5 billion, up 7% from $4.7 billion in the same period last year.

In its earnings announcement, Amazon pointed out several highlights to its first quarter:

— Kindle Owners’ Lending Library has grown to over 300,000 books. (It is thought that the lending library has a majority of self-published titles.)

— Amazon announced the launch of Kindle Fire HD 8.9” for the U.K., Germany, France, Italy, Spain and Japan.

— Amazon Publishing announced that it will start paying authors their royalties monthly, about six times more often than the twice-a-year standard in the industry.

Amazon acquired Goodreads.

Related: The Future of Goodreads Under Amazon

 

[Earnings Announcement]

Amazon.com Announces First Quarter Sales up 22% to $16.07 Billion

Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its first quarter ended March 31, 2013.

Operating cash flow increased 39% to $4.25 billion for the trailing twelve months, compared with $3.05 billion for the trailing twelve months ended March 31, 2012. Free cash flow decreased 85% to $177 million for the trailing twelve months, compared with $1.15 billion for the trailing twelve months ended March 31, 2012. Free cash flow for the trailing twelve months ended March 31, 2013 includes fourth quarter 2012 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 471 million on March 31, 2013, compared with 464 million one year ago.

Net sales increased 22% to $16.07 billion in the first quarter, compared with $13.18 billion in first quarter 2012. Excluding the $302 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 24% compared with first quarter 2012.

Operating income decreased 6% to $181 million in the first quarter, compared with $192 million in first quarter 2012. The unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was $12 million.

Net income decreased 37% to $82 million in the first quarter, or $0.18 per diluted share, compared with $130 million, or $0.28 per diluted share, in first quarter 2012.

“Amazon Studios is working on a new way to greenlight TV shows. The pilots are out in the open where everyone can have a say,” said Jeff Bezos, founder and CEO of Amazon.com. “I have my personal picks and so do members of the Amazon Studios team, but the exciting thing about our approach is that our opinions don’t matter. Our customers will determine what goes into full-season production. We hope Amazon Originals can become yet another way for us to create value for Prime members.”

Highlights

— Amazon.com expanded selection for Prime Instant Video, announcing new licensing agreements with A+E Networks, CBS Corporation, FX, PBS Distribution and Scripps Networks Interactive, bringing exclusive access to popular television series such as Downton Abbey, Justified and Under the Dome as well as shows from HGTV, DIY Network, Food Network, Cooking Channel and Travel Channel. Prime Instant Video now includes more than 38,000 movies and TV episodes that are available for Prime members to watch at no additional charge.

— Amazon Studios, the original film and series production arm of Amazon.com, debuted 14 original comedy and kids pilots. The pilots, which feature stars such as John Goodman, Jeffrey Tambor and Bebe Neuwirth, are available exclusively at www.amazonoriginals.com and on the Amazon Instant Video app for Kindle Fire HD, Kindle Fire, iPad, iPhone, iPod touch, Roku, Xbox 360, PlayStation 3, Wii and Wii U, as well as hundreds of other connected devices. Viewer feedback will help determine which pilots Amazon Studios will produce into full series.

— Amazon expanded the popular Kindle Fire feature “X-Ray for Movies” to TV shows, bringing the power of IMDb directly to the most popular TV shows on Kindle Fire. With a single tap viewers can discover the names of actors and what they’ve been in, without even leaving the TV show.

— Kindle Owners’ Lending Library has grown to over 300,000 books available to borrow for free as frequently as a book a month, including many titles exclusive to Amazon.

— Amazon announced the launch of the Amazon MP3 store optimized specifically for Safari browser. For the first time ever, iPhone and iPod touch users can discover and buy digital music from Amazon’s 22 million song catalog. Amazon also announced its Cloud Player app for iPad and iPad mini, enabling customers to play or download music stored in Cloud Player to their device, play music that is already stored on their device, and manage or create playlists.

— Amazon announced it has extended its popular AutoRip services to vinyl records. AutoRip provides customers with free MP3 versions of CDs and vinyl records they purchase from Amazon. Additionally, customers who have purchased AutoRip CDs or vinyl records at any time since Amazon first opened its Music Store in 1998 will find MP3 versions of those albums in their Cloud Player libraries – also automatically for free.

— Amazon announced the launch of Kindle Fire HD 8.9” — the large-screen version of its best-selling tablet —for the U.K., Germany, France, Italy, Spain and Japan. With the expansion of Kindle Fire HD 8.9” to Europe and Japan, Amazon also announced a lower price on Kindle Fire HD 8.9” in the U.S., with the Wi-Fi version starting at $269 and the 4G version starting at $399.

— Amazon Publishing, the publishing arm of Amazon.com, announced that it will start paying authors their royalties monthly, 60 days in arrears — allowing authors to receive payment more frequently than the twice-a-year industry standard.

— Amazon acquired Goodreads, a leading site for readers and book recommendations that helps people find and share books they love. Goodreads members can discover new books by seeing what their friends are reading or by using the Goodreads Book Recommendation Engine; share ratings and recommendations; track what they have read, and list what they want to read.

— Amazon Web Services (AWS) announced the launch of Amazon Redshift, a fast and powerful, fully managed, petabyte-scale data warehouse service in the cloud for a fraction of the cost of a traditional data warehouse.

— AWS launched AWS OpsWorks, an application management solution for the complete lifecycle of complex applications, including resource provisioning, configuration management, deployment, monitoring, and access control.

— AWS announced Amazon Elastic Transcoder, a highly scalable service for transcoding video files between different digital media formats. Amazon Elastic Transcoder manages all aspects of the transcoding process transparently and automatically, providing scalability and performance by leveraging AWS services.

— AWS announced AWS CloudHSM, a new service enabling customers to increase data security and meet compliance requirements by using dedicated Hardware Security Module (HSM) appliances within the AWS Cloud. The CloudHSM service allows customers to securely generate, store and manage cryptographic keys used for data encryption in a way that keys are accessible only by the customer.

— AWS has lowered prices 31 times since it launched in 2006, including 7 price reductions so far in 2013.

The following forward-looking statements reflect Amazon.com’s expectations as of April 25, 2013. 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.

Second Quarter 2013 Guidance

Net sales are expected to be between $14.5 billion and $16.2 billion, or to grow between 13% and 26% compared with second quarter 2012.

Operating income (loss) is expected to be between $(340) million and $10 million, compared to $107 million in the comparable prior year period.

This guidance includes approximately $340 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions, investments, 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, 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, payments, 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.com, Inc. (NASDAQ: AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth’s Biggest Selection. Amazon.com, Inc. seeks to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers offer millions of unique new, refurbished and used items in categories such as Books; Movies, Music & Games; Digital Downloads; Electronics & Computers; Home & Garden; Toys, Kids & Baby; Grocery; Apparel, Shoes & Jewelry; Health & Beauty; Sports & Outdoors; and Tools, Auto & Industrial. Amazon Web Services provides Amazon’s developer customers with access to in-the-cloud infrastructure services based on Amazon’s own back-end technology platform, which developers can use to enable virtually any type of business. Kindle Paperwhite is the most-advanced e-reader ever constructed with 62% more pixels and 25% increased contrast, a patented built-in front light for reading in all lighting conditions, extra-long battery life, and a thin and light design. The new latest generation Kindle, the lightest and smallest Kindle, now features new, improved fonts and faster page turns. Kindle Fire HD features a stunning custom high-definition display, exclusive Dolby audio with dual stereo speakers, high-end, laptop-grade Wi-Fi with dual-band support, dual-antennas and MIMO for faster streaming and downloads, enough storage for HD content, and the latest generation processor and graphics engine—and it is available in two display sizes—7” and 8.9”. The large-screen Kindle Fire HD is also available with 4G wireless, and comes with a groundbreaking $49.99 introductory 4G LTE data package. The all-new Kindle Fire features a 20% faster processor, 40% faster performance, twice the memory, and longer battery life.

Amazon and its affiliates operate websites, including www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, www.amazon.cn, www.amazon.it, www.amazon.es and www.amazon.com.br. As used herein, “Amazon.com,” “we,” “our” and similar terms include Amazon.com, Inc., and its subsidiaries, unless the context indicates otherwise.

 

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

References to units mean physical and digital units sold (net of returns and cancellations) by us and sellers at Amazon domains worldwide – for example www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, www.amazon.cn, www.amazon.it, www.amazon.es, www.amazon.com.br, www.diapers.com, www.shopbop.com and www.zappos.com – as well as Amazon-owned items sold through non-Amazon domains. Units sold are paid units and do not include units associated with certain acquisitions, rental businesses, web services or advertising businesses, or Amazon gift certificates.

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