Amazon continues to grow at a fast clip.
Revenues at the nation’s largest bookseller increased 23% in its second quarter to $19.34 billion. At the same time, losses increased to $126 million; the company lost $7 million in the second quarter last year. Huge revenues with slim profits or even losses has been the pattern at Amazon in virtually all of its earnings reports in its 20-year history.
Media sales, which includes ebooks, were up 13% in North America to $2.46 billion for the quarter; internationally, media sales were up 7% to $2.38 billion.
Amazon.com Announces Second Quarter Sales up 23% to $19.34 Billion
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 of Amazon.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.”
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.
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.
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.