10-QPeriod: Q3 FY2011

AMAZON COM INC Quarterly Report for Q3 Ended Sep 30, 2011

Filed October 26, 2011For Securities:AMZN

Summary

Amazon.com, Inc. (AMZN) reported its third-quarter results for the period ending September 29, 2011. The company demonstrated robust top-line growth, with net sales increasing by 44% year-over-year to $10.88 billion. This growth was driven by strong performance in both North America and International segments, with sales up 44% and 44% respectively. Despite the significant revenue increase, net income saw a considerable decline, falling to $63 million from $231 million in the same quarter of the previous year. This decrease was largely attributed to increased operating expenses, particularly in technology and content, and fulfillment, alongside a significant gain from an equity method investment in the prior year. The company's cash position remained strong, with cash and cash equivalents totaling $2.82 billion.

Financial Highlights

47 data points
Beta

Revenue

$13.81B

39.7% Gross Margin

Net Income

-$274.00M

-2.0% Net Margin

EPS (Diluted)

$-0.03

Total Assets

$19.05B

Cash & Equivalents

$2.82B

Free Cash Flow

$268.00M

Financial Statements
Beta
Revenue$13.81B
Cost of Revenue$8.32B
Gross Profit$5.48B
Operating Expenses$10.80B
Operating Income$79.00M
Interest Expense$17.00M
Net Income-$274.00M
EPS (Basic)$-0.03
EPS (Diluted)$-0.03
Shares Outstanding (Basic)9.04B
Shares Outstanding (Diluted)9.04B

Key Highlights

  • 1Net sales surged by 44% year-over-year to $10.88 billion, indicating strong market demand and expansion.
  • 2North America and International segments both experienced robust sales growth of 44%, demonstrating broad-based geographic strength.
  • 3Net income decreased significantly to $63 million from $231 million in Q3 2010, driven by increased operating expenses and the absence of a prior year gain from an equity investment.
  • 4Operating expenses, particularly in Technology and Content (+74% YoY) and Fulfillment (+65% YoY), increased substantially, reflecting ongoing investments in growth.
  • 5The company maintained a healthy cash and cash equivalents balance of $2.82 billion.
  • 6Free cash flow for the trailing twelve months was $1.53 billion, a decrease from $1.83 billion in the prior year, impacted by increased capital expenditures.
  • 7Amazon is facing numerous patent infringement lawsuits, with ongoing litigation being a material risk factor.

Frequently Asked Questions

Amazon's revenue growth was primarily driven by increased unit sales across both its North America and International segments. This was fueled by continuous efforts to reduce prices for customers, growth in categories like electronics and general merchandise, improved in-stock inventory availability, and an expanded product selection.

The significant decrease in net income was largely due to a substantial increase in operating expenses, particularly in 'Technology and content' and 'Fulfillment' as the company continued to invest in growth areas and infrastructure. Additionally, the prior year's net income included a gain from an equity method investment, which was not present in the current quarter, contributing to the year-over-year decline.

Amazon maintained a strong liquidity position with $2.82 billion in cash and cash equivalents as of September 30, 2011. The company's principal sources of liquidity are operating cash flows and its cash reserves. Free cash flow for the trailing twelve months was $1.53 billion, though it decreased year-over-year due to higher capital expenditures, reflecting ongoing investments in technology infrastructure and fulfillment capacity.

Amazon faces intense competition across its various business segments. Significant operational risks include managing rapid global expansion, potential system interruptions, inventory management, and the seasonality of its business. Legally, the company is involved in numerous patent infringement lawsuits and is subject to evolving government regulations related to e-commerce and data privacy. These factors are highlighted as material risks that could adversely affect the company's business and financial performance.