10-QPeriod: Q1 FY2012

AMAZON COM INC Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 27, 2012For Securities:AMZN

Summary

Amazon.com, Inc. (AMZN) reported its first quarter 2012 financial results, showcasing significant year-over-year growth in total net sales, which increased by 34% to $13.19 billion. This growth was driven by a 36% increase in North America sales and a 31% increase in International sales. Despite the topline growth, profitability faced headwinds, with income from operations declining by 40% to $192 million due to increased operating expenses across key areas like cost of sales, fulfillment, technology, and marketing. The company experienced a substantial decrease in net income, falling to $130 million in Q1 2012 from $201 million in Q1 2011, impacting diluted earnings per share to $0.28 from $0.44. This decline was partially offset by positive equity-method investment activity. Amazon's cash position saw a significant reduction, with cash and cash equivalents decreasing from $5.27 billion at the end of 2011 to $2.29 billion by the end of Q1 2012, primarily due to substantial share repurchases and increased capital expenditures.

Financial Highlights

48 data points
Beta

Revenue

$13.19B

24.0% Gross Margin

Net Income

$130.00M

1.0% Net Margin

EPS (Diluted)

$0.01

Total Assets

$20.34B

Cash & Equivalents

$2.29B

Free Cash Flow

-$2.82B

Financial Statements
Beta
Revenue$13.19B
Cost of Revenue$10.03B
Gross Profit$3.16B
Operating Expenses$12.99B
Operating Income$192.00M
Interest Expense$21.00M
Net Income$130.00M
EPS (Basic)$0.01
EPS (Diluted)$0.01
Shares Outstanding (Basic)9.06B
Shares Outstanding (Diluted)9.20B

Key Highlights

  • 1Total net sales grew 34% year-over-year to $13.19 billion, driven by strong performance in both North America (36% growth) and International (31% growth) segments.
  • 2Income from operations declined 40% to $192 million, indicating increased operational costs outpaced revenue growth.
  • 3Net income decreased to $130 million ($0.28/share) from $201 million ($0.44/share) in the prior year's quarter.
  • 4Cash and cash equivalents significantly decreased to $2.29 billion from $5.27 billion, largely due to substantial common stock repurchases of $960 million in the quarter.
  • 5Investments in fixed assets, including technology and fulfillment infrastructure, increased to $386 million from $298 million year-over-year.
  • 6Gross margin improved to 24.0% from 22.8%, primarily attributed to a higher mix of service sales.
  • 7The company is facing multiple patent infringement lawsuits, though a settlement was reached in one case (Execware, LLC) without material impact.

Frequently Asked Questions

The primary driver for the significant decrease in cash and cash equivalents, from $5.27 billion at the end of 2011 to $2.29 billion at the end of Q1 2012, was the substantial repurchase of common stock totaling $960 million during the quarter, as well as increased capital expenditures for investments in technology and fulfillment infrastructure.

Operating expenses increased significantly in Q1 2012, growing faster than net sales. Key areas contributing to this increase included higher costs in cost of sales, fulfillment, technology and content, and marketing. These rising expenses led to a 40% decrease in income from operations, despite a 34% increase in net sales.

For the second quarter of 2012, Amazon guided for net sales between $11.9 billion and $13.3 billion, representing a growth of 20% to 34% compared to Q2 2011. However, operating income is expected to be between a loss of $260 million and a profit of $40 million, reflecting continued investment and potential pressures on profitability.

The acquisition of Kiva Systems, Inc., was announced in March 2012 for approximately $775 million and was expected to close in Q2 2012. The financial results for Q1 2012 do not include the impact of this acquisition, as it was not yet completed.