This summary is based on the second quarter fiscal 2007 earnings call conducted by Amazon.com, Inc. (AMZN: chart) on July 24, 2007.
IR: Kim Nelson
CFO: Tom Szkutak
President, CEO, Chairman: Jeff Bezos
Key Investors Issues
- EPS were 19 cents a share compared to 5 cents a share last year.
- Net income was $78 million compared to $22 million a year ago.
- Revenue was $2.89 billion compared to $2.14 billion last year.
Second Quarter Highlights
Worldwide revenue grew 35% to $2.89 billion, or 33%, excluding the $46 million favorable impact from foreign exchange rates.
Media revenue increased to $1.83 billion, up 27%, or 25%, excluding foreign exchange rates.
EGM revenue increased to $970 million, up 55%, or 53%, excluding FX. EGM continued to increase its share of worldwide sales mix, representing 34% of sales, up from 29% for the same period last year.
GAAP operating income grew 149% to $116 million, or 4% of net sales.
Provision for income taxes was $33 million, or a 30% rate, which includes a $4 million year-to-date adjustment to reflect current estimate of annual effective tax rate of 26%, which incorporates strong North America growth. There is potential for volatility of effective tax rate, due to several factors, including variability in accurately predicting the amount and mix of tax flow income by jurisdiction.
GAAP net income was $78 million or 19 cents per share, compared with $22 million and 5 cents per share.
- Cash and marketable securities were $1.66 billion, an increase of $245 million year over year.
- Inventory increased 41% to $735 million, and inventory turns decreased from 14.3 a year ago to 12.9 as the company expanded selection and improved in-stock levels across product categories and geographies and introduced new product categories.
- Investment in fixed assets, which includes net capitalized software development costs, increased $38 million from a year ago to $443 million.
- Return on invested capital was 39%.
- ROIC is free cash flow divided by average total assets minus average current liabilities.
- Unlike CSOI, GAAP operating income includes stock-based compensation and other operating expense.
Trailing 12-month free cash flow increased 87% to $700 million, while the combination of common stock and stock-based awards outstanding decreased 2% to $435 million.
- Worldwide unit growth was 25%, and active customer accounts exceeded $69 million, up 16% year over year.
- Worldwide gross profit was $701 million, up 38%.
- Gross margin increased 49 basis points to 24.3%, primarily due to the wind down and termination last year of contract with TRU, which negatively impacted worldwide gross margins in the second quarter of 2006 by approximately 90 basis points and North America gross margin by approximately 170 basis points. This was offset partially by product mix.
- Worldwide active seller accounts were over 1.1 million, and third-party units, representing Marketplace and Merchants@ units sold on Amazon sites, were 30% of total units versus 29% in the prior year.
Fulfillment, marketing, tech and content and G&A combined was $536 million, or 18.6% of sales, an improvement of 148 basis points year over year.
Fulfillment was $248 million, or 8.6% of net sales, up 8 basis points year over year.
The company announced plans for a new fulfillment center in Phoenix, and it opened up a fulfillment center in Guangzhou, China.
Technology and content was $176 million, or 6.1% of net sales, an improvement of 99 basis points year over year as the company continues to grow into new level of spending.
Consistent with prior periods, the company cannot allocate to segments stock-based compensation or other operating expense line items.
