This summary is based on the first quarter fiscal 2006 earnings call conducted by Amazon.com, Inc. (AMZN: chart) on April 25, 2006.

Management:

Founder and CEO: Jeff Bezos
CFO: Tom Szkutak
IR: Kim Nelson

Key Investors Issues

- EPS were 12 cents per share compared to 18 cents per share last year.
- Net income was $51 million compared to $78 million a year ago.
- Revenue grew 20% to $2.28 billion.

First Quarter Highlights

Trailing 12-month free cash flow grew 20% to $501 million.

Free cash flow is operating cash flow minus capital expenditures. Trailing 12-month free cash flow includes a one-time payment of $40 million in connection with the patent lawsuit settlement in the third quarter 2005 and excludes $13 million of tax benefits from stock-based compensation that are classified as positive financing cash flows under FAS 123R. Adjusting for these two items, TTM free cash flow grew 32% to $554 million.

- The combination of common stock and stock-based awards outstanding was 438 million shares compared with 434 million, up 1%.
- Stock-based awards outstanding were 21 million or 4.9% of shares outstanding, down from 24 million or 5.7% of shares outstanding.
- Return on invested capital was 32%. ROIC is TTM free cash flow divided by average total assets minus average current liabilities.

- Revenue grew 20% to $2.28 billion or 25%, excluding the $94 million unfavorable impact in year-over-year changes in foreign exchange rates. Worldwide unit growth was 24%.
- Third-party units representing marketplace and merchant''s units sold on Amazon sites were 29% of total units, up from 27%.
- Active customer accounts, representing customers who have ordered in the past year, surpassed 57 million, up 19%.

Electronics and other general merchandise, or EGM, increased 33% to $639 million or 38% excluding foreign exchange rates.

- EGM represents 28% of worldwide sales, up from 25%.
- Gross profit grew 19% to $547 million, and gross margin decreased 9 basis points to 24%, primarily due to greater shipping loss driven by free shipping in Amazon Prime and lower product prices. These decreases were partially offset by increased third-party sales.
- Fulfillment, marketing, technical content and G&A combined was $427 million or 18.8% of sales, up 141 basis points. Fulfillment was $190 million or 8.3% of sales, down 24 basis points.

Marketing was $54 million or 2.4% of sales, up 11 basis points.

- Technology and content increased 69% year-over-year to $138 million, and the company expects this percentage to decrease substantially in the back half of this year. The first quarter represents 6.1% of sales, up 177 basis points.
- G&A was $45 million or 0.2% of sales, down 24 basis points. In the first quarter 2005 the company recorded an $8 million charge related to litigation matters.

Consistent with prior periods, the company doesn’t don''t allocate stock-based compensation or other operating expense to segments.

- In the North American segment, revenue grew 21% to $1.25 billion.
- Media revenue grew 17% to $815 million, and EGM revenue grew 33% to $374 million, representing 30% of North America revenues, up from 27%.
- Apparel, jewelry and sporting goods revenue all more than doubled year-over-year.

- Gross profit grew 22% to $341 million, and gross margin increased 18 basis points to 27.3%, largely due to third-party sales, as well as an $11 million increase in other revenue primarily driven by Amazon Enterprise Solutions, partially offset by Amazon Prime, price reductions across product categories, product mix shift and free shipping.
- North America segment operating income decreased $4 million to $62 million, a 5% operating margin.

- In the International segment, revenue grew 18% to $1.03 billion.
- Revenue growth accelerated to 29%, adjusting for the $96 million year-over-year unfavorable impact from foreign exchange rates.

- Media revenue grew 13% to $763 million or 24%, excluding FX, the highest growth rate since the fourth quarter of 2004.
- EGM revenue grew 33% to $265 million, or 45% excluding FX, representing 26% of international revenues, up from 23%.
- Gross profit grew 15% to $206 million or 26% excluding FX, while gross margin decreased 53 basis points to 20% primarily from free shipping, product price reductions and a mix shift.

- International segment operating income decreased $4 million to $58 million, a 5.6% operating margin. Excluding FX, international operating income increased 6%. The combination of operating income in North America and International segment is consolidated segment operating income, or CSOI.