Amazon Reports Huge Jump In 1Q Sales, Operating Income

As of Friday, April 26 at 9:15am, Amazon’s stock price stood at $1,910 a share, still below the 52-week high of $2,050. Analysts are setting a price target between $2,100 and $2,400

Highlights from the Amazon earnings report for the first quarter of 2019 and year-to-year comparisons include:

• 89% increase in operating cash flow y/y to $34.4 billion
• 17% increase in net sales during 1Q to $59.7 billion
• Amazon Business Prime members can now select a day and time they want their orders delivered
• Amazon will host 6 Small Business Selling Summits to help businesses set up online selling opportunities
• Amazon will invest $800 million to create even faster daily delivery

During the Amazon earnings conference call, a reporter asked Amazon Senior Vice President and Chief Financial Officer Brian Olsavsky about third-party sellers.  Olsavsky’s response was, “So the main goal here is that it will allow customers to have the broadest selection, the best available price and also the most convenient options on how they receive the item. If we’re delivering on those three elements, we’re indifferent as to whether it’s sold by us or a third-party. We actively recruit sellers to sell on our platform, it’s because it adds selection. We spend billions of dollars a year, as Jeff (Bezos) said, on infrastructure, tools and services, not only to allow sellers to sell, but to help themselves more successfully. So we have a vested interest in the success of our sellers. So you’ll still see the percentage of third-party units increased and has been steadily over the last few years. So again, the sellers are as important to us as anything for servicing the customers’ need for price selection and convenience.”

SEATTLE–(BUSINESS WIRE)– Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its first quarter ended March 31, 2019.

Operating cash flow increased 89% to $34.4 billion for the trailing twelve months, compared with $18.2 billion for the trailing twelve months ended March 31, 2018. Free cash flow increased to $23.0 billion for the trailing twelve months, compared with $7.3 billion for the trailing twelve months ended March 31, 2018. Free cash flow less principal repayments of finance leases and financing obligations increased to $15.1 billion for the trailing twelve months, compared with $1.1 billion for the trailing twelve months ended March 31, 2018. Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations increased to an inflow of $11.8 billion for the trailing twelve months, compared with an outflow of $3.0 billion for the trailing twelve months ended March 31, 2018.

On January 1, 2019, we adopted accounting guidance amending the accounting for leases, which did not have a material impact on our first quarter operating results. Prior period amounts were not retrospectively adjusted. Under this new guidance, leases we previously referred to as “capital leases” are now referred to as “finance leases.” Leases we previously referred to as “finance leases” are now referred to as “financing obligations.”

Common shares outstanding plus shares underlying stock-based awards totaled 507 million on March 31, 2019, compared with 504 million one year ago.

Net sales increased 17% to $59.7 billion in the first quarter, compared with $51.0 billion in first quarter 2018. Excluding the $1.1 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 19% compared with first quarter 2018.

Operating income increased to $4.4 billion in the first quarter, compared with operating income of $1.9 billion in first quarter 2018.

Net income increased to $3.6 billion in the first quarter, or $7.09 per diluted share, compared with net income of $1.6 billion, or $3.27 per diluted share, in first quarter 2018.

“The son of a working single mom, Leo Jean Baptiste grew up speaking Haitian Creole in a New Jersey home without internet access. He’s also one of our inaugural group of 100 high school seniors to receive a $40,000 Amazon Future Engineer scholarship and Amazon internship,” said Jeff Bezos, Amazon founder and CEO. “He rose to the top of his class and is set to study computer science at college this fall, with the dream of getting a job in machine learning. Our passion for invention led us to create Amazon Future Engineer so we could help young people like Leo from underrepresented groups and underserved communities across the country. In addition to 100 college scholarships a year, we’re funding computer science classes in 1,000 high schools and counting, and inspiring younger kids to explore coding through coding camps and after-school programs. We love this program, and we can’t wait to see what Leo and his fellow future engineers invent.”

Highlights

• Amazon announced Fire TV now has more than 30 million active users.
• Amazon launched a new version of the best-selling Fire TV ever – Fire TV Stick with the all-new Alexa Voice Remote, which has a rating of 4.6 stars on Amazon.com and is available in the U.S., Canada, U.K., Germany, Japan, and India.
• Alexa now offers more than 90,000 skills in the Alexa Skills Store from external developers. Amazon introduced health and wellness capabilities for developers to build skills that let customers track baby activities such as sleep, diaper changes, and feedings, and announced a HIPAA-eligible environment for developers with new healthcare skills from Express Scripts, Cigna, and Boston Children’s Hospital.
• Amazon now offers Apple Music via Alexa on Fire TV, Echo, and Sonos devices in the U.S. and U.K. In addition, Amazon announced the Apple TV app is coming to Fire TV devices.
• Amazon expanded Alexa features internationally: Echo Show launched inIndia, France, Italy, and Spain; Echo Input, which allows customers to add Alexa to an existing speaker, launched in India, Japan, France, Italy, Spain, and Australia; and Skype calling with Alexa expanded to Germany, France, Italy, Spain, and Mexico. Additionally, Alexa can now understand French in Canada, with a new experience built from the ground up for French Canadian customers.
• Amazon announced plans to bring Alexa to Brazil later this year. Developers can start building skills using the Brazilian Portuguese voice model, and commercial manufacturers can request access to the Alexa Voice Service developer preview to create devices with Alexa built-in. Bose, Intelbras, and LG, among others, have already committed to bringing Alexa built-in products to Brazilian customers.
• Alexa Auto launched in new vehicles, including the all-new Audi e-tron, so customers can ask Alexa to play music, locate points of interest, control smart home devices, and access thousands of Alexa skills with just their voice. Additionally, Amazon released new tools for developers to optimize their skills for Echo Auto, Alexa-enabled vehicles, and other automotive accessories with Alexa built-in.
• Amazon introduced the all-new Kindle for $89.99, the first Kindle with a built-in adjustable front light for under $100. The Kindle also includes an updated design, the latest electronic ink technology for better contrast, and three months of Kindle Unlimited for free.
• Amazon and Google announced that in the coming months, the two companies will launch the official YouTube app on Amazon Fire TV devices and Fire TV Edition smart TVs, as well as the Prime Video app for streaming to Chromecast and Chromecast built-in devices. Prime Video will also be broadly available across Android TV device partners, and the YouTube TV and YouTube Kids apps will also come to Fire TV later this year.
• MLB.tv launched as a subscription on Prime Video Channels, offering Prime customers streaming access to regular season out-of-market baseball games, both live and on-demand.
• Prime Video debuted Original Series Hanna, a part high-concept thriller, part coming-of-age drama, based on the 2011 film, and announced the series was picked up for season two. Additionally, the film Guava Islandstarring Donald Glover and Rihanna, launched on Prime Video after a surprise premiere at Coachella.
• Amazon Studios greenlit more than 20 new and returning local Prime Original Series, including La Templanza in Spain, Wir Kinder vom Bahnhof Zoo in Germany, Bandish Bandits in India, El Presidente in Mexico, and The Bachelorette in Japan.
• Amazon and Whole Foods Market announced a third round of price cuts, offering new lower prices on fresh produce for all customers and expanded Prime benefits with more exclusive weekly deals on popular products across departments.
• Customer demand for free, two-hour delivery from Whole Foods Market via Prime Now continues to exceed expectations. To meet this demand, Amazon and Whole Foods Market continue to grow the service in existing metros to serve even more customers and expand coverage to new metros, including the most recent delivery expansion to nine additional U.S. metros. Currently, delivery from Whole Foods Market via Prime Now is available in 75 U.S. metros, and grocery pickup from Whole Foods Market via Prime Now is available in 30 metros, with plans for continued expansion this year.
• Amazon Day, a new delivery innovation that gives Prime members the option to choose a day of the week for their packages to arrive, became available to all U.S. Prime and Business Prime members. Millions of Prime members are now using Amazon Day, making it easy for customers to group and receive purchases, and, in many cases, in fewer boxes. Members can still choose from Prime’s fast, free shipping options for any item they don’t want to include as part of their Amazon Day shipment.
• Key by Amazon is now available to millions more Prime members in 50 U.S.cities and surrounding areas. Additionally, Prime members can choose Key for Garage for secure delivery of Amazon packages, as well as to Key for Home and Key for Car.
• Customers in the U.S. can now use their Flexible Spending Account and Health Savings Account debit cards towards eligible purchases on Amazon, eliminating the need to pay out-of-pocket or submit receipts for reimbursement.
• Amazon now accepts New York-issued Supplemental Nutrition Assistance Program (SNAP) EBT cards as part of an online pilot launched in collaboration with the United States Department of Agriculture. Millions of beneficiaries can now use their nutrition assistance benefits to order groceries online and have them delivered directly to their door, including through free access to Prime Pantry and Amazon Fresh.
• Amazon announced its new Selling Partner Summits in the U.S., a series of six conferences for small and medium-sized business (SMBs) to help build their business in Amazon’s stores. Each Summit will feature an Amazon-led educational track, experts lounge, and product labs.
• Amazon launched more than 50 new and enhanced tools designed for SMBs to help build their business in Amazon’s stores. Amazon invests billions of dollars each year on infrastructure, tools, and services that enable SMBs to reach new customers and successfully sell their products online.
• Amazon announced Shipment Zero, the company’s vision to make all customer shipments net zero carbon, with the goal of making 50% of all shipments net zero by 2030. To track this progress, Amazon will share its company-wide carbon footprint as well as related goals and programs later this year.
• As part of its long-term goal to power all Amazon Web Services (AWS) global infrastructure with renewable energy, Amazon announced three new renewable energy projects. These projects – in Ireland, Sweden, and the U.S. – are expected to generate over 670,000 megawatt hours of renewable energy annually. The new projects are part of Amazon’s long-term commitment to achieve 100% renewable energy powering the AWS global infrastructure.
• Amazon announced the first-ever recipients of the Amazon Future Engineer (AFE) scholarship. AFE is a childhood-to-career program that works to inspire and educate millions of children and young adults each year from underrepresented and underserved communities to pursue careers in the fast-growing field of computer science and coding. The 100 student recipients were each awarded a $40,000 scholarship to study computer science at a college of their choice, as well as a guaranteed paid internship offer at Amazon after their freshmen year of college.
• Amazon Future Engineer announced robotics grants to 100 schools serving students from underrepresented and underserved communities. The schools will receive FIRST Robotics memberships, giving each school the opportunity to start their first robotics club, $10,000 from Amazon to expand access to computer science education in their school, and a tour of a local Amazon Robotics fulfillment center.
• Amazon announced a collaboration with the National Science Foundation to commit up to $10 million in research grants per year over the next three years focused on fairness in Artificial Intelligence (AI), with the goal of contributing to trustworthy AI systems that are readily accepted and deployed to tackle challenges facing society.
• Amazon was recognized by LinkedIn as one of the most desirable companies to work for in the U.S., U.K., Australia, India, Japan, China, Canada, Germany, and Mexico.
• AWS announced several new customer commitments and major migrations during the quarter: Gogo, Inc. and Lyft are going all-in on AWS; Second Spectrum and the L.A. Clippers named AWS their official cloud and machine learning provider; Standard Bank Group and Vertafore selected AWS as their preferred cloud provider; the Guinness Six Nations Championship named AWS as their official technology provider; Volkswagen (VLKAF) is joining forces with AWS to transform automotive manufacturing, powering the Volkswagen Industrial Cloud, and integrating more than 30,000 facilities and 1,500 suppliers and partners in Volkswagen’s global supply chain over time; and Ford (F) and Autonomic, creators of the Transportation Mobility Cloud (TMC), selected AWS to power TMC and become the standard connected car solution for Ford vehicles, giving automotive manufacturers and software developers the cloud infrastructure needed to build innovative connected vehicle services at scale.
• AWS continued to expand its infrastructure to best serve customers, launching the AWS Asia Pacific (Hong Kong) Region, and announcing plans for the AWS Asia Pacific (Jakarta) Region. AWS now provides 64 Availability Zones across 21 infrastructure regions globally, with announced plans for another 12 Availability Zones and four regions in Bahrain, Indonesia, Italy, and South Africa.
• AWS announced the general availability of Amazon S3 Glacier Deep Archive, a new storage class that provides secure, durable object storage for long-term retention of data that is rarely accessed. At just $0.00099 per GB-month (less than one-tenth of one cent, or $1 per TB-month), S3 Glacier Deep Archive offers the lowest cost storage in the cloud, at prices significantly lower than storing and maintaining data in on-premises magnetic tape libraries or archiving data off-site. In its first week of availability, Deep Archive grew three times faster than any other storage class in the 13 years since S3 launched. Now with six different storage class options, Amazon S3 provides the broadest array of cost-optimization options available in the cloud today.
• AWS announced the general availability of Concurrency Scaling for Amazon Redshift, a new Amazon Redshift feature that automatically adds and removes capacity to handle unpredictable demand from thousands of concurrent users. With more than 200 new features and enhancements in the last two years, Amazon Redshift is delivering an average of 10x faster query times. Pfizer, McDonald’s, Hilton Hotels Worldwide, Yelp, Intuit, Redfin, FOX Corporation, NTT DOCOMO, Equinox Fitness, and Edmunds are among the more than 10,000 customers collectively processing more than two exabytes with Amazon Redshift every day.
• AWS announced the general availability of Amazon EFS Infrequent Access (IA), a new storage class for Amazon EFS that is designed for files accessed less frequently, enabling customers to reduce storage costs by up to 85% compared to the Amazon EFS Standard storage class. With EFS IA, Amazon EFS customers simply enable Lifecycle Management, and any file not accessed after 30 days gets automatically moved to the EFS IA storage class.
• AWS announced Open Distro for Elasticsearch, a 100% open source distribution of the Elasticsearch analytics engine that includes features like security, alerting, cluster diagnostics, and SQL support. With all of the features of Open Distro for Elasticsearch licensed under Apache 2.0, developers can use it without any commercial use restrictions, providing customers a fully-featured, completely open source distribution that makes it easy for everyone to use, collaborate, and contribute.
• AWS announced the general availability of Amazon WorkLink, a fully-managed service that enables companies to provide their workforce with secure one-click access to internal websites and web applications from their mobile devices without connecting to VPNs or using custom browsers. Amazon WorkLink removes the need to build and maintain complicated infrastructure and software deployments to secure mobile access to internal content while also reducing the risk of information loss or theft because content is never stored or cached on devices.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of April 25, 2019, 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 customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, and the various factors detailed below.

Second Quarter 2019 Guidance

• Net sales are expected to be between $59.5 billion and $63.5 billion, or to grow between 13% and 20% compared with second quarter 2018. This guidance anticipates an unfavorable impact of approximately 150 basis points from foreign exchange rates.
• Operating income is expected to be between $2.6 billion and $3.6 billion, compared with $3.0 billion in second quarter 2018.
• This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.

A conference call will be webcast live today at 2:30 p.m. PT/5:30 p.m. ET, and will be available for at least three months at 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 and services sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income or other taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment, sortation, delivery, and data center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains, and develops commercial agreements, proposed and completed 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.

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