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Thomson Reuters StreetEvents Event Transcript
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E D I T E D V E R S I O N
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Q4 2012 Amazon.com Inc Earnings Conference Call
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01/29/2013 05:00 PM GMT
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Corporate Participants
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* Sean Boyle
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Amazon.com, Inc. - VP of IR
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* Tom Szkutak
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Amazon.Com Inc - CFO
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Conference Call Participiants
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* Justin Post
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BofA Merrill Lynch - Analyst
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* Heath Terry
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Goldman Sachs - Analyst
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* Gene Munster
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Piper Jaffray & Co. - Analyst
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* Rohit Kulkarni
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Citi - Analyst
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* Ben Schachter
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Macquarie Research - Analyst
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* Ken Sena
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Evercore Partners - Analyst
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* Brian Pitz
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Jefferies & Co. - Analyst
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* Ross Sandler
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Deutsche Bank - Analyst
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* Jordan Rohan
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Stifel Nicolaus - Analyst
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* Mark Mahaney
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RBC Capital Markets - Analyst
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* Scott Devitt
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Morgan Stanley - Analyst
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* Brian Nowak
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Nomura Securities Intl - Analyst
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* Douglas Anmuth
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JPMorgan - Analyst
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* Tom Forte
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Telsey Advisory Group - Analyst
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* Anthony DiClemente
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Barclays Capital - Analyst
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Presentation
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Operator [1]
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Good day, everyone, and welcome to the Amazon. com fourth-quarter 2012 financial results teleconference. At this time, all participants are in a listen-only mode. After today's presentation, we will conduct a question-and-answer session. Today's call is being recorded. For opening remarks, I will be turning the call over to the Vice President of Investor Relations, Mr. Sean Boyle. Please go ahead.
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Sean Boyle, Amazon.com, Inc. - VP of IR [2]
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Hello, and welcome to our Q4 2012 financial results conference call. Joining us today is Tom Szkutak, our CFO. We will be available for questions after our prepared remarks. The following discussion and responses to your questions reflect management's views as of today, January 29, 2013, only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent Annual Report on Form 10-K.
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As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. During this call, we will discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website.
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You will find additional disclosures regarding these non-GAAP measures, including reconciliations to these measures, with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2011. Now, I'll turn the call over to Tom.
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Tom Szkutak, Amazon.Com Inc - CFO [3]
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Thanks, Sean. I'll begin with comments on our fourth quarter financial results. Trailing 12-month operating cash flow increased 7% to $4.18 billion. Trailing 12-month free cash flow decreased 81% to $395 million. Trailing 12-month capital expenditures were $3.79 billion. This amount includes $1.4 billion in purchases of our previously leased corporate office space, as well as property for development of additional corporate office space located in Seattle, Washington, which we purchased in the fourth quarter.
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The increase in capital expenditures reflects additional investments in support of continued business growth, consisting of investing in technology infrastructure, including Amazon Web Services and additional capacity to support our fulfillment operations. Return on invested capital was 4%, down from 22%. ROIC is TTM free cash flow divided by average of total assets minus current liabilities, excluding the current portion of long-term debt over five quarter-ends. The combination of common stock and stock-based awards outstanding was 470 million shares compared with 468 million shares one year ago.
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Worldwide revenue grew 22% to $21.27 billion, or 23% excluding the $178 million unfavorable impact from year-over-year changes in foreign exchange. We're grateful to our customers, who continue to take advantage of our low prices, vast selection, and shipping offers.
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Media revenue increased to $6.51 billion, up 8%, or 10%, excluding foreign exchange. EGM revenue increased to $13.93 billion, up 28%, or 29%, excluding foreign exchange. Worldwide EGM increased to 65% of worldwide sales, up from 63%. Worldwide paid unit growth was 32%. Active customer accounts exceeded 200 million. Worldwide active seller accounts were more than 2 million. Seller units represented 39% of paid units.
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Now I'll discuss operating expenses, excluding stock-based compensation. Cost of sales was $16.14 billion, or 75.9% of revenue, compared with 79.3%. Fulfillment, marketing, technology and content, and G&A combined was $4.45 billion, or 20.9% of sales, up approximately 293 basis points year-over-year. Fulfillment was $2.2 billion, or 10.3% of revenue, compared with 9.3%. Tech and content was $1.22 billion, or 5.7% of revenue, compared with 4.5%. Marketing was $833 million, or 3.9% of revenue, compared with 3.3%.
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Now I'll talk about our segment results and consistent with prior periods, we do not allocate the segments, our stock-based compensation, or other operating expense line item. In the North America segment, revenue grew 23% to $12.17 billion. Media revenue grew 13% to $2.9 billion. EGM revenue grew 24% to $8.5 billion, representing 70% of North America revenues, up from 69%. North America segment operating income increased 114% to $608 million, a 5% operating margin.
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In the International segment, revenue grew 21% to $9.09 billion. Adjusting for the $183 million year-over-year unfavorable impact from foreign exchange, revenue growth was 23%. Media revenue grew 5% to $3.61 billion, or 7% excluding foreign exchange. And EGM revenue grew 35% to $5.43 billion, or 37% excluding foreign exchange. EGM now represents 60% of international revenues, up from 54%.
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International segment operating income decreased 61% to $70 million, at 0.8% operating margin. Excluding the unfavorable impact from foreign exchange, international segment operating income decreased 56%. CSOI increased 47% to $678 million, or 3.2% of revenue, up approximately 54 basis points year-over-year. Unlike CSOI, our GAAP operating income includes stock-based compensation expense and other operating expense.
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GAAP operating income increased 56% to $405 million, or 1.9% of net sales. Our income tax expense was $194 million in Q4, resulting in a 58% rate for the quarter, and a 79% rate for the full year 2012. GAAP net income was $97 million, or $0.21 per diluted share, compared with $177 million and $0.38 per diluted share.
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Now, I'll discuss the full-year results. Revenue grew 27% to $61.09 billion. North America revenue grew 30% to $34.81 billion and international revenue grew 23% to $26.28 billion, or 27% growth excluding year-over-year changes in foreign exchange. Consolidated segment operating income, or CSOI, increased 6% to $1.67 billion, or 7%, excluding the unfavorable year-over-year impact from foreign exchange. Operating margin decreased 54 basis points, 2.7%. GAAP operating income decreased 22% to $676 million, or 1.1% of net sales.
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Turning to the balance sheet, cash and marketable securities increased $1.87 billion year-over-year to $11.45 billion. Inventory increased 21% to $6.03 billion and inventory turns were 9.3, down from 10.3 turns a year ago, as we expanded selection and improved in-stock levels and introduced new product categories.
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Accounts payable increased 20% to $13.32 billion and accounts payable days increased to 76 from 74 in the prior year. In Q4 2012, we issued $3 billion of senior non-convertible unsecured debt and three-, five- and seven-year tranches with proceeds to be used for general corporate purposes.
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I'll conclude my portion of today's call with guidance. Incorporated into the guidance are the order trends we've seen to date and what we believe to date to be appropriately conservative assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including a high level of uncertainty surrounding exchange rate fluctuations, as well as the global economy, and consumer spending. It's not possible to accurately predict demand and therefore, our actual results could differ materially from our guidance.
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As we describe in more detail on our public filings, issues such as settling intercompany balances and foreign currencies amongst our subsidiaries; unfavorable resolution of legal matters; and changes to our effective tax rates can all have a material impact on guidance. Our guidance further assumes that we don't conclude any additional business acquisitions, investments, or settlements, record any further revisions to stock-based compensation estimates, and that foreign exchange rates remain approximately where they have been recently.
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For Q1 2013, we expect net sales of between $15.0 billion and $16.6 billion, or growth between 14% and 26%. This guidance anticipates approximately 122 basis points of unfavorable impact of foreign exchange rates. GAAP operating income or loss to be between $285 million loss and $65 million positive income compared to $192 million in income in the prior period year. This includes approximately $285 million for stock-based compensation and amortization of intangible assets.
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We anticipate consolidated segment operating income, which excludes stock-based compensation and other expense, to be between $0 and $350 million, compared to $398 million income in the prior period. We remain heads-down focused on driving a better customer experience through price, selection and convenience. We believe putting customers first is the only reliable way to create lasting value for shareholders. Thanks. With that, Sean, let's move to questions.
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Sean Boyle, Amazon.com, Inc. - VP of IR [4]
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Great. Thanks, Tom. Let's move on to the Q&A portion of the call. Operator, will you please remind our listeners how to initiate a question?
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================================================================================
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Questions and Answers
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Operator [1]
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Thank you. At this time, we will now open up the call for questions. In the interest of time, we ask that you limit yourself to one question.
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(Operator Instructions)
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Scott Devitt with Morgan Stanley.
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Scott Devitt, Morgan Stanley - Analyst [2]
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Tom, it looks to us that you have successfully begun the transition of your logistics cost in the direction of being more of a fixed fulfillment cost, with lower unit base shipping costs, given that the growth rate of up on shipping is now meaningfully below the fulfillment growth rate. So the question is, is that something that we should expect to continue now on the back of this meaningful fulfillment center expansion ramp?
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Then separately, but on the same topic, we're also wondering, are there other parts of the business in which you can make this transition to more of a fixed cost in the future? Thanks.
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Tom Szkutak, Amazon.Com Inc - CFO [3]
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In terms of fulfillment question, you're right in terms of, over the past few years, we have expanded our fulfillment network pretty extensively to the point where we are closer to customers; and you're seeing that reflected in our transportation costs.
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You can obviously see the fulfillment expense is certainly not fixed in terms of in absolute terms. But you can see that we had the 20 fulfillment centers last year and that's reflected in the operating expense that you're seeing. But that is a benefit of adding to our fulfillment center network. We are closer and closer to customers, with a lot of great selection. You're seeing that reflected in the individual business gross margins, which shows up as benefits of transportation costs.
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In terms of other opportunities, certainly there are a number of opportunities, as we invest in individual customer experience areas across the business; many of those would be on our website. We have a relatively fixed expense, as we launch those and we're able to amortize those costs over our full customer base. As they grow, they become more effective on a per-unit or per-customer basis. There is a number of opportunities that we have had and will have going forward to do that.
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Operator [4]
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Douglas Anmuth with JPMorgan.
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Douglas Anmuth, JPMorgan - Analyst [5]
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Just wanted to ask about the shift to third-party and in particular, I think last 4Q, you talked about shifting more of the business in the video game space in particular to third-party. Are there certain categories that you would specifically point to in this last 4Q where you made a similar shift? Thanks.
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Tom Szkutak, Amazon.Com Inc - CFO [6]
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We did see a good expansion, as you've mentioned, in 3P. Our third-party units as a percentage of total units increased some 36% last year, Q4 to 39%, some expansion of approximately 300 basis points. Our overall unit growth rate for the quarter in total was 32% and our third-party growth rate was in excess of 40%. So, again, nice growth.
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It is -- you're certainly seeing it in a number of areas. You see it certainly in our EGM business. If you look at our North America growth rates, you can see that our revenue was up 23%, but our third-party -- our total unit growth rate was substantially faster than that and our third-party units were growing very fast there as well. So there's a number of different areas that you're seeing that, but certainly you're seeing it there.
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Operator [7]
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Brian Pitz with Jefferies.
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Brian Pitz, Jefferies & Co. - Analyst [8]
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Looks like you're moving more in the direction of same-day shipping. Would you provide any thoughts or insights here? Should we anticipate a significant ramp-up of fulfillment center build-outs, particularly in Q2, Q3? Maybe you could just comment more generally on your FC build-out plans, US versus international. Thanks.
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Tom Szkutak, Amazon.Com Inc - CFO [9]
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There's not a lot I can comment on in terms of our plans. Similar to last year, as we progress through the year, we can give you further updates on what we plan to do there. Last year, we opened up 20 new fulfillment centers and so we saw very rapid growth and fulfillment capacity last year. Stay tuned and we'll let you know more as the year progresses there.
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Operator [10]
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Mark Mahaney with RBC Capital Markets.
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Mark Mahaney, RBC Capital Markets - Analyst [11]
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The paid unit growth deceleration to 32%; there seems a bit of a disconnect versus an active customer growth that didn't decelerate as much on a per-customer basis. Are you seeing some change in overall activity? Is that the impact of newer international markets? Then just on the investment cycle, the last couple of calls, you've consistently called out future investments, whether the $1.4 billion for Seattle or distribution center expansion. You didn't do it this quarter. I don't want to over-read into it, but does that mean that we're at the end of a major investment cycle? Thanks.
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Tom Szkutak, Amazon.Com Inc - CFO [12]
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In terms of unit growth, there's not a lot more I can add to it. We did see very strong -- we saw a substantially high unit growth and revenue growth in terms of paid unit growth in Q4 which we're seeing very strong third-party growth as well; it was up over 40%. In terms of investment cycle, yes, I wouldn't read into anything related to that. We will still be adding capacity during 2013. In terms of the levels of how much we'll add, as I mentioned earlier on the call, I'd just stay tuned and we'll let you know as the year progresses.
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Operator [13]
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Heath Terry with Goldman Sachs.
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Heath Terry, Goldman Sachs - Analyst [14]
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I was wondering if you could give us just a bit of a sense of what you're seeing as you roll out fulfillment centers into new states. Obviously, the sales tax issue has been one that's come up a good bit. But you've touched on the impact of being closer with faster delivery in those same states. Net-net, what do you see as being the impact on -- I'm not asking you to give us a state-by-state breakdown, but the impact of rolling out the fulfillment center footprint, taking both of those things into account?
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Tom Szkutak, Amazon.Com Inc - CFO [15]
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I'm not really sure how best to answer your question. We certainly have expanded pretty dramatically over the past, coming out of 2009, so between 2010, '11 and '12, we've rapidly increased our footprint globally. Your comment was more directed towards the US, but we've also rapidly increased our footprint in the US.
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As a result of that, we're able to carry selection, a much broader selection, closer to customers, just with the, as you would expect, with this rapid increase. We've also expanded selection during that time period. So we continue to be in the locations we would like to be in and we'll continue to expand our footprint over time and become even closer and closer to customers. Beyond that, there's not a lot I can add.
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Operator [16]
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Gene Munster with Piper Jaffray.
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Gene Munster, Piper Jaffray & Co. - Analyst [17]
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From a high level, can you remind us the margin difference between 1P and 3P? I know in the past you've talked about you being agnostic between the two. But the growth in 3P and what your CSOI margin as would imply that 3P has a little bit higher margin. Is that the correct read-through? Thanks.
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Tom Szkutak, Amazon.Com Inc - CFO [18]
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There is some variation by business, but certainly that's -- what we attempt to do is, from a pricing standpoint, is to try to be agnostic. That's certainly how we run the business. Again, this is on a third-party versus retail and then we've always -- also added certainly a lot of other services over the past year in terms of fulfillment. So it really depends upon where we are in the investment cycle, what our utilization is.
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As you know, certainly as you look at the last few years, we've been very heavily expanding in terms of fulfillment capacity because of the growth that we've been experiencing. That certainly would put pressure on our overall cost structure, certainly as a -- on a per unit basis because we're not getting the productivity. We don't get the full productivity for a number of years after expanding.
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So depending on what type of customer is, whether it's a -- excuse me, whether it's a retail unit, a straight third-party unit, or an FBA unit. But again, we're certainly attempting, at least on a product basis, to be roughly agnostic.
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Operator [19]
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Brian Nowak with Nomura.
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Brian Nowak, Nomura Securities Intl - Analyst [20]
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On the device strategy, with Kindles and Kindle HDs, can you help us at all with what you're seeing with attach rate trends on digital goods, after people buy the Kindles? Then generally, do you see a higher overall GMV per customer on Kindle devices than users on Amazon apps through other devices?
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Tom Szkutak, Amazon.Com Inc - CFO [21]
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In terms of attach rates, it's not -- we haven't given a lot of detail. But I think one thing certainly to look at, it doesn't give an attach rate, but it gives you at least a sense of the health of the business, is the number that was in the release today. We surely have a multi-billion dollar eBook business, growing approximately 70% year-over-year. That's total year, last year. That's growing at that rate after a -- really just launching the business approximately five years ago. So it's a pretty good, healthy growth rate, five years in.
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We're seeing good -- I can't give you specific numbers, but we're seeing very good progress on a number of our other digital media categories. Video, I talked about a little bit earlier. We're seeing Prime customers, certainly the percentage of Prime customers who were watching free content through Prime Instant Video has gone up dramatically year-over-year. We've also increased Prime membership dramatically year-over-year. They are also purchasing paid content.
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Those customers that are using the service, they watch free, but they are also paying for new content, which is great. We've launched a number of new services on the music side, most recently, certainly, our CD with free MP3, which we have on many titles. It's still very early, but we certainly like that service and pleased to offer it to customers. So I can't give you specific for attach rates, but the business is making good progress on the video content side and again, it's still very early.
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Operator [22]
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Ross Sandler with Deutsche Bank.
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Ross Sandler, Deutsche Bank - Analyst [23]
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As you guys build out the Prime membership and the SKUs available through FBA, you run into this challenge of increasing your unit volume of tail items. At the same time, you need to get products to customers in much shorter shipping cycles. So can you talk about how the new fulfillment footprint helps on that front -- is your reliance on air going down as a percent of total items shipped?
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Then if I remember correctly, you guys reclassified some FBA revenue early in 2012. Can you just remind us how that flows through the shipping revenue line and what would happen as you comp that in the beginning of '13? Thanks.
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Tom Szkutak, Amazon.Com Inc - CFO [24]
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Sure. Just in terms of overall selection, as we added to Prime, what I was talking about earlier in terms of having a -- just a more expanded footprint is, there's no question that's helping us add additional selection more economically to Prime. So that's both in terms of third-party selection as well as our retail selection. So that's something that we continue to have the benefit of as we get more and more members of Prime and have a bigger and bigger concentration of two-day shipping in the US for that.
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So we did add the shipping portion of the FBA fees in Q1 of 2012 and we see some benefit year-over-year. But we're still seeing leverage in terms of our, ex the FBA fees, quite a bit of leverage there. So we don't have the specific number for you there, but we're still seeing quite a bit of leverage there, ex that reclass that you're referring to.
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Operator [25]
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Justin Post with Merrill Lynch.
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Justin Post, BofA Merrill Lynch - Analyst [26]
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Last year, you reported 4Q in the lower half of revenue range and you were able to call out Taiwan and video games category. Any reasons why revenues were in the lower half this quarter and then if you look at gross profit growth, it clearly has accelerated to 40% growth, but unit growth decelerated to 32%. Can you describe what's driving that accelerating gross profit in the face of lower unit growth? Is it possible maybe you're letting the third-parties handle some of the maybe less profitable categories for Amazon? Could you talk about that at all? Thank you.
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Tom Szkutak, Amazon.Com Inc - CFO [27]
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If you take a look at our growth rate, we're -- we think the growth rate for Q4 was solid. It was up 23% on a revenue basis, quite a bit higher than that on a unit growth basis, up 32% year-over-year. In terms of some of the things that we saw, we, again, there's -- we saw solid growth across many different categories and geographies year-over-year.
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Certainly, some things to call out in terms of things that may have been a little bit softer. A few examples would be we did see some of the higher average selling price items, particularly the items that are greater than $1,000, a little bit softer. A few of the consumer electronics sub-categories like TVs, MP3 players, digital cameras, to some extent, were softer. But, again, with the base that we have in Q4, still very solid growth.
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Another one, we certainly were thrilled to have Paperwhite in our lineup. It's certainly the best eReader that's out there and we're very pleased with it. But we couldn't keep up with demand. We would have had more sales in Q4 if we were able to keep up with the demand. So the team is working very hard to make sure we have good in-stock going forward on that product. But we certainly could have sold more in Q4.
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Operator [28]
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Tom Forte with Telsey Advisory Group.
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Tom Forte, Telsey Advisory Group - Analyst [29]
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I wanted to ask you on Amazon Instant Video, how you felt about your current offering and your ability to add exclusive content in a cost-effective manner through Amazon Studios? And what the relationship is between adding more titles and uses on your hardware such as your Amazon Kindle devices? Thanks.
|
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Tom Szkutak, Amazon.Com Inc - CFO [30]
|
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We'll continue to look at -- continue to expand our selection, both in terms of Amazon Instant Video as well as Prime Instant Video. We'll do that in a number of different ways. We think we have a very interesting selection right now. You should expect that we'll be spending more on content as it relates to Prime over time and we'll continue to add selection on Amazon Instant Video. Beyond that, you'll have to stay tuned.
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Operator [31]
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--------------------------------------------------------------------------------
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Ken Sena with Evercore Partners.
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Ken Sena, Evercore Partners - Analyst [32]
|
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|
Can you talk a little bit about the non-AWS drivers within that line, such as advertising? As you look out, are there advantages to you in terms of having AWS, as far as offering things like buying, serving analytics through the AWS platform to advertisers? Where are you in that roll-out phase now? Thank you.
|
||
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Tom Szkutak, Amazon.Com Inc - CFO [33]
|
||
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|
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|
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|
|
In terms of the AWS business, we've -- the business is growing very fast. We've increased a number of services pretty dramatically over the past several years. The team's doing a fantastic job there and we'll continue to innovate on behalf of customers in that space. There's a number of other things that go into that line item, other. Some of the credit card, as well as other marketing revenue goes in there, so -- but again, AWS is in that line item.
|
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Operator [34]
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--------------------------------------------------------------------------------
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Anthony DiClemente with Barclays.
|
||
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Anthony DiClemente, Barclays Capital - Analyst [35]
|
||
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||
|
|
I wondered if you could comment on the pace of business throughout the fourth quarter. Did you see a particular deceleration in the month of December? Second question, on international, I'm wondering are there any callouts in terms of specific countries that may have been weighing on profitability, countries where there's outsized dollars of investment going on, or accelerated investment at the current time? Thanks.
|
||
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Tom Forte, Telsey Advisory Group - Analyst [36]
|
||
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|
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||
|
|
In terms of -- there's not a lot of specifics. We have a long-standing practice of not talking about trends within the quarter, and -- but in terms of year-over-year growth or anything like that. Obviously, the Q4 is very seasonal. December is, by far, the largest month followed by November, but in terms of individual growth rates, don't have a lot of comments there.
|
||
|
|
In terms of international, yes, there certainly are geographies that we're investing in heavily. Certainly China would be one. Some of the newer -- some of the European countries, including some of the newer launches we're investing in. So those are certainly -- you're seeing those represented in those segment results.
|
||
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--------------------------------------------------------------------------------
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Operator [37]
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||
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--------------------------------------------------------------------------------
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|
|
Rohit Kulkarni with Citi.
|
||
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|
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Rohit Kulkarni, Citi - Analyst [38]
|
||
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|
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|
||
|
|
In terms of your recent margin profile, that's truly comparing US and International, over the past four quarters, the vast majority improvement of other have been less worse margin continuing of -- seeing have been due to US margins improving, whether International was, planning in the range of 300, 350 basis points.
|
||
|
|
In Q4, international declined just 160 basis points, so my question is, should we read this as a big enough of a trend that we saw, how international -- how domestic margins increased over the last four quarters, whether international should follow the same route over the next foreseeable future?
|
||
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|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
Tom Szkutak, Amazon.Com Inc - CFO [39]
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
|
||
|
|
Yes, there's not a particular callout that I can make on that. The only thing that I would, in terms of the change I'm referring to, but in terms of the difference between the two, keep in mind that a couple factors, one, mix of business is a little bit different. Our AWS business is in the North America segment.
|
||
|
|
You also have some newer geographies. Our geographies -- I shouldn't say that are necessarily newer, but geographies that we're investing in heavily that have a longer-term horizon for returns, some of the ones I mentioned earlier. So those are factors as you look at the two different segments.
|
||
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--------------------------------------------------------------------------------
|
||
|
|
Operator [40]
|
||
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--------------------------------------------------------------------------------
|
||
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|
||
|
|
Ben Schachter with Macquarie.
|
||
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|
||
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|
--------------------------------------------------------------------------------
|
||
|
|
Ben Schachter, Macquarie Research - Analyst [41]
|
||
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|
--------------------------------------------------------------------------------
|
||
|
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|
||
|
|
It looks like the first-party gross margin is actually up fairly meaningfully year-over-year. I wonder if you can talk about that within the context of how Amazon Kindle hardware is impacting the gross margin. Then separately, just any view on how video game sales impacted the year-over-year growth rates for the quarter? Thanks.
|
||
|
|
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
Tom Szkutak, Amazon.Com Inc - CFO [42]
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
|
||
|
|
Yes, I apologize. We're not -- we haven't broken out the first-party versus third-party. It's not something we've done for -- not something I'm doing today or we've done in previous calls, so there's not a lot I can help you with there.
|
||
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|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
Operator [43]
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
|
||
|
|
Jordan Rohan with Stifel Nicolaus.
|
||
|
|
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
Jordan Rohan, Stifel Nicolaus - Analyst [44]
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
|
||
|
|
The content cost for Prime Instant Video flow into the cost of goods line, even though there's no direct revenue associated with it, not into the tech and content line, right? Is that right?
|
||
|
|
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
Tom Szkutak, Amazon.Com Inc - CFO [45]
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
|
||
|
|
That's correct.
|
||
|
|
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
Jordan Rohan, Stifel Nicolaus - Analyst [46]
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
|
||
|
|
Okay. So gross margins would have been even higher if those costs were included elsewhere or broken out separately. Do you have any common or -- to reduce the carrying value in your investment in LivingSocial, do you have a feel on a broad strategic level as to whether the local deals business through Amazon Local or through LivingSocial is something that you care to keep investing in? Thanks.
|
||
|
|
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
Tom Szkutak, Amazon.Com Inc - CFO [47]
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
|
||
|
|
There's not a lot I can specifically talk about as it relates to LivingSocial beyond what's in our results today and what we'll have in our 10-K, which will be filed soon. So I would encourage you to take a look at our full disclosures related to that. But in terms of Local, there certainly is still a very interesting opportunity there. We do have a couple -- we have an investment in LivingSocial.
|
||
|
|
We also have a local business ourselves. So those are -- it's an interesting opportunity. It's a long-term opportunity and we'll continue to work on that -- for customers to make that experience even better. You should think about it not unlike a lot of the other businesses that we invest in, with it [budding] over long-term horizon and it's very early there.
|
||
|
|
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
Sean Boyle, Amazon.com, Inc. - VP of IR [48]
|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
|
||
|
|
Okay. Thank you for joining us on the call today and for your questions. A replay will be available on our Investor Relations website at least through the end of the quarter. We appreciate your interest in Amazon.com and look forward to talking with you again next quarter.
|
||
|
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|
||
|
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|
||
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|
||
|
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|
||
|
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|
||
|
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|
||
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|
||
|
|
--------------------------------------------------------------------------------
|
||
|
|
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|
||
|
|
--------------------------------------------------------------------------------
|
||
|
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|
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|
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||
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|
||
|
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|
||
|
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|
||
|
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