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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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Q3 2013 Amazon.com Inc Earnings Conference Call
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10/24/2013 02:00 PM GMT
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Corporate Participants
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* Tom Szkutak
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Amazon.com, Inc. - CFO
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* Sean Boyle
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Amazon.com, Inc. - VP of IR
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Conference Call Participiants
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* Scott Tilghman
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B. Riley Caris - Analyst
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* Jordan Rohan
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Stifel Nicolaus - Analyst
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* Tom Forte
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Telsey Advisory Group - Analyst
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* Scott Devitt
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Morgan Stanley - Analyst
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* Kerry Rice
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Needham & Company - Analyst
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* Greg Melich
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ISI Group - Analyst
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* Benjamin Schachter
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Macquarie Research - Analyst
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* Ron Josey
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JMP Securities - Analyst
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* Brian Pitz
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Jefferies & Company - Analyst
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* Victor Anthony
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Topeka Capital Markets - Analyst
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* Douglas Anmuth
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JPMorgan - Analyst
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* John Blackledge
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JPMorgan - Analyst
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* Heath Terry
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Goldman Sachs - Analyst
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* Mark Mahaney
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RBC Capital Markets - Analyst
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* Mark Miller
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William Blair & Company - Analyst
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* Mark May
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Citi - Analyst
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* Carlos Kirjner
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Sanford C. Bernstein & Company, Inc. - 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 third-quarter 2013 financial results teleconference.
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(Operator Instructions)
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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, sir.
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Sean Boyle, Amazon.com, Inc. - VP of IR [2]
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Hello and welcome to our Q3 2013 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, October 24, 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. 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 our metrics and commentary on the quarter.
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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. You'll find additional disclosures regarding these non-GAAP measures, including reconciliations of 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 2012. Now I will turn the call over to Tom.
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Tom Szkutak, Amazon.com, Inc. - CFO [3]
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Thanks, Sean. I will begin with comments on our third-quarter financial results. Trailing 12 month operating cash flow increased 48% to $4.98 billion. Trailing 12 month free cash flow decreased 63% to $388 million. Trailing 12 month capital expenditures were $4.59 billion. This amount includes $1.4 billion in purchases of our previously leased corporate office space as well as property for our development of additional corporate office space located in Seattle, Washington, which we purchased in the fourth quarter of 2012. The increase in capital expenditures reflects additional investments as part of our continued business growth, consisting of investments in technology infrastructure, including Amazon web services, and additional capacity to support our fulfillment operations.
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Return on invested capital was 3% down from 10%. ROIC is TTM pre-cash flow divided by average 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 475 million shares compared with 469 million shares. Worldwide revenue grew 24% to $17.09 billion or 26% excluding the $332 million unfavorable impact from year-over-year changes in foreign exchange rates. We are grateful to our customers who continue to take it advantage of our low prices, vast selection, and shipping offers. Media revenue increased to $5.03 billion, up 9% or 13% excluding foreign exchange.
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EGM revenue increased to $11.05 billion, up 29% or 31% excluding foreign exchange. Worldwide EGM increased to 65% of worldwide sales, up from 62%. Worldwide paid unit growth was 29%. Active customer accounts exceeded $224 million, worldwide active seller accounts more than $2 million. Seller units represented 40% of paid units. Now I will discuss operating expenses excluding stock-based compensation. Cost of sales was $12.37 billion or 72.3% of revenue compared with 74.7%. Fulfillment, marketing, technology, and content, and G&A combined was $4.46 billion or 26.1% of sales, up approximately 250 basis points year over year. Fulfillment was $1.96 billion or 11.5% of revenue compared with 10.5%. Technical content was $1.58 billion or 9.2% of revenue compared with 7.8%. Marketing was $671 million or 3.9% of revenue compared with 3.8%.
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Now we will talk about our segment results and consistent with prior periods, we do not allocate to segments our stock-based compensation or other operating expense line item. In the North America segment, revenue grew 31% to $10.3 billion. Media revenue grew 18% to $2.61 billion. EGM revenue grew 33% to $6.73 billion representing 65% of North America, revenues up from 64%. North America segment operating income increased 1% to $295 million, a 2.9% operating margin. In the international segment, revenue grew 15% to $6.79 billion. Adjusting for the $327 million year-over-year unfavorable foreign exchange impact, revenue growth was 20%. Media revenue increased 2% to $2.42 billion or 9% excluding foreign exchange. EGM revenue grew 23% to $4.32 billion or 28% excluding foreign exchange. EGM now represents 64% of international revenues, up from 59%.
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International segment operating loss was $28 million, compared to a $59 million loss in the prior period. Consolidated segment operating income increased 15% to $267 million or 1.6% of revenue, down approximately 10 basis points year over year. Excluding the unfavorable impact from foreign exchange, CSOI increased 18%. Unlike CSOI, our GAAP operating income or loss includes stock based compensation expense and other operating expense. GAAP operating loss was $25 million compared to a $28 million loss in the prior year period. Our income tax benefit was $12 million. GAAP net loss was $41 million or $0.09 per diluted share compared with net loss of $274 million or $0.60 per diluted share. The third quarter 2012 included a loss of $169 million or $0.37 per diluted share related to our equity method share of losses reported by LivingSocial primarily attributable to its impairment charge of certain assets including goodwill. Turning to the balance sheet, cash and marketable securities increased $2.44 billion year over year to $7.69 billion. Inventory increased 20% to $607 billion and inventory turns were 9.2, down from 9.7 turns a year ago, as we expanded selection, improved in stock globals, and introduced new product categories. Accounts payable increased 20% to $10.04 billion and accounts payable days was 75, consistent with the prior year.
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I will conclude my portion of today's call with guidance. Incorporated into our guidance are the order trends that we have seen to date and what we believe today 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 is not possible to accurately predict demand and therefore our actual results could differ materially from our guidance. As we describe in more detail in our public filings, issues such as settling intercompany balances from foreign currencies amongst our subsidiaries, unfavorable resolution of legal matters, and changes to our effective tax rates can all have a material effect on guidance.
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Our guidance further assumes that we don't conclude any additional business acquisitions, investments, restructurings, or legal settlements, report any further revisions to stock based compensation estimates, and net foreign exchange rates remain approximately where they have been recently. For Q4 2013, we expect net sales of between $23.5 billion and $26.5 billion or growth between 10% and 25%. This guidance anticipates approximately 125 basis points of unfavorable impact from foreign exchange rates. GAAP operating income or loss could be between a $500 million loss and $500 million in income compared to $405 million income in the fourth quarter 2012. This includes approximately $350 million for stock-based compensation and amortization of intangible assets.
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We anticipate consolidated segment operating income or loss which excludes stock-based composition and other expense to be between a $150 million loss and $850 million income compared to $678 million income in fourth quarter 2012. We remain headstrong 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. And 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 would you please remind our listeners how to initiate a question?
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Questions and Answers
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Operator [1]
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(Operator Instructions)
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Ben Schachter, Macquarie.
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Benjamin Schachter, Macquarie Research - Analyst [2]
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On the press release it says that you signed up millions of new Prime members. I believe if you read it, it says that it happened in the last 90 days. I wonder if you ever commented on a time period like that before. Is that a normal run rate to add millions of Prime users in 90 days or is it something special in this quarter that drove Prime? Thanks.
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Tom Szkutak, Amazon.com, Inc. - CFO [3]
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I do not recall if we've actually given a 90 period before. I do not believe that we have. In terms of beyond that, there's not a -- that I can add to that. We are very excited. Prime is growing very fast. I am very excited for the service that we offer customers both in terms of physical and digital goods. So it is exciting and that is why we put it in there today in the release.
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Operator [4]
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Scott Devitt, Morgan Stanley.
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Scott Devitt, Morgan Stanley - Analyst [5]
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Two if I could. First on the Kindle family. It seems like the timing of device launches, on the eBook library size, and local language content could be drivers of different levels of penetration in digital media in the US relative to what you've been able to obtain outside the US to date. I was wondering if there was anything else notable that you would highlight that helps explain the different dynamic that seems to be playing out within the media revenue line, domestically versus international. And whether you think any of those issues are structural or they just work themselves out with the benefit of time and your execution. And then secondly, if you could talk a bit about how you think about the lifetime value of a non-Prime customer versus a Prime customer and what the intended outcome may be as it relates to the increase in super saver pricing in the US market. Thanks.
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Tom Szkutak, Amazon.com, Inc. - CFO [6]
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In terms of the first question, certainly we have been launched devices in the US earlier in terms of content, both, you are really referring to mostly eBook content. And both are growing very fast. The base is different, as you mentioned. We have a higher base in the US just based on when we launched. So you're absolutely right. You do see that difference in the media line between North America and international. And so it is just again, both are growing very nicely right now in terms of digital Kindle books. In this case as you referenced, but it is just a different base. And so we're excited about the opportunity that we have in both segments there. But we are further ahead right now in North America. And then, I am sorry, can you repeat the second part of your question again?
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Scott Devitt, Morgan Stanley - Analyst [7]
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How do you think about lifetime value of those that are not Prime subs versus Prime subs given the increase you recently did with super saver shipping in the US from $25 to $35 threshold?
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Tom Szkutak, Amazon.com, Inc. - CFO [8]
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In terms of Prime customers, we have seen not only a very strong increase in Prime membership but we have seen a very good retention of Prime members. And so certainly, when you look at that, in terms of lifetime value, we have a customer base that is certainly staying with us longer. They are doing more cross shopping and they are getting the benefits of Prime that we are offering that we continue to add to. And then we still have a very good customer base that is non-Prime. You mentioned that the threshold changed. We did change. We have different thresholds in various geographies around the world for super saver, shipped with our super saver delivery in those geographies.
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And in the case of the US, we have had the $25 threshold for over 10 years and we changed it to $35. And during this time frame, we have certainly increased our selection that is eligible for that by millions of items. And certainly as you would know, during this rather lengthy time frame, transportation costs and fuel prices have changed significantly over that time period. So we had to change it. So we just thought that was the right thing to do.
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Operator [9]
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Mark Mahaney, RBC Capital Markets.
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Mark Mahaney, RBC Capital Markets - Analyst [10]
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I want to ask about the North American EGM line. I guess it is the second quarter in a row you have had acceleration. When I asked about you about it last quarter, I think you singled out fashion apparel and consumer staples. But the acceleration really seems to be in line with using comps. Is there something in there that to you indicates that you are getting real critical mass with your customers in those two particular categories? And then just real quickly on the Kiva robots, is there a reason you would call that out? Should that have some sort of material impact over time on leverage in the fulfillment cost line? Thank you.
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Tom Szkutak, Amazon.com, Inc. - CFO [11]
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Sure. In terms of our growth in EGM, you highlighted a couple of categories that are growing very nicely that we mentioned last quarter as well. What you are seeing there, and actually the growth is very broad. We have added a lot of unique selections in both our hard lines and soft lines, categories including consumables and apparel, as you mentioned. The experience has gotten better on the site. Unique selection has increased dramatically over the past few years. So just a number of things are coming together in those categories so when I look at it, it just seems very broad, which we like. And there is just a lot of new selection with great category expansion too over the last several years. That is really what you are seeing there.
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In terms of Kiva, we have launched in a few FCs. We think it is an interesting opportunity. I think as I mentioned, last quarter at this time we're ahead of the schedule that we had set forth at the time, that we joined with Kiva and we are excited what we see. Certainly, we will still be adding associates. Certainly over time in those FCs but this certainly will be productivity with Kiva. And we will have to stay tuned to see what that looks like but we are certainly excited about that opportunity and the roll out.
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Operator [12]
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Victor Anthony, Topeka Capital Markets.
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Victor Anthony, Topeka Capital Markets - Analyst [13]
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ROIC is the metric you highlighted each quarter. It has hovered around 20%, 30%, 40% range throughout the quarters of 2010, 2011. It is obviously been depressed over the past several year and a half due to investments. Maybe you can help us with the timing of when you expect ROIC to return to levels we saw in 2011. And second, you are investing a lot in video content for Prime Instant Video. Are there any hard numbers you can share in terms of conversions from the Kindle devices? And there -- in the past there has been talk about converting Prime Instant Video into standalone product. Maybe you can share your thoughts there. Thanks.
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Tom Szkutak, Amazon.com, Inc. - CFO [14]
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Sure. Keep in mind, when the -- as you mentioned, we are investing very heavily in the business. We think that is the right thing to do. We have a lot of good long-term opportunities which is why we are doing it. It is depressing ROIC. Just keep in mind from a pure metric standpoint, just as a reminder, the way we measure ROIC is free cash flow divided by average investor capital so total assets minus current liabilities. That is over a five point average and so when you do that first in the numerator, we do have, keep in mind, it's about $1.4 billion in our free cash flow number that relates to the purchase. It goes back to Q4 last year but it's in our TTM free cash flow that relates to the purchase of our campus here in Seattle and some nearby land, so it's $4.4 billion of that. So that is bringing the free cash flow down.
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Also keep in mind in the invested capital, we do include cash and marketable securities which is certainly the largest piece of our invested capital. We think that is the right thing to do until we either deploy that capital or return it in some way. Just keep in mind that is included in the metric. In terms of Prime Instant Video, we are getting great usage from a broad set of customers on Kindle as well as other devices, and the adoption is going very well. I apologize. I can't share any specific metrics today but we like what we see. It certainly -- we think it is certainly helping the Prime numbers, you know, the Prime membership increases that you're seeing. It is -- we think it is interesting and we are investing there. We included in both our Q3 results as well as the Q4 guidance, our assumptions around additional content that we'll be acquiring including original content. So I am very excited about that opportunity.
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Operator [15]
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Mark May, Citi.
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Mark May, Citi - Analyst [16]
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The seasonal hiring is -- I think last year it grew about in line with growth rate in US revenue growth. But this year it looks like it's -- you are growing it about 10 percentage points above the midpoint of your range. Is there anything that is different this year that is driving that? And then second question on pricing. There have been numerous reports recently, and I think for a while now, that the multi-channel competitors are competing more fiercely with Amazon in terms of price parity, et cetera. What impact are you seeing or do you think you could see from that and how you are addressing it? Thanks.
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Tom Szkutak, Amazon.com, Inc. - CFO [17]
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In terms of the seasonal employees, unfortunately there is not a lot I can add to that. We are getting ready for an exciting holiday season. And that includes making sure that we have the right amount of employees as well as seasonal help during that period. It also includes making sure that we have the right capacity in place, making sure we have -- we have added a lot of selection over the past couple of years and particularly over the last 12 months in making sure that we have good in-stock levels related to that selection. We are making sure that we have people to help us with not only serving customers with our retail inventory but also Fulfilled by Amazon has grown, certainly very strongly over the past year. And that impacts the capacity and the number of employees that you see there.
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So that is really what you are seeing in that number. In terms of pricing, we operate in a very competitive arena. That is not something that is new. That is something that we have been doing since our inception. We have many, many different competitors. You will pass those competitors on your way to work and on your way home. They are offline, they are offline. It's a very competitive marketplace. It is something -- pricing is something that we worked very hard at over the years. We want to make sure that we have great values for our customers. And it is something that we spent a lot of time on and worked very hard to make sure that we can offer that to customers. So I would not say that it is anything new. It is something that we have been dealing with since our inception. But it is a very competitive environment.
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Operator [18]
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Carlos Kirjner, Sanford Bernstein.
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Carlos Kirjner, Sanford C. Bernstein & Company, Inc. - Analyst [19]
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Two quick questions. First, how do you see your competitive position versus Alibaba in China and what gives you confidence that you have a chance of being a relevant player there, even in the long term? And secondly, in the US you have a service similar to subscription video-on-demand that is a feature of Prime which is Amazon Prime video, while in Europe you have a full-blown standalone service you offer them. Why is your strategy in Europe so different from your strategy in the US when it comes to video-on-demand? Thank you.
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Tom Szkutak, Amazon.com, Inc. - CFO [20]
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In terms of China, it is very early there. There is certainly room for many winners. It's a very large segment. We have seen -- we have a good business there in terms of top line that is growing, and we continue to look for ways to make sure that we satisfy customer demand. We work on a lot of the same inputs that we work on in our other geographies to make sure that we have great prices, good selection, speed of delivery. We've worked very hard in terms of putting in a lot of capacity close to customers. So those are the things that we're working on to try to ensure our success there.
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In terms of the visual competitors, we have a long-standing practice of not talking about other companies, but again, there is room for a lot of winners. In terms of video content, there's not a lot that I can add to that question. I apologize. But certainly we have been ramping up our content in the US on Amazon.com as part of Amazon Prime. It is something that we have been looking at very carefully. We like what we see so far. We think it is interesting but beyond that, I can't speculate what we might do or might not do in another location.
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Operator [21]
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Mark Miller, William Blair.
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Mark Miller, William Blair & Company - Analyst [22]
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On AmazonFresh, can you comment on what you are seeing in LA versus the Seattle test? How important is the attachment rate with general merchandise? And then as you are making more frequent deliveries, are you finding that it is driving higher sales of general merchandise?
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Tom Szkutak, Amazon.com, Inc. - CFO [23]
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It is very, very early in LA, but we see so far we like. We are adding a lot of selection there on behalf of customers. It is a great opportunity for customers to get both a number of different items through AmazonFresh. So we are excited. We like the trials that we have done have been very good. The conversion has been good. We look forward to even improving the experience even more over time for customers but it is very early. We like what we see but you will have to stay tuned on that one.
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Mark Miller, William Blair & Company - Analyst [24]
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And with general merchandise?
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Tom Szkutak, Amazon.com, Inc. - CFO [25]
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Sorry?
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Mark Miller, William Blair & Company - Analyst [26]
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Are you selling more general merchandise as a result of more frequent deliveries in that market?
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Tom Szkutak, Amazon.com, Inc. - CFO [27]
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Yes.
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Operator [28]
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Kerry Rice, Needham & Company.
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Kerry Rice, Needham & Company - Analyst [29]
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I just wanted to ask a question on your acquisition of TenMarks which is really diving a little bit deeper into the Ed Tech market. I know you sell and rent the textbooks. Can you talk a little bit maybe what your strategy is there?
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Tom Szkutak, Amazon.com, Inc. - CFO [30]
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We though it was a company that is doing some interesting things about helping students and children learn math. We thought it was an interesting fit for us, and we look forward to exploring what opportunities we can do together there. And you'll have to stay tuned on that one but we think it is -- it's doing a very nice job and we are very excited to have them as part of the Amazon business.
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Operator [31]
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Scott Tilghman, B. Riley.
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Scott Tilghman, B. Riley Caris - Analyst [32]
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I just wanted to touch on the North American segment margins for a little bit. We have seen some pretty good progress there in terms of year-over-year improvement, a little bit of a back step last quarter but not too much. The category fell back this quarter. I am wondering if there is anything unusual there in terms of timing or investments that may be more called out and how we should think about it over the next few quarters.
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Tom Szkutak, Amazon.com, Inc. - CFO [33]
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Sure. In terms of Q3 specifically, Q3 just because of the, as I would call it the Q4 readiness, the seasonal readiness, you see this often in Q3 where both our total and our segment operating profit is lower than other quarters. That certainly is what you are seeing in Q3 in North America, so that is in terms of the investments we are making to get ready for the season. We talked about, you heard in Jeff's quote, the capacity that we are adding and certainly in multiple geographies but certainly in the North America is impacting that as well. You can see it in our fulfillment line item as a percentage of revenue being up. You can see it in our technical content. We are certainly investing. The other part too that I mentioned earlier is we are investing in video content for Prime in the US, and you see that certainly in this result as well.
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Operator [34]
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Tom Forte, Telsey.
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Tom Forte, Telsey Advisory Group - Analyst [35]
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I wanted to know where you stand. Last year, I think you added 20 fulfillment centers on a full-year basis. And the last time you gave us an update, I think this year it was five US and a handful of international. I wanted to know where you stood on that and why the change versus last year. And then also very quickly I wanted to see where you stood or how you felt about your Amazon locker initiative. Thank you.
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Tom Szkutak, Amazon.com, Inc. - CFO [36]
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Sure. In terms of fulfillment centers, the number is seven but it is a net number. And so included in that are several consolidations. We are building generally larger FCs and we are consolidating some of those. So that is a net seven. And so what that means is if you were to take that as a percentage of our total fulfillment centers, you would certainly get a number that is less than the square footage that we are actually adding. We are adding square footage that would be significantly higher than that. In terms of lockers, it is early. It is another way to get closer to customers to make it convenient for customers, and it is interesting. We have it in a few different geographies right now. It is limited. We do not have it probably across our full network. So that is something we are learning. It is an interesting experience. It is certainly something that over time we will continue to take a closer look at and certainly expand if it makes sense to do so on behalf of customers.
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Operator [37]
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Douglas Anmuth, JPMorgan.
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Douglas Anmuth, JPMorgan - Analyst [38]
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I just want to ask two things. First, Tom, can you give us some color on where you are in the shift from third party to first party eBooks and how much of a factor that has been in re-accelerating media revenue? We have seen re-acceleration in media the last three quarters I think in North America. And then secondly, it looks like there are six fewer shopping days this holiday season between Black Friday and Christmas. I am just curious what you do if anything differently to prepare for that and do you think that could actually drive more holiday shopping online. Thanks.
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Tom Szkutak, Amazon.com, Inc. - CFO [39]
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In terms of your second one, second question, there are fewer days. There is not a lot that we do different. We certainly see when that happens, there is some behavioral differences on behalf of customers just because of the shorter time period. We have certainly some more sizable days during that period. But there is not a lot to add to that. In terms of the transition for eBooks, in terms of our total growth across Amazon on both North America total or global total, it is not a significant or meaningful impact to the overall growth rate. And certainly this transition has been going on for some number of quarters now so there is not a lot I can help you with there.
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Operator [40]
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Greg Melich, ISI Group.
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Greg Melich, ISI Group - Analyst [41]
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I wanted to dig into the inventory a little bit. It looks like the growth slowed to 20% if the sale is accelerated. Tom, could you give us an insight as to why that is and maybe which categories out- performed in the quarter?
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Tom Szkutak, Amazon.com, Inc. - CFO [42]
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Sure, I would look at it more from a turns perspective. And if you look at it more over an average turns basis, it has gone down and the reason is unique selection. We keep adding a growth and unique selection so it certainly has increased over the past year, in stock levels have gotten better. And so those are the things that are really driving it. In terms of endpoints for any particular quarter, they can be a little bit lumpy, but I would look to the turns.
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Operator [43]
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John Blackledge, Cowan and Company.
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John Blackledge, JPMorgan - Analyst [44]
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Two questions. First, is it a priority to offer one day or same day delivery at some point as some competitors are offering same-day delivery in large markets for certain brick and mortar retailers? And then secondly, can you talk about the prospects for the log in and pay program? How many online merchants are signed up for it and what is Amazon getting out of it either economically and/or from getting data out of the purchases? Thank you.
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Tom Szkutak, Amazon.com, Inc. - CFO [45]
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In terms of speed of delivery, whether it be one day or same day, what has happened certainly over the past 10 plus years is we have added a lot of selection, we have added a lot of fulfillment centers. As a result of that, we have selection that is by default, increased in our selection that's closer and closer to customers. As a result of that, our speed of delivery has improved. And certainly for Prime customers, depending upon the geography in the case of the US, we have expressed two day shipping for free and then first of all fees so they get it faster than that. That is something that you have seen that improvement gradually over the past 10 plus years. You have seen it certainly getting even better the last few years as we have rapidly increased the number of fulfillment centers.
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That is something that we think is important and we will continue to work on behalf of customers to give them those options and to make sure they get product when they want it. In terms of log in and pay, it is something that we think is interesting. Because of our large customer base and the credentials that we have and the secure payments that we have, we think it is an interesting opportunity. We think that there is -- it is certainly interesting ways to monetize that over time. But again, we think it is an interesting opportunity.
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Operator [46]
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Ron Josey, JMP Securities.
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Ron Josey, JMP Securities - Analyst [47]
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I want to talk about newer international markets. Specifically, I think Amazon India was called out given 10 new category launches in the past 120 days or so. My question is related to infrastructure in India and how good is it so that Amazon can continue to grow there. Specifically if other countries can follow a model like this, Brazil comes to mind. Thank you.
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Tom Szkutak, Amazon.com, Inc. - CFO [48]
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Sure. We have a few different models in India. And we -- from a -- we have a marketplace model which we offer Fulfilled by Amazon, which as you mentioned, certainly would be infrastructure is not as advanced as some geographies but we also we also view that as an opportunity. And we're happy to help sellers, we'll fulfill by Amazon. It is an interesting opportunity. It is very, very early. We are in investment mode there. It's a long-term opportunity but it is a very exciting opportunity. We are a very strong team that is working on that opportunity. So we're excited about it.
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Operator [49]
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Brian Pitz, Jefferies.
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Brian Pitz, Jefferies & Company - Analyst [50]
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Maybe you could comment on what you are seeing domestically and internationally in terms of eCommerce trends in the current quarter. Anything specific stand out, especially in North America, given some of the mixed commentary we have heard from some of your competitors? And then just some additional comments if you could on growth in the other revenue category, specifically on AWS and/or on your advertising business. Thanks.
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Tom Szkutak, Amazon.com, Inc. - CFO [51]
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Sure. I will take the second one first. In terms of AWS, it is growing very, very strong. It is an area that is very early for us. It is growing very, very strong. We have a great team that is working on it, servicing customers, and we are very excited about the long-term opportunity. In terms of you mentioned the trends in North America, what you have see is there are really a nice steady acceleration of growth since Q4 last year. If you look back to Q4 last year, for North America specifically, and you just trace that back over the past four quarters, you see a really nice sequential increase from quarter to quarter. Again, that gets back to it went from 23% in Q4 last year to 26% to 30% and 31%. Those are the year-over-year increases in by quarter for North America revenue And so a lot of it is what we talked about earlier. It is focused on a lot of the retail basics as well as also improving seller performance as well. Those are things that are driving it.
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Operator [52]
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Jordan Rohan, Stifel Nicolaus.
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Jordan Rohan, Stifel Nicolaus - Analyst [53]
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A follow-up to the last question on US in particular. Did you see any weakness or any discernible trends around the government shutdown and all of the politics going on in Washington in September and early October? And separately, can you talk about what you are learning from being an investor in LivingSocial? The accounting charges aside, can you talk about your own local business, how that may compete with other players in the space and all of the various initiatives you have with? What can be learned from what you know at this point? You are no longer a new investor in that company. Thank you.
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Tom Szkutak, Amazon.com, Inc. - CFO [54]
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In terms of North America growth, other than what I mentioned on the quarterly growth, Q3 was strong, 31% growth. Again, we see a nice steady increase over the past four quarters. That is overlapping a quarter from Q3 of last year that was 33%. So again, we like what we see from a growth perspective in Q3 for North America. In terms of total growth, giving a wide range for Q4 and that reflects our view for Q4 but we are excited about the quarter and about getting ready for customers during this heavy seasonal quarter. So we are excited about what we see there. In terms of LivingSocial, there is really not a lot that I can add to your question. I apologize. They are doing a good job in terms of local. We also have a local offering on Amazon. The team is very dedicated to make that work and it is an interesting area. We're learning but it is early.
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Operator [55]
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Heath Terry, Goldman Sachs.
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Heath Terry, Goldman Sachs - Analyst [56]
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When you look at the deceleration in growth in North America and other revenue and obviously it is still at a very high level. When we are thinking about the major components of that line, AWS, advertising, credit card relationship, is there anything relevant to the relative growth rates between those components that we should be thinking about?
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Tom Szkutak, Amazon.com, Inc. - CFO [57]
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I am not sure how to answer your question. The only part I would call out, you mentioned there is a number of different items that is in there. Certainly the largest and fastest growing largest area by far is AWS, and it is growing very nicely. That is certainly reflected in that line item.
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Sean Boyle, Amazon.com, Inc. - VP of IR [58]
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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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Operator [59]
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Thank you. That does conclude our conference. You may now disconnect. ( End of transcript )
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