Amazon 2011 q3 earnings

Q3 2011 Financial Results
Conference Call Slides

This presentation may contain forward-looking statements which are inherently
difficult to predict. Actual results could differ materially for a variety of reasons,
including fluctuations in foreign exchange rates, changes in global economic
conditions and consumer spending, world events, the rate of growth of the
Internet and online commerce, the amount that Amazon.com invests in new
business opportunities and the timing of those investments, the mix of products
sold to customers, the mix of net sales derived from products as compared with
services, the extent to which we owe income taxes, competition, management
of growth, potential fluctuations in operating results, international growth and
expansion, the outcomes of legal proceedings and claims, fulfillment center
optimization, risks of inventory management, seasonality, the degree to which
the Company enters into, maintains and develops commercial agreements,
acquisitions and strategic transactions, 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, payments, 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, including its
most recent Annual Report on Form 10-K and subsequent filings.

Additional information relating to certain of our financial measures contained
herein is available in the appendix to our presentation, our most recent earnings
release and at our website at www.amazon.com/ir under ‘Financial Documents’.

2

MM
Free Cash Flow -- TTM (1)

$4,000

Down 17% Y/Y

$1,829MM
$2,000
$1,525MM

$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

Long Term Goal – Optimize Free Cash Flow
(1) Free Cash Flow, a non-GAAP financial measure, is GAAP Operating Cash Flow Less Purchases of Fixed Assets. See appendix for a
reconciliation of Operating Cash Flow to Free Cash Flow.

3

Shares
MM

600

465 469

16 14

300
449 455

0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
Common Shares Outstanding Stock-Based Awards Outstanding

Efficiently Managing Dilution – Up 1% Y/Y

4

Return on Invested Capital -- TTM (1)

80%

40%
28%

17%

0%
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

Efficient Capital Structure
(1) ROIC = TTM Free Cash Flow divided by average Total Assets minus Current Liabilities, excluding current portion of our Long Term Debt,
over 5 quarter ends.

5

MM
Net Sales
$20,000

$10,876MM
$10,000
$7,560MM

$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

Up 44% Y/Y (39% F/X Adjusted)

6

MM
Net Sales -- TTM
$60,000 WW Revenue Mix
$1,398MM
Up 42% Y/Y; 3%
39% F/X Adjusted
$43,594MM
$25,191MM
58%
$30,776MM
$30,000

$17,005MM
39%

$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

58% of WW TTM Revenue from EGM, Up From 51% Y/Y

7

GAAP Operating Income
MM

$700
Down
71% Y/Y

$350
$268MM

$79MM

$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

8

GAAP Operating Income – TTM (1)

MM

$2,000
Down
24% Y/Y
$1,408MM

$1,076MM
$1,000

$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

9

Consolidated Segment Operating Income (1)

MM

$800
Down
35% Y/Y

$401MM
$400
$260MM

$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

(1) Consolidated Segment Operating Income (CSOI), a non-GAAP financial measure, excludes Stock-Based Compensation and Other Operating Income (Expense).
See appendix for a reconciliation of CSOI to GAAP Operating Income.

10

Consolidated Segment Operating Income -- TTM (1)

MM

$3,000
Down
9% Y/Y

$1,910MM
$1,734MM

$1,500

$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

(1) Consolidated Segment Operating Income (CSOI), a non-GAAP financial measure, excludes Stock-Based Compensation and Other Operating Income (Expense).
See appendix for a reconciliation of CSOI to GAAP Operating Income.

11

GAAP Net Income
MM

$600

Down
73% Y/Y

$300
$231MM

$63MM

$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

12

Segment Results – North America
MM MM

$10,000 $400
Net Sales Operating Income (1)
Up 44% Down 23%
Y/Y Y/Y
$5,932MM

$5,000 $200 $186MM
$4,126MM
$144MM

$0 $0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

TTM Net Sales Over $24.0B
(1) A majority of our costs for "Technology and Content" are incurred in the United States and most of these costs are allocated to our North
America segment.

13

Segment Results – International
MM MM

$10,000 $500
Net Sales Operating Income

Up 44%Y/Y; 33% Down 46% Y/Y;
F/X Adjusted 55% F/X Adjusted

$4,944MM
$5,000 $250 $215MM
$3,434MM

$116MM

$0
$0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

TTM Net Sales Over $19.5B

14

Supplemental Revenue Highlights – Media
MM

$4,000
$4,000
North America International
Up 27% Y/Y; 17%
Up 21% Y/Y
F/X adjusted

$2,226MM
$2,000 $1,927MM
$2,000 $1,759MM
$1,591MM

$0 $0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

Books, Music, Movies, Video Games and Consoles, Software and
Digital Downloads

15

Supplemental Revenue Highlights –
Electronics & Other General Merchandise (EGM)
MM MM

$6,000 $6,000
Up 56% Y/Y
Up 63% Y/Y; 51% F/X
$3,635MM Adjusted

$3,000 $2,681MM
$3,000
$2,326MM
$1,644MM

$0
$0 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

Computers & Office, Electronics, Home & Garden, Grocery, Health & Beauty, Toys, Kids & Baby,
Apparel, Shoes & Jewelry, Sports & Outdoors, Tools, Auto & Industrial and Digital Devices

16

Supplemental Revenue Highlights – Other
MM MM

$500 $60
Up 21% Y/Y; 13%
$370MM F/X Adjusted
Up 77% Y/Y
$37MM
$31MM
$250 $30
$209MM

$0 $0
Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11

Amazon Web Services, Marketing and Promotional Activities, Other Seller Sites, &
Co-branded Credit Cards

17

Free Cash Flow Reconciliation -- TTM

$MM Q3 ‘10 Q4 ‘10 Q1 ‘11 Q2 ‘11 Q3 ‘11

Operating Cash Flow $ 2,617 $ 3,495 $ 3,033 $ 3,205 $ 3,114

Purchases of Fixed Assets,
Including Internal-Use Software
and Website Development (788) (979) (1,138) (1,374) (1,589)

Free Cash Flow $ 1,829 $ 2,516 $ 1,895 $ 1,831 $ 1,525

19

Consolidated Segment Operating Income
Reconciliation

$MM Q3 ‘10 Q4 ‘10 Q1 ‘11 Q2 ‘11 Q3 ‘11

Consolidated Segment Operating
Income $ 401 $ 622 $ 465 $ 386 $ 260

Stock-Based Compensation (107) (119) (110) (144) (144)

Other Operating Income
(Expense), Net (26) (29) (33) (41) (37)

GAAP Operating Income $ 268 $ 474 $ 322 $ 201 $ 79

20

Consolidated Segment Operating Income
Reconciliation -- TTM

$MM Q3 ‘10 Q4 ‘10 Q1 ‘11 Q2 ‘11 Q3 ‘11

Consolidated Segment Operating
Income $ 1,910 $ 1,936 $ 1,894 $ 1,874 $ 1,734

Stock-Based Compensation (404) (424) (448) (481) (518)

Other Operating Income
(Expense), Net (98) (106) (112) (128) (140)

GAAP Operating Income $ 1,408 $ 1,406 $ 1,334 $ 1,265 $ 1,076

21

Amazon 2011 q3 earnings

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