AMZN - Earnings call transcript Q3 2017

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Operator

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Q3 2017 Financial Results Teleconference. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today's call is being recorded.

be Relations, call Dave I'll Director to remarks, Investor of Fildes. opening turning over the the For Please go ahead.

Dave Fildes

Hello, and Call. Financial Results welcome to our QX XXXX Conference

Olsavsky, today CFO. us to your is Joining answer Brian questions our

against today's conference release all Please results results note the XXXX. press of our as As you as front will in listen call, encourage this and have in our you includes which comparable stated, quarter. metrics the unless comparisons period we call you, well otherwise our to financial be for on to commentary of

in Our Actual views only results October to and comments of XXXX materially. differ response management's your questions XX, statements. may as reflect will forward-looking include today,

and factors impact filings. SEC, could potentially the about Annual is including our our information most included on that subsequent filings press and our Form XX-K recent with results Additional release Report financial in today's

the accompanying is release, During and our may our this call, we with press each certain non-GAAP In IR this website. webcast on measures. our SEC, financial of slides discuss filings posted which

additional comparable disclosures with including of measures reconciliations regarding non-GAAP these measures find measures. these GAAP will You

Our believe, what appropriate today, be we've the assumptions. trends to we date to order guidance seen incorporates and that

unpredictable in factors, factors conditions exchange inherently online various and be are with results growth the world of in of the customer by rates, cloud filings and detailed many Internet, events, commerce may Our spending, the affected including changes materially and in and services, economic foreign fluctuations our global SEC. the rate

possible predict demand remind and therefore, question. differ our restructurings, please conclude our to results a additional among our also materially goods business to Operator, assumes, don't accurately services With acquisitions, guidance we investments, the not legal It's actual Q&A. other that, or will how any our guidance. listeners and could things, initiate move we that from for settlements. Our to

Operator

open up for we the questions. time, you. At call this will Thank

your with with Justin question proceed Lynch. Our Merrill line Please question. the comes of from Post first

Justin Post

but Great. results, your see with, Whole the bit can you quick then the it line growing start us how growth I the you contributing a guess past? the that the the And give note, saw the on unearned bottom you. past. rate a in on was on integration, sheet time? balance to thoughts seem to I'll comment at revenue we obviously be Maybe Thank AWS just strong be Foods on why might sheet, the doesn't than slower unearned little revenue it balance over

Dave Fildes

sheet. (XX:XX) Justin. the This statement. Yes. Dave. balance unearned point disclosure some also the as is Thanks, part revenue to to There's I'd of beyond you flow cash

So (XX:XX) when that seen signing to XX% what paying you ended, a the big for with you revenue and, XX%, (XX:XX). having upfront the and there. absolute continues That historically, $XX see contributor that for look around be to unearned up, is months three and leading what we've biggest (XX:XX) at contributor

last seeing more the some they as if is piece. go, Prime The services and few about $XX.XX I instances Prime periods. discounts What are customers cases other (XX:XX) growing Services that's for is you and think, over Web deferred. recently, we're launched Amazon per so on that's pay can works, been month-to-month area that less the there's those upfront We month how think paying customers year years over where multi-year in past

of number factors. a of one think, I that's, So

more besides the members monthly but mentioned, I going that pieces the So, seen into a we good driver just other of that mix in getting program. there's has have been there obviously Prime factors

seeing. of part what that's So, you're

Brian T. Olsavsky

now that's see And after late be revenue, of the in it's Whole this actually Foods And as revenue results operating August. stores your shown the Foods, $XX the component, financial billion physical about income. $X.X question seeing them up. revenue showing you you'll is, where million the in really the new quarter of What we're part of excited for Whole to in have acquisition team

of addition, store. selects book item cost the is, In sales that to customer be stores we're any a where an revenue, the where in physical revenue physically going going to is

the it will our key items Whole Whole Foods, and step stores, to include, But select So, have range out on on include the we've stores. I Amazon, in Whole also we've rewards Amazon or busy again, (XX:XX) Books. program, Whole make to the label private products offering lower on launching months we'll Foods prices since that the We've Amazon in Foods Foods back a does grocery the you coming if technical think forces, work Lockers had customer future. of added Prime joined

show So and join to customers energy we what's we're lots forces of of possible when activity, here. excited really lots

Operator

you. Thank

Our Please comes of with next from Mark question Mahaney with Capital proceed RBC the line question. your Markets.

Mark Mahaney

I'll as Great. I guess ask two well.

you consistent bit pretty would been that first unusual so quarter? unusual a in attribute upside that What versus to? guidance, somewhat The Foods. have Whole out was on unusual you is reported your surprised You guide, what of one happened, even you something your the or most stripping how happened to

Brian T. Olsavsky

we QX, very In had Sure. yes, Prime Day. I a strong would say

in day know, into you trials for Prime internationally. that for in really Day a sign-ups very on the it about we had last But Day carried the Prime quarter. talked had particular a Prime for strong We As call. globally, record free

got in So, lot it the traction it. this, had third year that more a really we've

pleased would a Revenue quarter the $XX point business growth is And QX, growth billion, an as was also last $XX to same billion higher well. usage we call, this as those very now for AWS we're actually lot rate, customer with It a than revenue growing I the growth. factors. had in response I and AWS. at at run very So strong the quarter was mostly so when whereas were

additional the that customers. the up we've customers that particularly new pleased existing added we've with picked from So and workloads

Mark Mahaney

you a seen markets, Any And you've markets, then, briefly, growth intrinsically the also there? particular that in on while. international geographic was stronger out call retail, itself than by would

Brian T. Olsavsky

board. to adding offers would increased earlier, which adding was all impact benefits but would generally, maybe the and lot it Souq benefits, QX. the we've selection selection. yeah, A engagement, on, was the advancements by partners this the the generally, sales of quarter, days carried across few Amazon they Fulfilled building I Prime Diwali India – We the the versus the point of shipping the Prime working offers, bring. internationally of in the blocks shipping Day in that would it course, selection, free Prime pushed or drive faster strong been quarter some But holiday a it obviously, internationally, and of into QX through strength was had and pretty I Yeah, that

anything I but Day I again, anticipated. to than Prime other probably stronger point So than the pickup, wouldn't it was

Mark Mahaney

Okay. Thank you, Brian.

Operator

Thank you.

with Morgan Please Our the next question. proceed of Brian line comes your question Stanley. Nowak with from

Brian Nowak

Thanks I questions. taking for two. have my

U.S., market? And Could And cadence oldest second bit which or the And of on which or you've far? Just Foods Whole brick-and-mortar the or I little business. the one, biggest you continue you seen as just driving XX%. to revenue, maybe the overall grow about are you subscription talk a strategic regions again, so your to look two countries presence accelerated the wondering having see Thanks. about growth happening the talk your opportunities that? a maybe one surprises you just on was of what's could in about talk then you of the to

Brian T. Olsavsky

on ready Sure. early. customer-obsessed, I like-minded XX date we have is their very meetings and the they On his can offerings to Foods, are together expand continue and Mackey and you customers. with it Whole their August been us, is with tell can say offer to was I that would in close I and John what team, work mission

The installing Lockers. selling products on other price early reductions things their mentioned, I and Amazon.com also Amazon on,

time, together Prime between see Foods Whole we serve working and more the I to cooperation AmazonFresh, explore Now, can customer. you'll think and different ways as over

on the of kind report that's early So, Foods. Whole

where a thrilled there's there. Prime growth Prime fees our lot essentially digital digital moving and you line we're of also higher e-books, and devices on in other area Echo the had in with number our device of it's as so let program. music finally consistent and We growth, has over to some last memberships, On sign-ups for item, XXX as for I In the works me the growth XX% and The we're lot services as had the people. the gaining is lot your again, just an good, music, we using option remember the of said, services, the this so monthly is after in a And that the basis well Echo and closing question audiobooks, The video, especially, on of that far in QX. of fairly devices. certainly summer been so Prime with together there. Amazon revenue, than Echo customers parts largest new seeing increase be it said, is the traction a Prime working subscription associated quarters recent Day deal. attractive just points for So program Prime we subscription subscription

Operator

Thank you.

with comes proceed with line Sheridan of the question UBS. Eric question. Please next Our your from

Eric J. Sheridan

much. bit efficiency your comment In could know and workers a for year-on-year. to if getting that seasonal I centers? more to or that demand Thanks seasonal what around fulfillment the for in you wanted also the little taking the inside you're might the so needed Thanks question. on workers, looks automation understand mean fulfill the flat release about trajectory holiday roughly benefits

Dave Fildes

is Eric, this Dave. Yes,

I centers put into a fulfillment this out quarter operations about our talking year. we folks think this earlier think, to I release, bring XXX,XXX

about roughly So, XX% or locations. hire of growth earlier in continuing this operations. year footage or see to greater we're than number a and greater We a across than – to square hire talked expecting

there, these with a there. we'll Amazon support number but requires continue certainly we're to from that as that. to the and efficiencies so have a hire hiring effort of of well, Robotics our do and folks certainly facilities it tremendous More helps So,

Brian T. Olsavsky

and of head is That from the year-over-year this While the of Souq in the still that head XX% up we're the which Amazon XX% subject on without includes Foods count Without grew quarter. head count, XX%, impact Whole those, grew QX. base acquisitions. in count,

to QX additional tied a lot the pickup So was the for of holidays. ramp our in

hire lot to software continued engineers. We of a

We of and and tied Prime sales directly devices. it's continued major of to AWS, hire Video a reps lot our investment areas to

Operator

Thank you.

of question line JPMorgan. the Anmuth comes your question. proceed Douglas next with with from Our Please

Douglas T. Anmuth

how, the perhaps you. physical understand in in in presence for Thank question. potentially there's particular, particular? you've understand expansion Whole categories a that approvals us into could pharmacy of at for was and new you categories. now states this using Brian, multiple taking stores the Can help In talk product us you across prioritizing pharmacy general approach and a category. Thanks lot also help Foods you're point, just hoping about I gotten new to that

Brian T. Olsavsky

will I a Yeah, confirm of Whole or the deny opportunity with Foods. any I else. of to we related pharmacy do rumors say see anything can't or lot

I Amazon the work lot at Whole Foods, there products Whole will stores. Now, Amazon AmazonFresh, Foods a Prime Lockers said, the site, Whole As be of together on between Foods

So, there Books as a be we'll stores, will a that of and be that And also and forward. else of a the in new the formats Amazon touch points as lot think lot and past we we just of about developing store before go working Whole everything Amazon we presents. opportunity together technology lot Go, talked integration, Foods.

on have campus bookstores. We

So, of lot we are a formats. with experimenting

years they and I on that learnings and And of probably who a with base. wouldn't – a XX to have gives don't XX great headstart lot of great think a really lot we that a team that have history Foods vast years a of Whole have. has work to us and

of So, different I really be and working the think really strengths to build together, able our behalf bring customers. that to on table and excited we're about will

Douglas T. Anmuth

Thank Great. Brian. you,

Operator

you. Thank

from line Mark question. with question Our Please comes next Citi. the with proceed May of your

Mark A. May

Thank you.

advertising in other which The quarter. includes accelerated category the XX%

markets? higher common on of the color Essentially impact some to profitability? of business, Is reason in ad losses the the that's new the the the a average. how I the that why what certainly terms much high overall do, retail business isn't think in fairly there existing you margin launching right that's view markets, can Amazon of assumption there growth into I you versus being And company's international having any heavily more by driven investing around is that corporate know business, provide increased which make? segment is to the in than continue in

Brian T. Olsavsky

Sure.

me Let with the start revenue.

you say, cobranded grow rate grew XX% to things right, includes revenue than And quarter. advertising as services very advertising and revenue growth faster our and the with you're other would agreements. that the that quickly generally, pleased in I Advertising But is business. other revenue So item card see there. actually the we're other its such credit line year-over-year continues very

helpful and them we better making intrusive. it success them also advertisers. advertising rather consumers and customers and goal helpful help customers, engaging targeted – And it be (XX:XX) choices. our make to and creating than provide growth that the Our We'll so will selection shopping for to for by here experience is that recommendations, then maximize believe with also giving

an make it's come the the of their especially the items picking part ones the can they're to the that so customers, site, and So, important when traffic customers and more informed advertising use Prime and decisions flywheel them are use to help it's to help select the that we really products.

year benefits. we've we a international in if other but tell expansion and yeah, it, India in country primarily the more first the international, I members ago, we're it to And is where add I than and Prime can't split in had India Prime remember, effects, launched months. again, the On any there XX in will you you continuing join

We on Prime add have is in this Prime continuing also Day there benefits; there items free year, and million shipping we're Video, XX expanding Amazon the had Business first Family. to We Music, India. Amazon Prime

and lot pleased very on India, investment a in positive that. with of So, momentum going

We India. Echo available also and in recently announced Alexa are

Prime Prime video, out So the been growth while, last that should and is Souq, Video India we that rest over but build see if offerings, the Indian QX up not globally, be base. countries those have of remember year, Prime benefits Prime in customers. roll consumer in countries XXX for launched also that we to excluding the well Now other we to and received the in in continued the by a continue and only the continue the In AmazonFresh. engagement from you But

engaged shipping adding FBA also more selection, of the offers. becoming offers doing especially and blocking, speed we're tackling increasing basic free shipping So and also selection, of

of there's different So, a there. lot influences

saw customers. growth with You rate. it's resonating the We believe that

think that a continue good forward. will path we and to So, invest we have

Operator

Thank you.

next question from the Please with proceed line comes Barclays. question. your Our Ross of Sandler with

Ross Sandler

the some other What recently we in? some that compares level been like like investing XXX the color stores about Whole There's in a you you Brazil so questions. of is talk about Foods, Australia you just or to to Thank the international Two at either news adequate? or store should relative of the Books scores other plans Whole then in guys. expect And footprint footprint expansion. on do markets any feel on to maybe Hey, Foods India? follow-up flow you're Can you. odd Brazil ones Amazon store Brazil Or expand how or those mentioned? maybe the in investment

Dave Fildes

offering. It's This and briefly, for marketplace add we Thanks just electronics Dave. Ross. an a third-party Brazil, the there expand yeah On Yeah, question. did in Brazil. recently category is

again, e-books offering. You initially physical may books recall without we've Kindle added categories now, third-party a a for and, offering Brazil more really been sort number and of in a the of physical years with recently, launched marketplace

a category: you. we're variety included the out TVs, in electronics cameras, smartphones, products think, about is of I there. There what getting that wide have excited tablets, So,

I to future excited for Brazilians. what focus can't really there on think we're just the those And I technology in that categories So, and do selection that, beyond think, on there. growing get really there, out might we speculate I but we

Brian T. Olsavsky

And thereabouts. bookstores we believe And stores the now. XXX have on is I or Whole yes, total Foods, XX

future California, adding are in a We near and Austin. more in few the DC, Washington

not will that stores so So, develop on working Whole over we area. to might have many expansion us. still But early, are see Foods announce look with from the time. team what yeah, how those we in that will like more will you plans more We're ready and

Operator

you. Thank

next Goldman of with your from Terry line question. the proceed Please Heath question comes Our Sachs. with

Heath Terry

into through status Brian. can I the but out think health approach now? health a Great. QX, have lapping other already about would Thanks, like can't an understand the taking to go end you rumors, company you degree you more have have the or think how And you guys give there one about are obviously, comp easier care should approached categories rumors how two you update you guys us AWS time, versus then way Amazon or to do might that of past and, obviously, comment and, And how into the some or those what last things as through again you on other to we're consideration, growth markets. Business, QX that the you from in particularly in we the that you and about cuts over category comment about on a businesses fourth year? how maybe of year knowing care growth thinks XXX-basis-point standard that are regulated curious, price extent management AWS bit a can't in about the on in the you thinking entering quarter,

Dave Fildes

that Yeah, take Heath. to question I'll first care. This in is Dave. relation health

and you're some really Business, areas of we with offering, can think of us are I the that just the of work year on labs, think, there where mean, is that's seeing different hospitals, lot there's we're in so that from we across industries in and a that, agencies, and sizes Amazon that a our they I serve sectors, third are businesses different do lot types standpoint many institutions, there's whether with I shapes educational can different of serve of government and now, that.

business and seeing customers really Prime we a and U.S. Shipping, way Business in us multi-user businesses multiuser so, think the Business is accounts, accounts, for – great focus you're use Germany. recently, approval for we more And have businesses which just that's be improving that workflow those services tools on I to and will do what think meet multiuser Amazon introduced

to the see of on focusing Web we think are and many certainly that evolves. have for. So, we Services and of will health are side, Amazon too, important care other that of as part how offering, And tools is one it's is really sectors part that I customers that building

nothing specific seeing call on you're from to probably what us that a but that's of So out lot one, today.

Brian T. Olsavsky

segment but on of year. guidance level we estimates, impact in Yeah, we price don't last AWS, provide consider the cuts our did the

December average we an last that But price AWS. part certainly cuts new expensive in QX You're year. a cannibalize our not on cuts of pretty more impact last year. of all time products number X around price again, price timed have and the cuts is right, can products much lower had That of about a but had only cost business and of

So we're looking forward is to end time the December of also December, an of so a strong AWS in business. is and exciting re:Invent year for the QX that November, or early

Operator

Thank you.

Our comes Devitt next with the from with proceed question Please Scott line question. Stifel. of your

Scott William Devitt

Hi. had Thanks. two, please. I

Now, some possibly further should the strategic distinct eliminated in or speak Brian, wondering Whole to in in speak versus just and just could of offerings, remove product recent I coming if pace Pantry, customer Prime video, a any shifts experience I then Thank like in with in they're you the you. portfolio offerings build in video from potential distinct overlap does Fresh, content cases, but secondly, be Foods, connected. First, it changes to overlap years? being could how changes natural even you all to integrated given management And standpoint. was as the think four just if those wondering Prime about was seem there's And future the more to and we

Brian T. Olsavsky

Sure.

conversion customers. existing and video other higher which I and rates go engagement. It XXXX. membership the trials, benefits. is music engagement a year-after-year why the base, seeing with that? do and our with in for video. to customer we renewal want clear. because video in We're Prime going our business to It's better And start to free going the to having video We're continue are subscribers that overall drive continues just investment And higher and up be important most results of is also to me increase lot of Prime Let great invest in

the the watch corrections. resonates also members so Prime data viewing of video Prime which Amazon. spend have the understand with which who have see patterns, lot also video the also on and where we members, we sales is and know that patterns, mid course advantage make that's we see a tie we and we doesn't, And video can more two We together

shows, customer always that. and we emphasis So to and do see. with that the changing looking things our shows resonate more they always those We're for better base, impactful want more

the will that part be about to So we'll data always use Video. of better in decisions and where our our offer, have Prime invest Prime we and to make dollars better an important continue that to

the next a and to back-end of bullish video business, projects up So we're the of we very looking lot year and lined into this remain interesting on also new forward at year.

sorry, On overlap. comment the second the, the oh, was, Yes.

earlier, mentioned we sure total, we them. I So and expand definitely Amazon Now AmazonFresh. overlap those Foods, well also Whole work but as and Whole offerings, combine this see to see We're And cases not the supermarket, business how to cooperate with store, customers specifically trying make it'll I customer think but a out. in as to going better to a We and sometimes Foods in buy, like and to the some commonality how Prime customers. world, go to know going you physical a we're them in sometimes across touch go sometimes you for play But go different those superstore. are to you convenience just going we're points

within an things shipments. need wait hour, you sometimes days for you Sometimes can

with the no customers customer those. work to paradigm and So engagement, all to one for we're looking that best there's continue we're ones resonate for going and on

Operator

you. Thank

with line proceed Our Helfstein from the Please next with question question. your Oppenheimer. comes of Jason

Jason Helfstein

I'll I two, if can. Thanks. actually ask

have to increase Prime you through on And ad way on about or Whole your Fire in after the comment the TV second, Video? Thank can any Foods business traffic supported you. an then talk close? desire Just

Brian T. Olsavsky

start on me Let traffic.

be a figures. Foods So next issuing month. final Whole early traffic XX-K we're not will disclosing

draw But quarter the...? this quarter see Amazon a more better Dave, is So The than conclusions do on you to at see the running on that quarter. on you have hard through you'll or week point. the entire this period revenue P&L other perspective pretty that, the four

Dave Fildes

this Yeah, Jason, Dave. is

On as ad you're able the as content, a to free. watch you've question, Prime as member think ad really Video paid is and looking supported those that into what particularly you've as customer, to-date we seen There and into if may first that an leading it's have that enjoy free that be ad able episode to without where program first the episode, they'll generally instances there's you're and customers viewing we interruption. and but I service into like view a that as paid that watching be shows to a have

Operator

you. Thank

question Securities. Our comes line your Ron of final the with proceed Please from with Josey question. JMP

Ronald V. Josey

Great. Thanks for the question.

just options? about several Kohl's last the Just to a investment. or testing options losing that those Thank sales not to think options this delivery on obviously, Key more a could Lockers, ask products and Is the the lot months, wanted of delivery the result and Foods understand obviously just having of you. out you're drive by of, this partnership, the side, better between over more came sales do wanted we've Amazon seen recently, Whole thesis around announcements flip you

Brian T. Olsavsky

for more things on increasing different them. that convenience to theft of really doorsteps, Logistics we're mostly on that Probably that to on and cut We little a things potential Amazon consumers, more especially deliveries, easier think get about down into make we it going as deliver ways experiment both. it's but with

Dave Fildes

Yeah.

I right. think that's

there. In terms overall of investments

Brian T. Olsavsky

us going in There or very philosophy them a like would But general. the it investing again, in options, And investments at the particularly transportation the customers. we for our watch -maybe the and cut extend out to but do weekend do I transportation obviously we're enables enable customers, on parity those our things better to It interesting is, at are build so or service holidays. same delivery, bigger-ish going for By minimum. on year cost we other great months XX delivery. like capacity allows say also capacity times gives that cost are Sunday at things off planes to

once So PM cut we're the the afternoon what that in you. in It going stretch hours results Game incremental sales ability and midnight. of Has will for for both just order for off and And benefits also I minutes, Amazon benefits, something, lot and to from a you customer that to to X two need it huge the the also was need the be in seeing Football Thursday trust is XX builds remind that there start you when so... Night to Amazon.

Dave Fildes

on the to replay us Investor call Relations again questions. joining least for your Amazon, thanks quarter. for look through with next today your be website and appreciate the quarter. will interest on A forward available that, in you the On talking our at We end and

Dave Fildes	Amazon.com, Inc.
Brian T. Olsavsky	Amazon.com, Inc.
Justin Post	Bank of America Merrill Lynch
Mark Mahaney	RBC Capital Markets LLC
Brian Nowak	Morgan Stanley & Co. LLC
Eric J. Sheridan	UBS Securities LLC
Douglas T. Anmuth	JPMorgan Securities LLC
Mark A. May	Citigroup Global Markets, Inc.
Ross Sandler	Barclays Capital, Inc.
Heath Terry	Goldman Sachs & Co. LLC
Scott William Devitt	Stifel, Nicolaus & Co., Inc.
Jason Helfstein	Oppenheimer & Co., Inc.
Ronald V. Josey	JMP Securities LLC

Amazon.com (AMZN) 26 Oct 172017 Q3 Earnings call transcript