AMZN - Earnings call transcript Q4 2018

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Operator

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Q4 2018 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.

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

Dave Fildes

Hello, financial results our QX to and conference welcome call. XXXX

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

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

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

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

with slides non-GAAP which website, comparable press find call, reconciliations webcast and this In measures. disclosures you During our filings SEC, measures these measures. may of financial including GAAP we accompanying these our regarding IR this non-GAAP additional posted on certain the each release, measures, will discuss with our is of

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

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

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

Operator

you. [Operator Instructions] Thank

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

Justin Post

some given growth about are year ask the you I'll higher I the that areas overall us the And just, help to that if you. other units, on secondly, forward? Great. you here, there reaccelerate or change going Thank quarter, then you. make remind XXs QX? you how impact do the Prime last in just XX% was us investments you kind think about could growth feel the guess subscription do in accounting can and in in of Thank understand unit revenues

Brian Olsavsky

Take the subscription first.

Dave Fildes

is this Yeah. Justin, Dave. Hey,

accounting services, on We’d adoption Just revenue XXXX. last on the the subscription impacting second and of subscription number related revenue sort our recognition that call, headwind policies to of accounting to the the due of lower on change. standards the the we’d about anticipated in said XXX to in million probably areas update remember, services question you we'd a results said was

the out So that's quarter. where came we for

you'll that, FX. we reported So services exclude see increased revenue subscription you XX% when

XXX certainly part decelerate is in the that rate item. sequential So deceleration -- in million growth the the line of that

Brian Olsavsky

of our number. more it some some not growing the as units Foods include And unit fastest Yeah. deceleration, Dave I are mentioned, more the in unit require the AWS, think like, interpretation, advertising, subscription numbers areas, that things because doesn't services, and Whole -- on

strong quarter. good on the and in We for maintained in great part planning, strength the growth of about businesses, But in a as the customers. a deliver and AWS direct the parts. and was we component continued the customers teams had growth it much Conference breaks rate lot the focus retail we you a guidance of particular in a We is great here in to very Reinvent don't the we quarter preparing the job, on done executing had that a there that a, retail, So great the the QX then think number to quarter. quarter. more revenue for out general, was supplemental feel

quarter total in good So growth also and feel the the revenue and about we the income.

Operator

Thank you.

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

Mark Mahaney

Thanks.

you're the on there's on a bit India And you or talk outlook revenue little you a marketing on Secondly, up. that any spend? want that's marketing spent think getting talk quarter, you about third, you real doing? advertising on whether the just the a commentary revenue, international step and if and material ROI business? how lot to your comment quantitatively, you just I a could, Do about in that qualitatively it's Just could think impact on

Brian Olsavsky

Mark. Sure,

India. The is first question on

that. with start me Let

we guidance we there however, rule best will, as have for government impact we're situation. complying and to the change of the is estimate, but incorporated QX all So the have laws the to there. into remain the is much uncertainty India, we on regulations, going sector estimate We e-commerce to with committed have our in evaluating what

impact issue is dimensions and trying built why around talk you India. think our We've Dave, selection in to both main changes our about our those concern sellers We customers customers the in and don’t price and growth? India sellers. the help convenience. Our the for and in to the minimize business advertising don't main the also

Dave Fildes

Yeah, yeah.

serving I to lot we're think that -- mean, customer I there's of continuing set. on a focus

of make to our do a that sure and set agencies, evolve One help to got their of to tools the advertisers, things is products the variety goals. ways they've meet we're continually trying customer

campaign months so some things of sponsor recently the placements, expanded few campaign or brands, done new we've manager is out features. Some the so improved more rolled last reports, over

with that ad services we're continually it going but for features tools So a there companies think, easier and to the a the about there. and number the -- we that opportunity number there's make beyond grow ad of just offer to, I excited things of are that, out

Brian Olsavsky

mix going. technology like question areas, is And teams, includes revenue grew and then marketing. year-over-year. was points yes, headcount on also marketing, and of in XXX growing that sales only the XX% Headcount This that because category were year-over-year, in things areas mind, your our device sales that's percent the where keep of and AWS, marketing investment lot but a up that AWS basis especially marketing were of

was pretty consistent So the and on marketing. periods investment about good we feel variable our return marketing, variable prior the on marketing with

Operator

you. Thank

comes line of Anmuth next Our from question JPMorgan. the Doug with

Doug Anmuth

also strategy follow of on at Great. wanted your I Brian, bigger the the holidays? shipping just in fourth policies India, just view about think attractiveness near the And during about you. investment you from do US just you of hoping of term? the up how free then some UK to quarter the talk potential could and all in there your and impact picture, Thank the India or new the do operating in change

Brian Olsavsky

both to the long consequences. still customers be selection unintended sellers. We Yeah. interpreted, term price, consistent evaluating India. And in doing customer. necessarily to it's good better good don't regulations need and Really, better India Indian very we're have in new I need The don't feel be need job with the Indian convenience think situation for about a -- make prospects and Indian the sure again, to they better for and

say now. So it's can that not all we topic right on

Dave Fildes

it advantage and to And the that shipping the some think shipping around ahead lower took that from first but holiday the pleased shipping, continuing was in sort season, bit quarter, them fourth Brian before, We side, in great with well. but to offer holiday. customers just Yeah. also second party point both for a in of free holidays. of so a Doug, did the offers of do talked was the threshold the about sellers a I your little

with devices quarter than of offering, really from As of Alexa a had. pleased number quarter we've record had most in any number members, think just ever vein, breaking number up holiday of part Prime sign engagement sold as that continued of the we and Prime I members we the well this the shipping

pleased with that. really So

Operator

Thank you.

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

Mark May

somewhat see back more stable When and but you. impact the the I other what Foods, may driven for hiring think Can modest center fulfillment advertising factors see retail from capacity, to change Thank and more healthy Whole in in benefited discuss QX you the from that do meaningful segment. how retail modest then several year and in try what and what margin including in retail last slowdown these margins gross expansion you seems And factors, growth Thanks. separately, factors, have the quarters, retail about going gross more I growth to forward? factors like been, pretty persisting segment, out recent is have a year? revenue to accounting margins this

Dave Fildes

Thank Yeah. you.

unit put start part, fulfillment with me XXXX in if step I last cost in regarding clear are years, Starting with XXXX, and our and back there Certainly, Amazon greater trends were, two perspective, prior XXXX, XXXX, the costs, some by tied think Let so structure. we demand had because that to AFN we FBA remained but that In number lower, combined our than strong. XX%. Fulfilled fulfilment by and grew XX%. grown footage shipping was retail, demand we’ve square or and

a So Souq, number we some banking, the at were drove exclude we believe. on headcount years. of you Last growth. Similarly grew prior in headcount, of two we had XX% if year, which XXXX, XX% you expansions Foods XX% large in in up by I acquisitions will, if to XXXX, XX% Whole and the to the closer

continue still And XXXX business retail while a to G&A in in so, device way, functions, again like in of, tied things there that of AWS in a the then digested especially areas, lot and a area. to a we pre we invest to some sales but we was and core lot hiring was leverage technology also in an there AWS team lot of XXXX, continue, our

company invested grew And maybe use last XXXX. AWS grown then lease XX% and higher considerably expansion, slide have in the that had global especially growing capital are indicator into what for an that if on groups their capital, year, XX%. it XX%, as on grew our the to we when business infrastructure total, but number So capital, than XX% support you infrastructure

in investments lot was that So banking the infrastructure place in efficiencies people, of we about ways, put warehouses, XXXX in a ’XX. had and of in XXXX

Prime work relative take we certainly expect costs customer guidance. to these we we'll while would see continue so benefits, what to reflected XXXX and do we've on efficiencies. operational to and in will seriously to growth and So in I our drive we and QX increase investments concurrently offering far continue

Operator

Thank you.

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

Heath Terry

you that deceleration past the We lows are side your build the to under Great. fulfilment so what in of businesses, guys things, Thank in bit expectations least saw capacity. dig quarter, with guidance, A capital the bit to generally fourth saw those year. that CapEx at in have to that we into that expectations in Anything in for to you about lease of or of center the are seeing work your after after said hitting that data thinking QX. your you little trying you first you. not when in line the build about three for sort that deeper over referenced a -- read little that reacceleration investment of the the over course re-accelerate last quarters into growth build

Brian Olsavsky

CapEx and then Yeah. QX, total in I QX, X% positive that quarter just XX% -- negative QX see the grew itself. in in QX, was X% XX% in

still and was, AWS healthy into growth FBA both and very QX customer as bit countries, and there is new for in our in still and and with clip also growing QX. I you business of a a high when to a say, demand and relative you about with So strong supporting that's consumer very the us, XX% expansion QX the a core investment business. our -- AWS in low the talk number think

XXXX headcount go we So that you XXXX a for adding to what expect to lighter investment the we've three forecast the would the first year we XXXX built not year, say quarter now. I and the lighter we'll for fixed the through year compared to I year prepared and into right consider would certainly as first in months. but give be I am that, the reveal

Operator

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

Brian Nowak

I questions. my two. taking for have Thanks

-- Just quarter go to margins. the first gross fourth back to the one is

can of just should you from out back the we like a know looks I there to in business, all if to and other any or puts AWS, us, gross Thanks. impact advertising of the just help of the any then at quarter the line about was gross and takes fourth the more margin changes of margin I pressure. help accounting quarter? the business we little talk the try any advertising that a Can that perspective the think think includes on in growth you it

Brian Olsavsky

positive prior Yes. over tailwinds say FX were still question I quarters. that up margin XXX gross Sure. points neutral would the I skipped gross much of has year-over-year, I’m basis. as but well strong earlier, sorry as margins on were remain, up growth not basis yeah, an XX% AWS

grow, advertising units continue to well. grow very party dollars continue to Third

globally, were was headwinds, Amazon ways unit We don't of was in make how There of use video the our money. outbound would and different then so we also selling the and We and say, the shipping logistics. quarter. I cost, expanding and very who that devices content, including commitment our and devices discussed devices had would monetize we Echo very Amazon I device everything to mentioned, the of customers highest think will that the to in strong strong. greater We price group usage. usually it but expand use our are Some a higher else. to And units sales we had I shipping the the mostly, was as say the a, Amazon Dave did, Dot free retail fulfilled

it retail, of stronger which So a gross say a because would the was bit I lower this but more revenue in of treatment QX. was has margin mix,

Dave Fildes

Yeah. piece, Brian, adopt the other the accounting mentioned. just that did to And just I revenue XXXX on recognition get in as We standard revenue to side. back

certain of cost of a rather as sales. of As were the adoption, classified advertising revenue part reduction services than

an specific the will revenue you total. increase QX, impact So that was so of see the to in other to approximately billion other change $X that revenue, of in

Operator

Thank you.

Robert from Our comes next line Colin question W. the Sebastian of with Baird.

Colin Sebastian

the curious but particular for I an two an regions some are not out, those of international so on considering and accelerated, quarter, assume is Thanks. product focus Furnishings, in but also marketplace fees any then of well. expand what guess the given strategy is including health the going looking impact indication UK? to categories, I I several growth And was categories? categories the call as changing in forward, Thanks. or to India backwards, it the In beauty, retail there, selection, Home and weakness increasing especially curious me the

Brian Olsavsky

Sure.

your sellers our had with site, on party second They’ve our me -- important Let than of an third of part start from are half sellers. our sold are success third there. units party question. value proposition the Obviously, great more

important for business Amazon So sellers. the both have for to we us it's right profile, and that very the

lowering always that will it part adding evolving of involves structures, sometimes, subtracting we part of fees pay. involves So sellers new ones, raising fee that, that or changing or be old fees

change incentives from continue growth We are So you're us. going to in see third to sides and fees this make continually both strong the sure to to generally on that work the healthy we have party. a

FX that, If and in QX. last split we QX Diwali adjust adjust had, that primarily between and for XX% growth took impact year in QX neutral If I On for rates. if to and call, remember, you we our an international, QX place flat QX this it is QX timing international about XX% had pretty of was and the basis, the that the and again on last in was talked the Diwali But on growth growth QX. year.

Operator

Thank you.

with Lloyd Bank. line Our question of comes from Deutsche Walmsley next the

Lloyd Walmsley

if Two Thanks. can. I

the supply customers, we we suggestions but on lot just advertising of hear also from constraints. of First, positive a hear their side, feedback

expanding guys reports, driver then how shipping beyond and see is some grow can have growth pricing effort markets. as a inventory secondly, So, in kind test that of there things versus do are your And been do business to growth inventory? you Amazon there you some

sense this forward? So test and wondering for your going on if you us think about productized in basis what can how markets that efforts give shipping a you you've expanding Thanks. seen

Brian Olsavsky

priorities think also own a on but in addressing and to properties, piece in on in we're as I'll advertising activities, space, Amazon.com, looking them lot continue needs look mean, and we of our think the for come think questions. mean, good we regards products of of opportunity the for working tools. for automating I there's as the growth recommendations, usability but thanks I certainly the over a smarter those longer those so, there's some improving even advertising talked I all our of both the advertising for one brands, places on make that's think lot incenting beyond, first. ways I take like term, Lloyd, we before, Yeah. to in experimentation. of I the opportunities new to potentially priorities,

them very on we're of I lot to working a for telling think what us. with data a them, to great interested are to they're metrics learning more based and and understand be types want able better what toolkits company make brands they of successful develop

Dave Fildes

on And of support transportation, we where we capacity Amazon our do particularly we Again, and for need add feel globally, place speed and assume demand, have about service our Yeah. Amazon just I to business peak. is at logistics. you're ensure partners talking great deliveries up or we what in expansion

out we Amazon and will build and chip our DSP continue programs. So with flex to

it self-delivered presence we're So with call happy quarter, also as bigger both profile a that, performance products very and as our on we obviously during was it delivery strong estimate good the from was cost the accuracy the a well. very standpoint, much year-over-year, is so

Operator

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

Eric Sheridan

for periods your then or two opportunities the two, do terms Thanks you over or media with advertising just Lloyd's any it thinking Thanks properties own content the the or now might One much. that about taking video. update one. opportunities Prime rate and TV moving impact respect opportunity, periods, to got you're back investments of top to the I would on spend how about since there we of years going side, on question. connected historical to sponsored been media support forward video so video in Maybe beyond has branded a think an around with step-up how And It's ambition going your been going forward. products the number on the of if front, number [indiscernible] can. couple experimenting be on search or and question either

Brian Olsavsky

Yeah.

video. with start today, – it the has We're been increasing. spend Prime quantifying not video me Let do we but

like, expect of both usage Prime video and viewing it as We to success even step we received -- with least, particular strong again seeing some it we X nominations renewal and seasoned during engagement. rates a continue with I builds watched nominations say the two in We're lot and music would membership homecoming XX XXXX. were music. well connectivity members, and [indiscernible] the very And growing. in And in and our at of Oscar we've increase continued higher particular, a as see adoption and back, that had and our Golden stronger that we -- engagement Ryan quarter. higher Prime season further overall recently -- our and the see Jack in hours to Globe the of our

Dave Fildes

seen And streaming IMDB it shows US available customers on Yeah. may you and advertising that that's then or video and in channel launched question, is a it ad free just an to TV and not around your Database, have enables watch Internet second one of our long subscription. which the around Movie opportunities subsidiaries, video, supported ago, without FreeDive, purchasing movies

So ad available your with computer on. website IMDB the supported, on so or personal that's laptop

content. TV to a definitely well I the great as on think consume it's is devices Fire way

some seen we've like monetize with some offers, but that Football, with opportunities the working looking So the to been I pursuing and really types been video we've our think forward been take serve customers also of that that, those Thursday done, video with success for live the a opportunities opportunity Night from those advertising. engage sports bit that in things more time and with of learning on like to to we've and like longer offering, ads, have of period excited things sports about other

Operator

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

Jason Helfstein

Thanks.

comment, advertising for any Just down if adjusting slow third segments two, and then was stores why quarter. relative XXX can you in so and and was commentary online you to not secondly, any Thanks. just year-over-year? did physical physical reallocation One, down between stores of kind there

Brian Olsavsky

your Thanks, Yeah. Jason questions. for

revenues. stores physical the with start me Let

QX, What about with Amazon we we remember physical So their of our calendar other Amazon we were adjusted stores, into primarily purchased fiscal XXXX. added period revenue Foods, and it Amazon in this it last the Go, up decreased when year in X days had Books X% was includes – stores happened Whole as Whole stores, to a Amazon's is year. you QX quarter year-over-year In lapping of we the Foods also and last link of star. X QX, but

So we're comping year-over-year. that

where and people The second online Foods you is at app the Prime stores revenues. said, counted Whole delivery stores does go up or or the count is orders piece to the order in -- as that, for the then Now pick component of online

on true showing with Because mostly So days, Whole if an Foods growth you the those, issue, basis stores. was accounting negative approximately year-over-year apples-to-apples X%. up some adjust physical in again, up for of as X% the those, of year-over-year it's

Dave Fildes

look other then And the revenue, the some. Yeah. question advertising, at around second your you on just if rate decelerated growth

there vendors, of types So in of growth strong, other are largest of sellers, that. year, components, continuing number the in see to that adoption quarter at revenue by reiterate, prior you advertisers year-over-year authors, that comping aware, strong just I are is the still quite it's margin fourth period a part the a factor good you're Amazon’s think all across but revenue growth so as of a but rapid utilizing is we mentioned, advertising I’d and in are the XX%, the as there we're very

Operator

Thank you.

Markets. Our Dan next of with question comes Salmon Capital BMO the from line

Dan Salmon

that steps between the we you. you particular be during you go there, Brian, from logistics quarter, the most process, XXXX? a follow-up, third And as versus logistics, came hear season, next any highlight your feedback can would the return learnings would the curious you but what maybe everyone. obviously your just out then afternoon, color as well? I news Thank to view and on HQX some not balance about interested own just as that surprise to can the some quick proprietary of comment through just important into use using earlier that how parties color Good the and there the you offer on maybe Amazon increased a holiday

Brian Olsavsky

Yes, sure.

start So HQX. with let’s

Virginia in jobs. New City course, more creating and we we $X billion investing York the cities, Northern between two November, Of than and will XXXXX announce be we selected and

announced about Excellence estimated to of -- opened jobs. Operations be which also be XXXX a Center We in about up to Nashville, is

next we're now, through working right some issues both in So cities.

We’re New to looking community and forward well being as Nashville. partner good investing a and York in as Northern Virginia

to question logistics capability also your So not that. much on now matches as in for X time faster have or up within continue customers really else delivery of Prime this at speed XX,XXX comment cities town. we with members seeing that well. report one do transportation, it faster on On Amazon ship to items course, expand that that and our our we're would days, there's million or We within will delivered XXX be million get day in added, two but we over over and

extend to that the better in sort done as have centers So we've between the also party involving invest third partners we our order offs, of know third we is well we over the our lot time, that. times, can the do find are participate What where excuse the we ship like all space. we cutoffs like cost the and Amazon of two. We cut at me, big in we profile cost it of a demand or transportation transportation same perfect ability information can our and Again, deliveries by warehouses where a great our moving can more because we that years. or we're part and can last about few not things is, selectively and have parties know we we that

own consumers delivery. final side also doing me, our helpful transportation excuse we benefit for that's another when So are logistics,

Operator

you. Thank

final question comes with from the of Barclays. Ross Sandler Our line

Ross Sandler

aggressive the operating on XQ? it guys. right to be So that out from these then whether margins operating Can that to to XQ around more of color like you AWS guess drove the going of you margin North and continue move international sequentially the margin Any what you from Thanks. parse investment little in on we're bit catch decline historically I seeing the most be sounds America some are North stuff pace theme, of the a India going America will and a And going color XXXX the trajectory? up of is push investments kind and expect bit. retail in to any expansion back now, going on in

Brian Olsavsky

Yeah. Sure.

the number with AWS will start we around, you quarter. saw That we're as called operating very XX.X% the out. during margin, me Let the it move with that pleased

teams sales Of going of our a this course, at and build, And it again, to well any geographically, point will very expanding business infrastructure, relevant in and combination be adding prices, to especially lowering a products people minds. is of new to innovative staying time, tech and balance customers’ teams build and ahead between quarters bit.

impact up again and on higher the margins going than quarters. three slight but margin, is quite year-over-year, That the were Our almost this XXX basis capital points. efficiency a acquisition of were operating the is and lease expenditure and we we're down. end that of to cost in What openly to creative more bounce more for said do cost around. infrastructure had bit to and prior was QX We've around our operating up getting and work then customer value create our on one minimize getting getting great

Dave Fildes

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

Amazon.com (AMZN) 31 Jan 192018 Q4 Earnings call transcript