AMZN - Earnings call transcript Q4 2019

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Operator

Thank you for standing by. Good day, everyone and welcome to the Amazon.com Q4 2019 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 Shelly opening be call turning to For Kay Pfeiffer. ahead. go Please

Shelly Kay Pfeiffer

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

to of Investor Olsavsky, today Joining are Relations. your Dave Director and Brian us Fildes, our answer CFO; questions

press our commentary listen our financial well metrics today’s and results, the to to of quarter. front you call, we as in As you you, on encourage conference have release which includes as

call will otherwise the stated, all this results XXXX. comparisons Please against note, for be in comparable unless our of period

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

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

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

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

additional results materially restructurings, and goods legal demand business among therefore to for services, other things, our investments, from settlements. Our our accurately we or possible that conclude assumes, actual guidance. differ guidance any predict don’t our could also It’s and not acquisitions,

remind how will listeners that, initiate Q&A. question. to our to a Operator, please With we move

Operator

the this Instructions] questions. now we will [Operator for At time, call open

Please Our first Terry with from Sachs. Heath the question of Goldman proceed. coming is line

Heath Terry

this. appreciate Really Thanks. Great.

of is added sort either specific regions, would you you quarter workloads, AWS that particular by dollars you drove in we Just in the growth anything the on represented relative directional as terms specific to -- at in were particularly quarter-over-quarter, saw that customer the there the you out of of of direction earlier the the look business, call that felt particularly strength amount strength seeing year? that of types, of the parts in the like types

Brian Olsavsky

Hi I customers isolate would Heath. No, to of not any set it products. one or

adding adding been very and culmination of of and products think features, better pretty sales hitting and and penetration a marketing and teams, new broad-based, kind it's to the work of lot of enterprise I a our on it's lot industries. customers in different having

at our So, so add that's that competition, growing features quicker it I as is we what is the actually and set you're a feel product seeing. to our market, we the leads think on than pace gap -- We and speak. capacity

XX availability the partners. that We XX also We're real continue now of And zones network with a regions. tens across and we to think in thousands of when use of millions AWS active you global effect customers expand. geographic there's

increased what is it's geographic the you're also seeing. and better hit the sales needs, of and that I think So, products combination expansion support, customers' more

Operator

Thank you.

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

Colin Sebastian

commission Thank seeing you content how a third-party much you. marketplace the of specifically? Was are and bit And more Great. of uptick an some that of you was strength seller could just Thank services? in disaggregate the you. guys in hoping other services,

Brian Olsavsky

as MFN a It which in there's basis. fee higher FBA was say than strong unit would just I strength a in And services, you that's if quarter very seller to it XX% growth set was strong what probably referring has on said, On you're additional does. revenue.

I away, move think was So more -- step the delivery strong through but as of move seeing particularly one-day sellers year. what if is as more we see QX, our program XXXX. more participation into in we in and you're I you'll in think that That third-party general, you and

Operator

you. Thank

question Bank of with the comes from Please of line Justin next Our Post proceed. America.

Justin Post

Thanks. Great.

if wondering to you on in really go revenue Just there retail the guidance your high on drove could call quarter out? what level, Anything you'd the side? upside that

are talked investments, obviously you Your on that then And below investment? in XQ. peak. investments of starting are the that you. Where in investment AWS cycle? about Where you are still you just kind margins Thank in

Brian Olsavsky

our million the essentially I Sure. from that exceeded performance of foreign as -- revenue $XX.X due we November $XXX end was $XX.X very strong $XXX of on of range billion. what the was middle said, of to roughly on. came exchange, high of we billion, saw holiday which Well, but in at million

We a year. to very in response also been uptick building one-day availability had that's big through the the

been And we has very Prime in XXX joined Prime more Prime We have globally any quarter strong. members now. other think QX that mentioned before. I we million paid than more mentioned people that than

So, a built we one-day momentum on Prime of shipping. to to benefits recently aggregation of add -- continue good program that up expansion lot the most of there the the one-day

about where margins AWS, spend and prior the the versus when years. efficiency cycle? I XXXX in are talked in the in AWS we closer to -- of were On more XX% infrastructure

-- that well. since as we've So, expansion capability infrastructure continued our add and we global support continue to point, to to --

But the at that longer-term as we've and seeing customers. more costs you're effort and decreases well with those what expansion as signed sales some the some our marketing of contracts price in of probably is of our margins

multiyear and future up You commitments year-over-year. at the notice XX% that's now billion $XX deals stands year-end, at on sheet our balance our that on

on good side momentum the a lot as of there's well. enterprise So,

Operator

Thank you.

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

Jason Helfstein

Thanks.

I again recently the function Just investors increased and to of whether competition. about and the slowing about it's margin mean, I ask AWS again. have concerned AWS just become, revenue guess, a

you're So, about how maybe just talk reacting.

environment? more any cuts, just competitive you You sales but can did about and on talk the spending talk you. about price Thank

Brian Olsavsky

with comments. bit probably Sure. growth the argue I would a

grew rate of end here, it billion $XX at XXXX. we billion to run see from end the a the XXXX rate of at revenue revenue we a $XX As run

happy we with to dollar line terms percentages, growth. larger as in and a in dollar opposed The So, -- revenue to quarter-over-quarter. be top increase both we continue had our year-over-year

very of the progress and adoption the revenue we're and happy customers. with our So, acceptance by

only We've from As many that again, also very our we customers. far this as capacity, competitive set in of space with is lead start because services investment we we that and a think in learned we to customers. but concerned, -- -- of have provide not features in years big

but it all partners and of in launched issues our had new and great there were present products hear customer -- XXX our of great events, we to that We forward aggregation to conference developers. get help also road educate was over re:Invent and or -- a a only December just that in and at not map. those customers were to December, sign And get helps where our we

So, it's a great shared learning.

adoption cloud, Customers different organizing moving further. phases: the think of will always react and their at be There's curve. customers first, different then on I it. then stages the growing to to cloud,

movement. lot a of there's So

of of any lot on innovation lot generally, in customers. that going I said be to convergence operational a a bumpy. think behalf efficiency, what movement of of is quarter-to-quarter But the is I the little -- setting investment, a that quarter lot of seeing a you're repeatedly and

Operator

Thank you.

proceed. of Stephen line the Ju with from Suisse. comes Credit question next Our Please

Stephen Ju

Okay.

exactly And What need India. in is the a factors wanted it bit. perspective? the efforts sales other online payments can in reduce I some the a SMBs I'm between folks? you and logistics thank your you what get SMBs to if little So switch do called practical press Do your could friction guys but you. to there? you and talk this to guess micro involved door-to-door have up I release, out wondering from of to about

to And these SMBs global what can it think Thank second, And get that it be that you. you to inventory? do to selling? this Is could buyer could like content base? merchandise you Amazon? are be long-tail exclusive Is exports

Dave Fildes

Thanks Yes question. for is Dave. Stephen, the this

and said, of we I sellers, this experience you mentioned release, response in continuing definitely some customers by excited to as improve the seen. in think India the the we've As for we're

We medium-sized in continuing meaningfully and MSMBs businesses. micro-small say invest are digitizing to those

small and more and XX And to XXXX. goal bringing than digitize pledge a to did India. of micro we've We by got billion online traders invest help million $X across businesses those

by this investment will billion $X exports to So, XXXX. help Indian enable billion in cumulative $XX

over of lot different facets XXX,XXX too into of to XXXX, lot those work of we We're India creation in we've Since over investments, also A over launched a there. indirect there. won't go job jobs. but and job created direct types for growth, done specifics, focused on in being much

India to recently additional create one So also XXXX. -- we by plans million jobs in announced

a job great of a that with with that and really locally at I are That a building -- innovation great So, Amazon that team there investment. taking to over continues had do new innovation, region. think and the a of ideas, to done that coming of lot of there run up tenants think some and we've around over lot I features services job specific interesting and

to do as back we other other identifying over more and can help that in keep in and we'll hopefully, bring India And regions to we the other websites that, over India to tool broadly. continue features areas benefit sellers sets

Operator

you. Thank

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

Brian Nowak

question. for my Thanks taking I two. have

one-day talked of think I $X you're media about first cost delivery you more on becoming billion about with that current -- talked continue one Brian, quarter. and and you the do so continue the to Just, of next-day with one in and efficient how interviews,

of you've sort and with to go day product get from associated for us still good the costs categories just throughout you’d of specific in efficiency Maybe of really that qualitative the number call some sort seen to that down out? one-day fix demand or about the variable any then, an we opportunities and one And acceleration talk largest processes categories XXXX. maybe where as in

Brian Olsavsky

Sure.

sure make we had slightly $X.X was QX, into year And higher volumes would that under QX. about in to revenue close an despite that than and It up We be on mentioned talked estimated call me I the growth carried guidance. penalty. time We million second in quarter. was the billion in of last the step then QX higher initial our cost $XXX last -- in are this about QX-- understood. was slightly that in Let numbers

there'll year-over-year. costs on rates to to start additional billion then step doesn't And volume fulfilling a goes to and one QX, estimate this. we actually again, $X expand And as up looking grow day. ahead of and And lap we'll that basis our means delta and a delivering we'll mean where the on QX, that see in approximately It zero. be we are

on costs where we to you as the I posted those results So, keep our see future guide in will and going.

buckets. few you're Partners volumes If you get efficiency modes, routes. obviously -- first are and new out, density adding the new the transportation new out subscale or cost, a more where they at Many adding more volume, you transportation generally and you're deliveries. into It's you more they efficient, the you look with fall package start creates get efficiency. that them times build building

of we in we customer. abrupt network to year, QX transportation from also in advantageous to when inventory one-day the our When part it's last cases, a standpoint cost closer that you to tuned on fulfillment of have two-day most this, and had the that, to started a delivery lot it's again, change when move for

shorter So, we've transition. more hit in are enable will shift cutoff local, of it times. as we're still the we deliveries be inventory that local to middle to -- year last We

become to to last the So, further. We we XX% each continue of for network square by scale transportation will that fulfillment efficient. see grew footage will fulfillment years. have the two center We our and more -- do

in QX, one-day. this efficiencies And we we'll handle learn step up. look ahead start for and and guided to capacity but the we step-up that's something we grow haven't that get build volume. as But a beyond that more one-day certainly year more and see will as I

shipment start it Third lap area do That to but having is not because -- and while. doesn't simply, foregone just a charging after revenue unfortunately we're leverage, ship we it. free for

a lower -- cost have our to almost just every years would can opportunities increased to presence media we we can look as a we've shocks and of be here for to imagine, in say program one-day, product efficient penalties from where we that I third-party the the -- cycle FBA from had any system to move forward. over the now to you So, to warehouse having more as other going history

Operator

you. Thank

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

Dan Salmon

shipping. for the guys. just Thanks to question on taking Brain, follow-up one-day

volumes. that in quarter You is just incremental naturally regionally at that idea I But costs of and of the up with certain finished. the here we want noted beginning you that to second can you shipping sure just is is make one-day flow lap begin with functionally the properly. initiative I sort clear to of SKUs here to the understand or either expansion anniversary that be

-- reported. just see the other then can And we number

love any the bit color particular but on wasn't focus advertising an would there initiatives an your on you. Thank some that know to within part. of it be a Just holiday the I hear growing season, And important in update the just in probably seems brand to business. there.

Brian Olsavsky

Sure.

me on start Let the one-day.

the do expansion yeah, of we year. codes. additional program means So, as through last started routes, we We've year. zip one-day effort Expansion additional since this been in cities, see the expanding we of move QX additional

effort more more what I -- more see think -- more in But is an internationally. costs XXXX you'll internationally, also

one-day Japan. in selection particularly in have -- improved We of and our Europe greatly

higher of that. be in steps taking steps be our with shipments started -- are move do globally as geographies, it balanced have percentage to we take expect little we We to into increase more those cost started XXXX. to to we and one-day that but And a

Dave Fildes

Yeah, Dan.

terms the brands them. are on customer certainly customers and and focused In on providing around the lot set of brands. focus inspire products really advertising a We're an that help and question your tools to going of as

stores, So, to story. a can better multipage and are their brand about allows things they share customers curate who that store. a really so tell we're excited It them customize

option. loyalty So, and we customer of deepen type help engagement that the can brand the through

discover customers mobile page. Some features other there's feed helps through brand's international detail in it's that which some and brands. content and it's And lifestyle posts, curated products a like on things other expansion the areas. a And

do provide advertising, think of developing because uniquely with our with about can appreciate so outcomes. We're having broadly positioned around fidelity retail I is we the they shopping given -- much this relationships to these think this I business. great advertisers,

about the did that rate. line that. than about Advertising same XX% of quarter year-over-year quarter. is subset business, revenue item is the rate biggest On fourth or say in other at Advertising it in growing advertising growing the grew the is piece item same rather I the the should been revenue year-over-year. Line a at as about third

Operator

you. Thank

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

Eric Sheridan

can. a if Thanks taking part Maybe question. for the two question AWS on I

AWS going the change with out depreciation respect called You to forward.

drove on and the that better perspective decision about made some a how to to decisions understand were wanted Just of modeling from think that going useful that life that forward?

And terms part then what the be than Thanks way second cycles would maybe out prior CapEx is if business, forward the thinking of does in the you're life about that so you're moving much. assumptions? AWS for useful mean assuming

Brian Olsavsky

Sure. bringing for up. that Thanks

looking we've of a -- it the life FCs, at how to centers as we make annually. financial the in our fulfillment going a and assets the monitor QX our operations. to AWS also estimate both practice been assets are that be our depreciable In of useful statements sure So, review, regular and and used best reflect basis on long in

in it's there's XXXX, now is to the As trend believe -- of we exceeding life QX four useful we that enough show years. looked

servers for had -- been depreciating over been have we them our three years. We and

are So, start depreciating to basis. four on we year a them going

done to point into doesn't that asset do depreciation our server extends then new want from to an change. not will capacity play takes work a and rather three last It continue of already its I longer. out for we'll the It's instead be accounting-related depreciation unwind reflection put and make of extend it's revisit just the out to the this. status assets we've booked. current years any It been four and period that's just will

support years more Amazon for and our to and to scale servers to XX servers continue our through refine used over business It We've on been we life operating that run the the in hardware. extends that AWS useful use business the we own in efficiently and this also we businesses. then software stress both at lowers the

that So than and access because the this, actually customers AWS of continue latest despite get before. customers quickly AWS technologies we and -- ever to more give to

that have better extending our the reflecting So, we we into gotten essentially life moving building financials at and the useful are forward. that now here fact

It last consistent. keep capital. change quarter-to-quarter. check It in But me right. reason been of been our the will relatively it the of and two should under timing years be we've part that infrastructure you're I Yes, able in need capital area. it's would our also the $XXX the also depreciation that its -- say impact million and excuse lower $XXX in quarter will expense to

impact our billion But in We XXXX. as QX $X.X see can about you. will statements, in update it's financial you

Dave Fildes

Dave. is This Yes.

on Just expect decrease is go we We -- that too we tech in kind And for on of the through the think effectively, million QX. impact that the assets. amount $XXX do accounting point the will as year. modeling that it's that that infrastructure

it's -- infrastructure So, tech I servers are the should assets. say

So, when of segments you majority these about relate to the segment. think AWS the

Operator

you. Thank

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

Ron Josey

about the bit taking beat impact the ask season, question. just sales any third-party it shopping top just and little I the But holiday and seller about to want results is the given I days? like on Brian, services. doesn't in there's for line see maybe online if better retail shortened holiday the seem Thanks the a much Great. from any given to quantify way the mean, and six way the more to season. less think there

mentioned would to tax. Did any you. Thank impact quarter, Any sort there last according or from that an also thoughts consumption of helpful? Japanese then plan be impact? you the And go

Brian Olsavsky

Yes.

to Japan was consumption a the of The Japanese of discussed also -- effective into tax quarter QX and forward two raising there the some by effects on purchases pull were negative X. customers all we result elasticity X. some post October X% from October with XX% last First net items

very moved third item into revenues this other was -- it XXXX has the swing The on the timing, Diwali more in which holiday quarter versus Indian international large a XXXX. is, versus factor year

So, rate our impacted was negatively by QX. it help penalty and items that about basis to Those a and two actual outcome. the believe points. was QX growth to the we estimate QX was XXX a That

Dave Fildes

international? the On

Brian Olsavsky

as fashion. me works way into at a and incorporated for look On will the as that Yes, our question season. we And will customers in sorry generally it least negative holiday the is holiday -- it that the November. last first mentioned we spend segment see The a yes. at we a between don't the was in excuse and it call I middle wasn't of believe actually. international factor our guidance have it way they business that budget the The

early to and Black closer in And to Cyber threshold November in see the do obviously as It's cutoff. we spikes shipping holiday for the of get Monday and through creeping up and see the the we part relative Friday also holiday tick-up we trends season.

to polarization be So, there's to purchases. shipping me late a early -- tends and of purchase or a excuse early polarization

as, an As notice but business. days six the time sort on impact traffic, period Christmas issue bigger for we holiday, of see between it's don't we and it stores don't our in and far the foot Thanksgiving a that that. Perhaps

Operator

you. Thank

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

Doug Anmuth

I the month delivery. towns into Prime at the impact putting it Can you point? to previous of into removing shift talk about Thanks is there of Prime kind two-hour just just into bundling the the with X,XXX this Prime added kind early and Fresh cities component for taking what $XX.XX and you of Fresh a grocery. to U.S. gears I there and talked know you want Amazon question. about

now? you're about as grocery positioned how just then strategy your Thanks. And thinking you're

Brian Olsavsky

Thanks for your Sure. question.

of grocery Fresh are our Market the the delivery than results combination We orders more early So, and -- Foods Whole year-over-year. doubled in quarter fourth good. Amazon from

notice So, to and of we believe customers advantage this. are starting take

We tastes take where take wanted to them. people's -- will will we preferences see and

for the Whole go now, we're the or Now customers' preferences demand Foods use the whether Right testing Market and and whether store, do so -- their they to groceries. customer Prime foreseeable reacting we'll future. and store, really the are the Amazon We for delivery just they to

Operator

Thank you.

question Markets. RBC from Mark come line Our the with will Mahaney final of Please proceed. Capital

Mark Mahaney

for Okay. ones. me. throw including Thanks three Then quick I'll off

gross a talk in little quarter. margins the bit about Just more

it the this trend last had and was You year-over-year up -- quarter. quarter, reverse negative was turned but

So, are to if want out there you'd unusual factors call any there.

to a actually then is year the every delivered guided five -- into years that, read than down last above your sequentially This guidance, but the did what be lot fourth to high always obviously over Second end of operating and want guided I quarter. you don't for down. you've the profit but your year you may better range in always your you

people, the trying advertising color just of educate So, in profit just you more mix the how shift profile people, business to and towards tell there? Are people any remind on the the business? changing AWS is

then customers one coming mentioned the Sunday up. is know since And talked you and what XXers? about AWS about I the you last the but Seahawks, Thanks. Seattle

Brian Olsavsky

I'll Good that out XXers. there get luck first. indifferent. We're luck Sachse Good Ken fan.

the me -- on -- sorry, second start one margin. gross Let with your start with

Dave Fildes

Yes.

surprising So, too there. don't think there's anything I caught

I continue we growth the business. see some third-party to think in good

accelerate that well. of think You has And continues we taking faster with XP continuing and whatnot. that better saw sold of total program and a as keeps to getting are Brian see more some. that of some sellers through, do so do with that units that the signing to of the percentage FBA earlier, mix trend mentioned larger We're to shipping

to on We've course billions gross margin as make quarter so dollars of the it a even of for well. that program invested had in many AWS helps sellers. better strong side that

I And shipping the you think to outbound year-over-year. on costs around grow saw transportation XX% then

But of expectations. XXXX. our relative of that's up and a saw line deal the course So, to versus one-day trend we certainly overall good reflective in

with we that. a bit to As in guided under Brian $X.X the said came billion it

of that some better-than-expected part was of efficiencies. some So trends certainly

Brian Olsavsky

has had then other as -- bit in on and comment the stepping the that a been balance broken of QX bit on guidance in of peaking QX things. some a AWS in operating And think trend we've the and and of little QX up seasonality down I income historic

warehouse But operating in if remember income on difficult one last XXXX slowdown the back of not infrastructure but -- because QX off that actually the costs, fixed you -- the QX of like investment had was makes cost lot in a quarter the in -- down that look it of super-efficient XXXX XXXX. space, highest to headcount, we baseline of from that's And and of of comp year, zero, profit in you actually things into to prior XXXX if this quarter standpoint. it year, levels continued and was adding -- continued record. a expenditures A a cost like and

QX of one last we day. particularly again started year, to larger investments, make in

something we year that's in draw this that quarters it's lapping in -- is think so And really there's have so -- QX anymore. QX to I last one-day of hard But those of didn't parallels year. between now because

lives, I $X part will which of the server from depreciation that though is useful mention our range you billion. the the guidance we of that $XXX we $X.X extension billion of do of have our to gave lower million

Dave Fildes

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

Amazon.com (AMZN) 30 Jan 202019 Q4 Earnings call transcript