Analytics and Optimization Lead at Heathrow Airport, Stuart Irvine, says that email is still the key driver for them in marketing and personalizing the customer experience. Irvine said that Heathrow sends over 6 million emails monthly and that working with Adobe Campain has enabled them to move their opening rates to over 20 percent with 25 percent click-through.
Stuart Irvine, Analytics and Optimization Lead at Heathrow Airport, recently talked about their use of Adobe products and services and how they have driven their evolution in digital marketing:
Engaging 80 Percent of Our Customers Digitally
We have 78 million customers a year and we are targeted with engaging 80 percent of our customers digitally. Certainly, we need to raise pre-awareness of our products and services before someone arrives at the airport.
We have strong commercial targets that we need to hit and the Adobe Experience Cloud allows us to get from acquisition through to activity to after the trip activity. This allows us to tailor messages as someone moves through the airport experience to make sure that we deliver relevant push messages or relevant content throughout their journey.
Email is Still the Key Driver for Us
We work a lot with geolocation where we have over 11,000 beacons around the airport. Tools like Adobe Campaign allow us to move through that journey and keep that contact regular. We implemented Adobe Campaign three years ago with integration partner Acxiom, a long-term data partner. Adobe Campaign, as a truly omnichannel tool, has allowed us to really ramp up activity across channels.
Certainly, email is still the key driver for us. We send over 6 million emails every month and Adobe Campaign has allowed us to personalize a lot more emails and make sure we get the right offers to the customers. We’ve worked with Adobe Analytics for 8 years and we now capture all of our online data. That’s all passed to Adobe Audience Manager which allows us to drive personalization at scale and deliver relevant and contextual experiences.
Adobe Professional Services Has Been a Key Advantage
I think the Adobe DAM, obviously with the integrations with Creative Cloud, can offer us huge process improvements. Working with Adobe professional services has actually been one of the key advantages for us. They have the knowledge to make the best value of the integrations between all of the solutions to really deliver experiences at scale we need to have automated processes.
Moving More Towards Personalization
We have a lot of faith in the Adobe Sensei platform and the machine learning there. We’re just opening up our homepage to automated personalization to try and bring through some subcategories of products that we’ll get a much better cut through with our customers. Now we’re moving more and more towards personalization, recommendations being the key focus areas for target.
Adobe Audience Manager has been a key driver behind that. It is really a game changer for Heathrow Airport given our investment in the rest of our tech stack. Audience Manager really brings that all together and allows us to deliver an omnichannel experience.
Open Rates Are Now Above 20 Percent
We’ve seen open rates go from the low teens to above 20 percent, some great results there. We have over 25 percent click-through rates on some of our emails, which is a fantastic number to achieve. We’ve been able to increase average retail spend per passenger from £5 ($6.48) to £8 ($10.38). With our rewards customers, we see that they travel at least five times a year they have an average spend of £140 ($182) per visit. Adobe Campaign has been key to building that relationship.
Our journey with Adobe has been a great experience. We’ve moved through from basically analytics eight years ago, but actually, the development of Adobe’s roadmap has continually evolved and that has driven our evolution in digital marketing as well.
Amazon is now one of the ten largest retailers in the world. A study by One Click Retail also determined that the online giant accounted for about 44 percent of all eCommerce sales in 2017. These two reasons alone should be enough to convince you about the importance of integrating Amazon into your sales strategy.
However, simply creating an account and selling on Amazon is not enough. After all, there are millions of third-party sellers on the site, and a lot of them even offer the same merchandise as you. If you want more shoppers to see your product and boost your sales, you need to appear in Amazon’s vaunted Buy Box.
What’s a Buy Box?
TheAmazon Buy Box is the golden ticket for e-retailers because winning it means high visibility and amazing sales numbers. This is the white box found on the right of the product detail page, where shoppers can add the items they plan on purchasing.
When customers search for a product on Amazon, photos and details of the product appear, along with an “Add to Basket” or “Add to Cart” button. Once the customer clicks on the yellow button, the lucky seller who has the Buy Box at that particular moment will get the sale.
Image via websitemagazine.com
There’s another box underneath the Buy Box for the other sellers. However, 82 percent of shoppers tend to just click on the yellow button while 18 percent of customers really take the time to scroll through other sellers and compare prices, delivery methods, and seller feedback. So it’s easy to see why the Buy Box is a prime commodity among third-party sellers.
Advantages of Winning the Buy Box
Retailers who win the Buy Box have a huge advantage over their rivals, especially now that the majority of consumers are doing their shopping online and more often than not, they make their purchases on Amazon.
Winning the box is alsoessential now that mobile shopping is growing rapidly. As a matter of fact, shopping on Amazon’s mobile app increased by 56 percent globally and is expected to continue growing. Unfortunately, while the “Add to Cart” button can still be seen under the product image and details in the app, shoppers can’t view other sellers easily. So if you want to secure more sales, it’s vital that you win the Buy Box.
How to Win Amazon’s Buy Box
In order to win the coveted Buy Box, you have to have the following key requirements.
Have a Professional Seller account: Retailers with a Professional Amazon Sellers account are the only ones who have a shot at winning the Buy Box. The company’s algorithm does not include Basic Seller or Individual accounts. So if you want that box, make sure to upgrade to a Professional account.
Be Buy Box Eligible: You should be Buy Box Eligible for a specific product if you’re planning to compete for Buy Box sales. This means you have to have been trading for a minimum of two to six months. You should also have a history of successful sales. Closing a large number of sales proves your consistency and trustworthiness. Good customer metrics and great customer service are also needed to be eligible. You can also improve your chances by fast-tracking your eligibility via the Fulfillment By Amazon (FBA).
Products Should be New: Only new products can win a place in the Buy Box as the company wants to ensure that only products of high-quality and in good condition are being promoted. If you’re selling pre-loved items, you can be eligible for the Used Buy Box, which is distinct from the main box.
Have Enough Items: Having available stocks will certainly boost your chances here. After all, you can’t sell something if you don’t have it on-hand. Amazon also wants to minimize incidents of customers being disappointed when they reach checkout only to discover the item is sold out. So it’s crucial that you have enough stock and that your inventory is updated. Otherwise, your seller metrics will go down and your chances of getting the Buy Box will dwindle.
Winning Amazon’s Buy Box will undoubtedly help boost your sales and enhance your reputation as a successful seller. But you have to be ready for some strict competition if you’re planning to go for the box. Remember that there’s no solid way to beat your rivals and ensure you win the Buy Box. All you can do is monitor your metrics and focus on key factors like having Prime products, becoming an FBA seller, having excellent customer service and getting positive feedback from happy shoppers.
Facebook’s goal is to connect with everyone, yes every single person in the world. Not just that, but Facebook wants to connect to everyone at all times, in every waking moment. Facebook envisions a future where you will always be engaging with some part of the Facebook ecosystem, whether it’s on its mega social platform at Facebook, using it’s search engine, messaging a business associate or communicating on video or via a virtual reality environment.
But first lets talk business.
“I often talk about how when we develop new products we think about it in three phases, said Zuckerberg. “First, building a consumer use case. Then, second, making it so that people can organically interact with businesses. And then third, on top of that, once there’s a large volume of people interacting with businesses, give businesses tools to reach more people and pay. And that’s ultimately the business opportunity.”
During the earnings call yesterday, Mark Zuckerberg opened the curtain into Facebook’s plans, strategies and dreams for the future. He first provided the latest metrics illustrating Facebook’s continued success, 1.7 billion people now use Facebook every month, and 1.1 billion people use it every day. He said that Facebook revenue grew by 59% year-over year to $6.4 billion, and advertising revenue was up 63% to $6.2 billion.
Sheryl Sandberg, COO of Facebook said that Q2 ad revenue grew 63% and mobile ad revenue hit $5.2 billion, up 81% year-over-year, and was approximately 84% of total ad revenue. Facebook is now truly a mobile app rather than a desktop experience for the vast majority of its users.
Zuckerberg said that they continue to see excellent growth and over the past year Facebook has added over 200 million people using Facebook on a monthly basis. Time spent per person increased double digit percentages year-over-year across Facebook, Instagram and Messenger. And that doesn’t even include WhatsApp yet.
Facebook is still growing rapidly and that’s because it has continued to evolve. It’s evolution has happened because of increased bandwidth, technological advancements, acquisitions of new platforms like WhatsApp and Instagram and most importantly continuing to be on the cutting edge of what people want in a social network. All of this while simultaneously building a successful business model that pays for this evolution.
What’s really interesting however, is how Zuckerberg sees Facebook transforming in the future. “Our results show our progress as we work to make the world more open and connected across our three-, five- and ten-year horizons,” he said. “Over the next three years we are focused on continuing to build our community and help people share more of what matters to them. The next five years are about building our newer products into full ecosystems with developers and businesses. And over the next ten years we are working to build new technologies to help everyone connect in new ways.”
Facebook is seeking to be the world’s business platform, not just the peoples. More on this below in the Search section on a Facebook future where it is competing with LinkedIn.
“We’re excited to announce that we now have 60 million monthly active business Pages on Facebook,” said Facebook COO Sheryl Sandberg. “We also continue to grow the number of active advertisers on our platform. This shows that both our free and paid products are providing value to marketers of all sizes around the world. We continue to focus on our three priorities — capitalizing on the shift to mobile, growing the number of marketers using our ad products, and making our ads more relevant and effective.”
Trust me, this is just the beginning of Facebook’s morphing into both a personal and business platform in the future.
The Future of Facebook is Video
Facebook used to be mostly text and over the years they changed to be photo centric, with many people using Facebook as their family photo album. People still do that but Zuckerberg envisions a huge change coming. “We see a world that is video first, with video at the heart of all of our apps and services.”
“Over the past six months we have been particularly focused on Live video. Live represents a new way to share what’s happening in more immediate and creative ways,” Zuckerberg said. “This quarter Candace Payne’s Chewbacca mask video was viewed almost 160 million times. Live is also changing the way we see politics, as news organizations and delegates go Live from the Republican and Democratic conventions. And we have seen in Minnesota and Dallas how Live can shine a light on important moments as they happen.”
At Fortune‘s Most Powerful Women International Summit in London, Nicola Mendelsohn, VP EMEA at Facebook, predicted that the Facebook newsfeed will be all video in 5 years. “It will definitely be mobile. It will probably be all video,” Mendelsohn said. “I just think if we look, we already are seeing a year on year decline in text. We’re seeing a massive increase as I’ve said on both pictures and video. So yeah, if I was having a bet, I would say video, video, video.”
“When you think about what’s happening on video on our platform we’re really excited by the production and consumption of video and we’re seeing the full range from people posting the things in their personal lives; the power of what a mobile phone can produce and distribute now is pretty incredible when you compare it to just a few years ago to some of the most sophisticated content producers in the world producing for us,” added Sandberg.
Facebook Focuses on Search
Facebook is moving into the search space aggressively, definitely to help it compete with Twitter and perhaps even Google in the future. Facebook launched true keyword search in late 2014 that allows users to search not just profile names or just your friends posts, but also everyone’s public posts. And, if you didn’t know, all postings default at public, which means that anyone can search for your posts.
The first goal for Facebook with search is to become more like Twitter, where people post their thoughts, feelings and most importantly news reports, especially the on-the-scene kind. When the next plane lands in the Hudson, Facebook wants the survivor standing on the wing to use their platform to post about this breaking news, not Twitter. More precisely, Facebook wants you to use Facebook Live to stream your personalized live news coverage.
“We’re making good progress on core services within the Facebook app, like Search,” Zuckerberg stated. “A growing way people use search is to find what people are saying about a topic across the more than 2.5 trillion posts in our network. Now, people are doing more than 2 billion searches a day, between looking up people, businesses and other things that they care about. Continuous, steady improvement to services like search are an important part of helping people connect and realizing our mission.”
He also said this in minimizing their true plans, in my opinion.
So I’d say we’re around the second phase of that in search now. We have a pretty big navigational use case where people look up people and pages and groups that they want to get to and look at and search. One of the big growing use cases that we’re investing a lot in is looking up the content in the ecosystem and that is an area that we’re very excited about which helps people find more content.
But certainly there’s a reasonable amount of behavior in there which is looking for things that over time could be monetizeable or commercial intense and at some point we will probably want to work on that but we’re still in the phase of just making it easier for people to find all the content they want and connect with businesses organically.
But what’s their next goal? Facebook has certainly focused on the business use of their platform as they continue to look for monetization opportunities. My guess is that Facebook will seek to compete with LinkedIn as the business platform of record.
Over the last few years LinkedIn has certainly moved from a glorified directory of business professionals to a platform for business related news, conversation and connection. Facebook has the platform but would need to figure out how to easily separate family life from business life, which could be done rather easily. With Microsoft buying LinkedIn, Facebook will be highly motivated to compete.
Google tried to compete with Facebook with Google+ and it failed miserably, but that’s because it’s harder to get people to change their social habits than it is their search habits. You don’t need your friends to use Facebook Search in order for you to find it useful, but you definitely need your friends to move to a new social platform to make it work for you. That was Google’s dilemma, but it won’t be Facebook’s.
“Since it refocused on keywords, Facebook is now seeing 2 billion searches per day of its 2.5 trillion posts,” stated TechCrunch writer Josh Constine. “That’s compared to 1.5 billion searches per day in July 2015, and 1 billion in September 2012. That’s a 33% climb in just 9 months.”
That’s lets than half a reported 3.5 billion searches per day on Google. The difference is that Google’s searches are monitizable, while Facebook searches, not so much. However, this must scare the heck out of Google because it shows how ingrained people are to use Facebook for search. Therefore, over time I predict that Facebook will add web indexing to it’s search engine. They already have 3.5 billion searches, why not open up search to everything and in the process open up a huge monetization opportunity.
One other prediction, Facebook will disconnect its search app from just Facebook.com, just like they did Messenger. Then, voilà, Facebook is competing with Google.
Making Instagram Stronger
Instagram was purchased by Facebook for $1 billion while it was just getting off the ground. It is now center to its plans on connecting with everyone in the world on a constant always on basis. That’s why Instagram is so important to Facebook, it has a foothold with younger people and its active user base is not a clone of Facebook’s, so it expands the corporate Facebook’s universe of connectivity and engagement.
“Over the next five years we are working hard to build ecosystems around some of our newer products,” said Zuckerberg. “Instagram now has more than 500 million monthly actives, with more than 300 million daily. Now we’re working to make the experience more engaging.”
He said that when Instagram, despite user pushback, began to rank its feed in order to improve the experience, that they are already seeing a “positive impact” with people spending more time and share more content within the platform.
As always, business is important to Zuckerberg as well. “We’ve also introduced our advertising tools on Instagram and we’re seeing marketers engage with people in creative and innovative ways.”
Messaging with Messenger & WhatsApp
“In the two years since we separated Messenger from the main Facebook app — which was a controversial decision at the time — we’ve improved performance and given people new ways to express themselves,” commented Zuckerberg. “Now, for the first time, more than 1 billion people are using Messenger every month.”
Facebook sees a huge opportunity with messaging because it moves them closer to their goal of connecting everyone on a constant always on basis. That’s why they paid $22 billion for WhatsApp, which is a service that barely had a business model.
“I’m also happy with the updates we’re making to WhatsApp — which also has a community of more than 1 billion people,” said Zuckerberg. “This quarter we launched new desktop apps and end-to-end encryption, and millions of people are using WhatsApp’s voice calling features.”
Facebook has big plans for messaging because not only does it help them bring even more people into Facebook’s universe, but it moves them into the business space, where Facebook desperately wants to be, because that’s where the money is.
“The scale we’ve achieved with our messaging services makes it clear that they are more than just a way to chat with friends,” Zuckerberg noted. “That’s why we’re also making it easier for people to connect with groups and businesses as well. We are going to keep focusing on this over the next several years.”
Facebook owned messaging has now taken over standard text messaging according to Zuckerberg.
“Between Messenger and WhatsApp I think we’re around 60 billion messages a day which is something like three times more than the peak of global SMS traffic.”
It’s incredible to think that Facebook now owns the messaging space. Who would have thought that 3 years ago?
New Technologies
“I’m also excited about the early progress we’re making on our 10-year initiatives,” said Facebook CEO Mark Zuckerberg during their recent earnings announcement. “We are investing in new technologies to give more people a voice — including the 4 billion people around the world who aren’t yet online — and helping more people take advantage of the opportunities that come with the internet.”
Facebook is seeking to connect everyone in the world, regardless of any obstacle. It’s a long term plan, but Facebook is on it.
“One of the biggest opportunities to grow our community is in developing countries where connectivity is less advanced than what we take for granted here at home,” Zuckerberg said. “So over the past couple of years, we’ve began making steady improvements to our apps to make them work regardless of the device or connection people are using. We also built a light-weight version of our Android app, called Facebook Lite, that is tuned to work on 2G networks and is now used by more than 100 million people.”
Virtual reality is another huge area of investment for Facebook, especially with their $2 billion purchase of Oculus. They see VR as an extension of connecting and sharing. Know one really knows the future of VR, but it will be deeply engrained in advertising in the future and since all of Facebook’s revenue comes from advertising, they need to be in this space.
“We believe that virtual reality can help people share richer experiences and help everyone understand what’s going on around the world,” said Zuckerberg. “It’s really early for us in VR but we’re hitting some important milestones. As of the second quarter more than 1 million people a month are using Oculus on mobile phones through our Gear VR 4partnership with Samsung.”
Zuckerberg also commented on the potential revenue importance of their investment in VR:
“More than 300 apps are already available at the Oculus store for Gear VR, we’ve filled all of our pre-orders for Oculus Rift and we are seeing increasing demand from retail as stores plan for the holidays. While it’s still early for augmented reality, we’re doing AR research and are seeing lightweight versions of AR technology today in mobile apps like MSQRD.”
Facebook is Just Getting Started
“So that’s a recap of the progress we’re making in our 10 year plan,” said Zuckerberg. “We have a saying at Facebook that our journey is only 1% done — and while I’m happy with our progress, we have a lot more work to do to grow our community and connect the whole world. That means making big investments and taking risks — focusing not just on what Facebook is, but on what it can be.”
There’s been a lot of news about buy buttons on social sites for the past year or so, particularly on Facebook, Pinterest, and Twitter. In the months ahead, users of these services are likely going to see more and more of the buttons popping up in their feeds.
Twitter recently announced that businesses of all sizes can try out the Buy Now option as it partnered with three ecommerce platform heavyweights in an effort to make the social shopping experience more seamless.
As more and more businesses gain access to these kinds of features, they’re going to have to test the waters cautiously as to not alienate users and to make sure they actually are providing a good experience.
Rick Chavie, CEO at data solutions provider Enterworks, tells WebProNews, “The concept of buy buttons makes sense at first glance – consumers are increasingly digitally focused and brands are wise to engage with them on the platforms that they frequent. However, the authenticity of these sites is the differential that made them popular.”
“Brands that bombard shoppers with marketing material, making social sites less about collaboration and more about commerce, risk creating over-commercialization,” he adds. “There are definitely benefits to the integration of buy buttons but, in order for brands to preserve an authentic social presence while implementing buy buttons, three practices must be in play.”
These practices, as Chavie puts them, are as follows:
1. Use data to better predict and target customers who are ready to buy.
2. Be strategic about the products embedded with direct-to-purchase links.
3. Test the strategy using a small group of consumers, see what sticks, then adapt as necessary.
CloudCraze recently teamed up with Salesforce in what a spokesperson describes as “a similar pursuit to make the B2B buying process more convenient and seamless for its clients’ customers.”
CloudCraze CEO Chris Dalton shared some thoughts about the overarching trend on what the B2B space can expect to see in the coming years as ecommerce partnerships and platform integrations continue to “redesign the once very straight-forward and distinguished B2C and B2B buying experience.”
“As professionals in the eCommerce space, we’ve all witnessed firsthand the growing demand for a seamless, connected user experience,” Dalton tells us. “The needs and expectations for B2B buyers are vastly different than those in B2C, but the B2B buyers are looking for the same ease of use they get with their personal B2C purchases. Similar technologies are being developed to power both experiences.”
“With the introduction of eCommerce platforms for businesses to meet customer demands, a more integrated and scalable end-to-end process from factory to storefront has become a reality in the marketplace,” he adds. “Scalable, affordable platforms exist that can help B2B companies improve communication, increase production efficiency, and simplify the purchase process. One example we are already seeing gain traction is the integration of ‘buy’ buttons, allowing buyers to make purchases in context, rather than redirecting them through multiple sites before they make the final purchase. Taking cues from the B2C eCommerce marketplace, I expect we will see a fast growth in the adoption of in-context commerce technology in the B2B market.”
“While B2B is still in its pioneer stages of online sales compared to the maturity of its B2C cousin, B2B marketers actually have the advantage in the long term over that of B2C, as their customer profile is much deeper and more robust,” Dalton says. “With more background information to effectively address buyers’ needs, B2B companies will be able to integrate more intuitive and catered targeted marketing campaigns into the customer’s end-to-end buying experience that span from the research stages to the purchase. There is great potential for in-context commerce in the B2B market.”
In addition to CloudCraze, Salesforce recently made ecommerce partnerships with Bigcommerce and Demandware.
Amazon released its Q3 earnings report, including a 23% increase in sales year-over-year at $25.4 billion.
Net income was $79 million ($0.17 per diluted share) , compared with net loss of $437 million, or $0.95 per diluted share, in third quarter 2014.
Operating cash flow was up 72% at $9.8 billion with free cash flow increasing to $5.4 billion.
CEO Jeff Bezos said, “For the first time, we’re recommending you bring home a six-pack for the whole family. At a price of $50 for one or $250 for a six-pack, Fire sets a new bar for what customers should expect from a low-cost tablet. This is one more step in our mission to bring customers premium products at non-premium prices. Fire is the #1 best-selling product on Amazon.com since launch, and based on the strength of the customer response, we are building millions more than we’d already planned.”
Here’s the release in its entirety:
SEATTLE–(BUSINESS WIRE)–Oct. 22, 2015– Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2015.
Operating cash flow increased 72% to $9.8 billion for the trailing twelve months, compared with $5.7 billion for the trailing twelve months ended September 30, 2014. Free cash flow increased to $5.4 billion for the trailing twelve months, compared with $1.1 billion for the trailing twelve months ended September 30, 2014. Additional measures of free cash flow can be found in the “Supplemental Financial Information and Business Metrics.”
Common shares outstanding plus shares underlying stock-based awards totaled 489 million on September 30, 2015, compared with 481 million one year ago.
Net sales increased 23% to $25.4 billion in the third quarter, compared with $20.6 billion in third quarter 2014. Excluding the $1.3 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 30% compared to third quarter 2014.
Operating income was $406 million in the third quarter, compared with operating loss of $544 million in third quarter 2014.
Net income was $79 million in the third quarter, or $0.17 per diluted share, compared with net loss of $437 million, or $0.95 per diluted share, in third quarter 2014.
“For the first time, we’re recommending you bring home a six-pack for the whole family,” said Jeff Bezos, founder and CEO of Amazon.com. “At a price of$50 for one or $250 for a six-pack, Fire sets a new bar for what customers should expect from a low-cost tablet. This is one more step in our mission to bring customers premium products at non-premium prices. Fire is the #1 best-selling product on Amazon.com since launch, and based on the strength of the customer response, we are building millions more than we’d already planned.”
Highlights
Amazon introduced four new tablets, including Fire, which has the best display on any tablet under $50 and is also available for an even lower price when purchased in a six-pack; Fire HD, the incredibly thin and light 8” and 10.1” tablets designed from the ground up for entertainment; and Fire Kids Edition, a tablet built for kids and their parents — now under $100.
Amazon introduced three new Fire TV devices, all with Alexa integration. The new Fire TV is 75% more powerful and has the best-in-class Wi-Fi and 4K Ultra HD — and is still less than $100. The new Fire TV Stick with Voice Remote adds voice search — and costs less than $50. Fire TV Gaming Edition combines the new Fire TV, new game controller, a 32GB microSD card, and two games — Shovel Knight and Disney’s DuckTales — all for under $140.
Amazon launched Fire TV and Fire TV Stick for Japanese customers, which provides easy, instant access to Prime Video, Amazon Video, Hulu, GYAO!, Netflix, YouTube.com, Niconico, Video Market, and more. In addition to the device, Amazon launched Prime Video on Amazon.co.jp, exclusively for Prime members, with thousands of popular Japanese and U.S. movies and TV shows, anime series, music concerts, and variety shows, plus Amazon’s own award-winning originals.
Alexa, the brain behind Echo, continues to get smarter with new features including support for shared Google calendars, integration of additional connected home devices from SmartThings and Insteon, NCAA football scores and schedules, and more.
Amazon announced new investments from the $100 million Alexa Fund, including Petnet, the creator of the SmartFeeder, an app-enabled intelligent feeding appliance; Musaic, a high-resolution wireless HiFi system that combines home automation to create a connected smart home; and Rachio, maker of a smart sprinkler controller that helps customers intelligently water their yards.
Amazon Dash Button has received an overwhelmingly positive customer response and selection continues to grow; customers can now choose from over 500 products from 29 popular brands. Dash Replenishment Service (DRS) now includes 15 device makers, such as General Electric,Samsung, and Oster. The first DRS-enabled devices are expected to ship later this year.
Amazon announced Amazon Underground, a new app for Android phones that includes the same functionality of the Amazon mobile shopping app plus over ten thousand dollars’ worth of apps, games, and in-app items, for free.
Amazon Studios’ critically-acclaimed series, Transparent, won five Emmys, including Jeffrey Tambor’s award for Outstanding Lead Actor in a Comedy Series and Jill Soloway’s award for Outstanding Directing for a Comedy Series.
Amazon announced an agreement with Jeremy Clarkson, Richard Hammond, James May, and the trio’s longtime executive producer, Andy Wilman, to make a new car show exclusively for Prime members worldwide. The award-winning team has committed to three seasons.
Amazon Studios recently debuted new original series Red Oaks, Hand of God, and Wishenpoof, with more content coming soon, including the much anticipated The Man in the High Castle and season two of Transparent and Tumble Leaf. In addition, Amazon has announced 12 pilots that are scheduled to debut later this year.
Amazon.co.uk launched Prime Music, giving U.K. Prime members over one million songs and hundreds of playlists to stream and download for free.
Prime Music expanded its catalog in the U.S. and U.K. with the addition of artists from Universal Music Group, including Katy Perry, Lana Del Rey, Lady Gaga, The Weeknd, Of Monsters and Men, Ellie Goulding, and many more award-winning popular and legendary artists.
Prime Now added eight metro areas in the past quarter. Prime members can now choose from tens of thousands of daily essentials with free two-hour and paid one-hour delivery in 17 locations around the world.
Amazon launched Amazon Pantry in Japan and Germany. Amazon Pantry offers Prime members a different way to shop, allowing them to purchase daily essentials in everyday sizes and have items delivered for a low, flat-rate fee per Amazon Pantry box.
Amazon introduced Handmade at Amazon, featuring genuinely handcrafted products sold directly from artisans around the world.
Customers in both the U.K. and France rated Amazon as their top retailer based on separate surveys conducted by Havas and OC&C Strategy Consultants.
Amazon continues to expand its international categories with the launch of the Business, Industrial and Scientific Supplies store for Japan, U.K.,Germany, France, Italy, and Spain with hundreds of thousands of items available for businesses. Additionally, Amazon launched Grocery for Italy,France, and Spain with thousands of food products and household essentials from local producers and international brands.
Amazon expects to create over 100,000 seasonal positions in North America, and over 40,000 across its European Fulfillment Network this holiday season. Last year, Amazon converted tens of thousands of temporary employees into regular, full-time roles, and expects to do the same this year.
Since the fulfillment center tour program launched last year, over 26,000 people have visited one of the 18 facilities where tours are offered worldwide.
Launched in late June, Amazon.com.mx has expanded selection to 32 million items, added three new categories, started offering monthly installments for select purchases, and expanded delivery on weekends and holidays to over 70% of zip codes in Mexico City.
Amazon.in continues to be India’s largest store with over 30 million products, having added an average of over 40,000 products a day so far in 2015.
In the past year, the number of sellers on the Amazon.in platform has increased more than 250%, and nearly 90% of Indian sellers are using Amazon’s logistics and warehousing services. To serve this growing storage need, Amazon.in has nearly tripled its fulfillment capacity year-over-year.
In the third quarter, active customers on Amazon.in grew over 230% year-over-year.
So far, Amazon.in’s 2015 Diwali season is our largest ever, with daily sales of approximately 4x the prior year.
Amazon launched Kindle Unlimited on Amazon.in with over one million titles for 199 rupees a month, less than the average price of a single print book.
Amazon Web Services (AWS) hosted re:Invent, its fourth annual customer and partner conference, with more than 19,000 attendees and 38,000 streaming participants.
Accenture and AWS announced the formation of the Accenture AWS Business Group, a team of dedicated professionals from both Accenture and AWS that will help enterprise customers more easily migrate their existing applications and build new applications for the AWS Cloud.
AWS introduced Amazon QuickSight, a very fast, cloud-powered business intelligence (BI) service that makes it easy for all employees, regardless of their technical skill, to build visualizations, perform ad-hoc analysis, and quickly get business insights from their data at 1/10th the cost of traditional solutions. QuickSight integrates automatically with AWS data services and uses a new, Super-fast, Parallel, In-memory Calculation Engine (“SPICE”) to perform advanced calculations, render visualizations rapidly, and scale to hundreds of thousands of users.
AWS launched new capabilities to make it faster, easier, and more cost-effective to move data from on-premises into the AWS Cloud. AWS Snowball is a petabyte-scale data transport appliance that can securely transfer 50 TB of data per appliance into and out of AWS for as little as 1/5th the cost of high-speed Internet. Amazon Kinesis Firehose is a fully-managed service that captures streaming data from hundreds of thousands of different sources and automatically loads it into Amazon S3 or Amazon Redshift for near real-time data analysis.
AWS announced new database tools and services that make it easier for enterprises to bring databases to AWS and break free from the cost and complexity of traditional commercial databases. The AWS Database Migration Service monitors the progress of database migrations, notifying customers of any issues and automatically provisioning a host replacement in the event of a failure. The AWS Schema Conversion Tool ports database schemas and stored procedures from one database platform to another, so customers can move their applications from Oracle and SQL Server to Amazon Aurora, MySQL, MariaDB, and soon PostgreSQL. In the first week after AWS re:Invent, more than 1,000 customers have signed up to use AWS’s new Database Migration Service.
In just four months since becoming generally available in July, Amazon Aurora has become the fastest-growing service in the history of AWS.
AWS launched AWS IoT, a managed cloud platform that lets billions of connected devices — such as mobile phones, cars, factory floors, aircraft engines, sensor grids, and more — easily and securely interact with cloud applications and other devices. AWS IoT can support trillions of messages, and can process, route, and keep track of those messages to AWS endpoints and to other devices reliably and securely, even when the devices aren’t connected.
AWS announced three new services and capabilities to make it easier for enterprises to build and manage secure, compliant applications on the AWS Cloud: Amazon Inspector is a service that automatically assesses how well customers’ applications follow security best practices and provides a detailed report to help fix any vulnerabilities found; AWS Config Rules is a new set of cloud governance capabilities that allow IT Administrators to define guidelines for provisioning and configuring AWS resources and then continuously monitor compliance with those guidelines; and AWS WAF is a web application firewall that protects applications from common web exploits by giving customers control over which traffic to allow or block to their web applications by defining customizable web security rules.
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of October 22, 2015, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet and online commerce, and the various factors detailed below.
Fourth Quarter 2015 Guidance
Net sales are expected to be between $33.50 billion and $36.75 billion, or to grow between 14% and 25% compared with fourth quarter 2014.
Operating income is expected to be between $80 million and $1.28 billion, compared to $591 million in fourth quarter 2014.
This guidance includes approximately $620 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.
A conference call will be webcast live today at 2:00 p.m. PT/5:00 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.
These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, 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, sortation, delivery, and data center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains, and develops commercial agreements, acquisitions and strategic transactions, payments risks, 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, 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 (“SEC”), including its most recent Annual Report on Form 10-K and subsequent filings.
Our investor relations website is www.amazon.com/ir and we encourage investors to use it as a way of easily finding information about us. We promptly make available on this website, free of charge, the reports that we file or furnish with the SEC, corporate governance information (including our Code of Business Conduct and Ethics), and select press releases and social media postings, which may contain material information about us, and you may subscribe to be notified of new information posted to this site.
About Amazon
Amazon.com opened on the World Wide Web in July 1995. The company is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon. For more information, visit www.amazon.com/about.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
Twelve Months Ended
September 30,
September 30,
September 30,
2015
2014
2015
2014
2015
2014
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
$
10,269
$
5,057
$
14,557
$
8,658
$
5,258
$
3,872
OPERATING ACTIVITIES:
Net income (loss)
79
(437
)
114
(455
)
328
(216
)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs
1,599
1,247
4,529
3,366
5,908
4,329
Stock-based compensation
544
377
1,513
1,089
1,921
1,414
Other operating expense (income), net
34
31
120
93
156
133
Losses (gains) on sales of marketable securities, net
2
(3
)
4
(4
)
4
(3
)
Other expense (income), net
56
42
166
(16
)
244
36
Deferred income taxes
(63
)
(270
)
(108
)
(503
)
76
(613
)
Excess tax benefits from stock-based compensation
(95
)
—
(212
)
(121
)
(96
)
(199
)
Changes in operating assets and liabilities:
Inventories
(1,537
)
(845
)
(844
)
(54
)
(1,983
)
(1,383
)
Accounts receivable, net and other
(588
)
(362
)
(577
)
66
(1,681
)
(1,173
)
Accounts payable
2,030
1,724
(1,846
)
(3,294
)
3,207
1,834
Accrued expenses and other
143
4
(925
)
(742
)
525
847
Additions to unearned revenue
1,779
1,069
4,979
3,055
6,358
3,874
Amortization of previously unearned revenue
(1,373
)
(811
)
(3,805
)
(2,353
)
(5,144
)
(3,175
)
Net cash provided by (used in) operating activities
2,610
1,766
3,108
127
9,823
5,705
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software and website development
(1,195
)
(1,378
)
(3,280
)
(3,748
)
(4,424
)
(4,628
)
Acquisitions, net of cash acquired, and other
(105
)
(860
)
(478
)
(926
)
(531
)
(986
)
Sales and maturities of marketable securities
1,045
1,439
1,890
2,994
2,244
3,509
Purchases of marketable securities
(1,122
)
(147
)
(2,732
)
(920
)
(4,354
)
(1,339
)
Net cash provided by (used in) investing activities
(1,377
)
(946
)
(4,600
)
(2,600
)
(7,065
)
(3,444
)
FINANCING ACTIVITIES:
Excess tax benefits from stock-based compensation
95
—
212
121
96
199
Proceeds from long-term debt and other
33
28
260
379
6,241
628
Repayments of long-term debt and other
(181
)
(84
)
(712
)
(331
)
(894
)
(371
)
Principal repayments of capital lease obligations
(656
)
(343
)
(1,738
)
(878
)
(2,144
)
(1,103
)
Principal repayments of finance lease obligations
(21
)
(13
)
(95
)
(68
)
(163
)
(73
)
Net cash provided by (used in) financing activities
(730
)
(412
)
(2,073
)
(777
)
3,136
(720
)
Foreign-currency effect on cash and cash equivalents
(63
)
(207
)
(283
)
(150
)
(443
)
(155
)
Net increase (decrease) in cash and cash equivalents
440
201
(3,848
)
(3,400
)
5,451
1,386
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
10,709
$
5,258
$
10,709
$
5,258
$
10,709
$
5,258
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt
$
7
$
7
$
177
$
56
$
212
$
93
Cash paid for income taxes (net of refunds)
80
38
200
148
230
173
Property and equipment acquired under capital leases
1,047
1,158
3,385
2,794
4,599
3,347
Property and equipment acquired under build-to-suit leases
125
343
381
707
595
920
AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
Net product sales
$
18,463
$
16,022
$
52,650
$
46,978
Net service sales
6,895
4,557
18,609
12,681
Total net sales
25,358
20,579
71,259
59,659
Operating expenses (1):
Cost of sales
16,755
14,627
47,310
42,080
Fulfillment
3,230
2,643
8,865
7,342
Marketing
1,264
993
3,496
2,806
Technology and content
3,197
2,423
8,971
6,639
General and administrative
463
406
1,357
1,110
Other operating expense (income), net
43
31
136
94
Total operating expenses
24,952
21,123
70,135
60,071
Income (loss) from operations
406
(544
)
1,124
(412
)
Interest income
13
9
37
31
Interest expense
(116
)
(49
)
(344
)
(136
)
Other income (expense), net
(56
)
(50
)
(187
)
(23
)
Total non-operating income (expense)
(159
)
(90
)
(494
)
(128
)
Income (loss) before income taxes
247
(634
)
630
(540
)
Benefit (provision) for income taxes
(161
)
205
(498
)
38
Equity-method investment activity, net of tax
(7
)
(8
)
(18
)
47
Net income (loss)
$
79
$
(437
)
$
114
$
(455
)
Basic earnings per share
$
0.17
$
(0.95
)
$
0.24
$
(0.99
)
Diluted earnings per share
$
0.17
$
(0.95
)
$
0.24
$
(0.99
)
Weighted average shares used in computation of earnings per share:
Basic
468
463
467
461
Diluted
478
463
476
461
_____________
(1) Includes stock-based compensation as follows:
Fulfillment
$
122
$
93
$
344
$
278
Marketing
48
32
133
91
Technology and content
309
204
861
579
General and administrative
65
48
175
141
AMAZON.COM, INC.
Consolidated Statements of Comprehensive Income (Loss)
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
Net income (loss)
$
79
$
(437
)
$
114
$
(455
)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $4, $(1), $3, and $0
(56
)
(248
)
(170
)
(209
)
Net change in unrealized gains (losses) on available-for-sale securities:
Unrealized gains (losses), net of tax of $3, $2, $(5), and $1
(3
)
(1
)
3
2
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $(1), $(1), $(1), and $(1)
1
(2
)
3
(2
)
Net unrealized gains (losses) on available-for-sale securities
(2
)
(3
)
6
—
Total other comprehensive income (loss)
(58
)
(251
)
(164
)
(209
)
Comprehensive income (loss)
$
21
$
(688
)
$
(50
)
$
(664
)
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
North America
Net sales
$
15,006
$
11,699
$
42,208
$
33,499
Segment operating expenses (1)
14,478
11,759
40,461
32,940
Segment operating income (loss)
$
528
$
(60
)
$
1,747
$
559
International
Net sales
$
8,267
$
7,711
$
23,577
$
22,936
Segment operating expenses (1)
8,323
7,885
23,728
23,144
Segment operating income (loss)
$
(56
)
$
(174
)
$
(151
)
$
(208
)
AWS
Net sales
$
2,085
$
1,169
$
5,474
$
3,224
Segment operating expenses (1)
1,564
1,071
4,297
2,804
Segment operating income (loss)
$
521
$
98
$
1,177
$
420
Consolidated
Net sales
$
25,358
$
20,579
$
71,259
$
59,659
Segment operating expenses (1)
24,365
20,715
68,486
58,888
Segment operating income (loss)
993
(136
)
2,773
771
Stock-based compensation
(544
)
(377
)
(1,513
)
(1,089
)
Other operating income (expense), net
(43
)
(31
)
(136
)
(94
)
Income (loss) from operations
406
(544
)
1,124
(412
)
Total non-operating income (expense)
(159
)
(90
)
(494
)
(128
)
Benefit (provision) for income taxes
(161
)
205
(498
)
38
Equity-method investment activity, net of tax
(7
)
(8
)
(18
)
47
Net income (loss)
$
79
$
(437
)
$
114
$
(455
)
Segment Highlights:
Y/Y net sales growth:
North America
28
%
23
%
26
%
24
%
International
7
14
3
17
AWS
78
43
70
50
Consolidated
23
20
19
22
Net sales mix:
North America
59
%
57
%
59
%
56
%
International
33
37
33
39
AWS
8
6
8
5
Consolidated
100
%
100
%
100
%
100
%
______________________________
(1) Excludes stock-based compensation and “Other operating expense (income), net,” which are not allocated to segments.
AMAZON.COM, INC.
Supplemental Net Sales Information
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
Net Sales:
North America
Media
$
2,963
$
2,734
$
8,552
$
8,022
Electronics and other general merchandise
11,840
8,793
33,077
24,988
Other (1)
203
172
579
489
Total North America
$
15,006
$
11,699
$
42,208
$
33,499
International
Media
$
2,320
$
2,510
$
6,734
$
7,532
Electronics and other general merchandise
5,901
5,160
16,705
15,260
Other (1)
46
41
138
144
Total International
$
8,267
$
7,711
$
23,577
$
22,936
Year-over-year Percentage Growth:
North America
Media
8
%
5
%
7
%
10
%
Electronics and other general merchandise
35
31
32
29
Other
18
20
19
19
Total North America
28
23
26
24
International
Media
(8
)%
4
%
(11
)%
5
%
Electronics and other general merchandise
14
20
9
24
Other
10
(18
)
(4
)
(1
)
Total International
7
14
3
17
Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:
North America
Media
9
%
5
%
7
%
10
%
Electronics and other general merchandise
35
31
33
29
Other
18
20
18
19
Total North America
29
23
26
24
International
Media
6
%
3
%
4
%
4
%
Electronics and other general merchandise
32
19
28
22
Other
26
(19
)
11
(3
)
Total International
24
13
20
15
______________________________
(1) Includes sales from non-retail activities, such as certain advertising services and our co-branded credit card agreements.
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
September 30, 2015
December 31, 2014
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
10,709
$
14,557
Marketable securities
3,719
2,859
Inventories
8,981
8,299
Accounts receivable, net and other
5,440
5,612
Total current assets
28,849
31,327
Property and equipment, net
20,636
16,967
Goodwill
3,529
3,319
Other assets
3,216
2,892
Total assets
$
56,230
$
54,505
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
14,437
$
16,459
Accrued expenses and other
9,157
9,807
Unearned revenue
3,063
1,823
Total current liabilities
26,657
28,089
Long-term debt
8,243
8,265
Other long-term liabilities
8,900
7,410
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares — 500
Issued and outstanding shares — none
—
—
Common stock, $0.01 par value:
Authorized shares — 5,000
Issued shares — 492 and 488
Outstanding shares — 469 and 465
5
5
Treasury stock, at cost
(1,837
)
(1,837
)
Additional paid-in capital
12,874
11,135
Accumulated other comprehensive loss
(675
)
(511
)
Retained earnings
2,063
1,949
Total stockholders’ equity
12,430
10,741
Total liabilities and stockholders’ equity
$
56,230
$
54,505
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
Operating income — TTM Y/Y growth (decline), excluding F/X
(94
)%
(79
)%
(56
)%
35
%
N/A
N/A
Operating margin — TTM % of WW net sales
0.1
%
0.2
%
0.3
%
0.8
%
1.7
%
N/A
Net income (loss)
$
(437
)
$
214
$
(57
)
$
92
$
79
N/A
Net income (loss) per diluted share
$
(0.95
)
$
0.45
$
(0.12
)
$
0.19
$
0.17
N/A
Net income (loss) — TTM
$
(216
)
$
(241
)
$
(405
)
$
(188
)
$
328
N/A
Net income (loss) per diluted share — TTM
$
(0.47
)
$
(0.52
)
$
(0.88
)
$
(0.41
)
$
0.69
N/A
______________________________
(1)
“Free cash flow” is defined as net cash provided by operating activities less cash expenditures for purchases of property and equipment, including internal-use software and website development.
(2)
Average Total Assets minus Current Liabilities (excluding current portion of Long-Term Debt) over five quarter ends.
(3)
“Free cash flow less lease principal repayments” is defined as net cash provided by operating activities, less (i) purchases of property and equipment, including internal-use software and website development, (ii) principal repayments of capital lease obligations, and (iii) principal repayments of finance lease obligations. Free cash flow less lease principal repayments approximates the actual payments of cash for our capital and finance leases.
(4)
“Free cash flow less finance lease principal repayments and capital acquired under capital leases” is defined as net cash provided by operating activities, less (i) purchases of property and equipment, including internal-use software and website development, (ii) principal repayments of finance lease obligations, and (iii) property and equipment acquired under capital leases. In this measure, property and equipment acquired under capital leases is reflected as if these assets had been purchased for cash, which is not the case as these assets have been leased.
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions)
(unaudited)
Y/Y %
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Change
Segments
North America Segment:
Net sales
$
11,699
$
17,333
$
13,406
$
13,796
$
15,006
28
%
Net sales — Y/Y growth, excluding F/X
23
%
21
%
24
%
26
%
29
%
N/A
Net sales — TTM
$
50,834
$
53,432
$
56,233
$
59,540
24
%
Operating income (loss)
$
(60
)
$
733
$
517
$
703
$
528
N/A
Operating income/loss — Y/Y growth, excluding F/X
77
%
111
%
N/A
N/A
Operating margin — % of North America net sales
(0.5
)%
4.2
%
3.9
%
5.1
%
3.5
%
N/A
Operating income — TTM
$
1,292
$
1,520
$
1,893
$
2,480
N/A
Operating margin — TTM % of North America net sales
Operating income — TTM Y/Y growth (decline), excluding F/X
(12
)%
(10
)%
(1
)%
34
%
134
%
N/A
Operating margin — TTM % of Consolidated net sales
1.9
%
2.0
%
2.2
%
2.8
%
3.8
%
N/A
______________________________
(5) Represents cost of sales, fulfillment, marketing, technology and content, and general and administrative operating expenses, excluding stock-based compensation.
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except inventory turnover, accounts payable days and employee data)
(unaudited)
Y/Y %
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Change
Supplemental
Supplemental North America Segment Net Sales:
Media
$
2,734
$
3,544
$
2,969
$
2,620
$
2,963
8
%
Media — Y/Y growth, excluding F/X
5
%
1
%
5
%
7
%
9
%
N/A
Media — TTM
$
11,536
$
11,567
$
11,711
$
11,867
$
12,096
5
%
Electronics and other general merchandise
$
8,793
$
13,529
$
10,250
$
10,987
$
11,840
35
%
Electronics and other general merchandise — Y/Y growth, excluding F/X
31
%
27
%
31
%
32
%
35
%
N/A
Electronics and other general merchandise — TTM
$
35,636
$
38,517
$
40,938
$
43,559
$
46,606
31
%
Electronics and other general merchandise — TTM % of North America net sales
74
%
76
%
77
%
77
%
78
%
N/A
Other
$
172
$
260
$
187
$
189
$
203
18
%
Supplemental International Segment Net Sales:
Media
$
2,510
$
3,406
$
2,320
$
2,094
$
2,320
(8
)%
Media — Y/Y growth, excluding F/X
3
%
(1
)%
2
%
3
%
6
%
N/A
Media — TTM
$
11,246
$
10,938
$
10,615
$
10,329
$
10,140
(10
)%
Electronics and other general merchandise
$
5,160
$
7,109
$
5,378
$
5,425
$
5,901
14
%
Electronics and other general merchandise — Y/Y growth, excluding F/X
19
%
19
%
21
%
31
%
32
%
N/A
Electronics and other general merchandise — TTM
$
21,737
$
22,369
$
22,559
$
23,072
$
23,814
10
%
Electronics and other general merchandise — TTM % of International net sales
65
%
67
%
68
%
69
%
70
%
N/A
Other
$
41
$
60
$
47
$
46
$
46
10
%
Balance Sheet
Cash and marketable securities — ending
$
6,883
$
17,416
$
13,781
$
14,001
$
14,428
110
%
Inventory, net — ending
$
7,316
$
8,299
$
7,369
$
7,470
$
8,981
23
%
Inventory turnover, average — TTM
8.9
8.6
8.8
8.9
8.6
(3
)%
Property and equipment, net — ending
$
15,702
$
16,967
$
17,736
$
19,479
$
20,636
31
%
Accounts payable — ending
$
11,811
$
16,459
$
11,917
$
12,391
$
14,437
22
%
Accounts payable days — ending
74
73
70
74
79
7
%
Other
WW shipping revenue
$
1,048
$
1,701
$
1,299
$
1,399
$
1,494
43
%
WW shipping revenue — % of net sales (6)
5.4
%
6.1
%
6.1
%
6.6
%
6.4
%
N/A
WW shipping costs
$
2,020
$
3,049
$
2,309
$
2,340
$
2,720
35
%
WW shipping costs — % of net sales (6)
10.4
%
10.9
%
10.9
%
11.0
%
11.7
%
N/A
WW net shipping costs
$
972
$
1,348
$
1,010
$
941
$
1,226
26
%
WW net shipping costs — % of net sales (6)
5.0
%
4.8
%
4.8
%
4.4
%
5.3
%
N/A
WW paid units — Y/Y growth
21
%
20
%
20
%
22
%
26
%
N/A
WW seller unit mix — % of WW paid units
42
%
43
%
44
%
45
%
46
%
N/A
Employees (full-time and part-time; excludes contractors & temporary personnel)
149,500
154,100
165,000
183,100
222,400
49
%
______________________________
(6) Includes North America and International segment net sales.
Amazon.com, Inc. Certain Definitions
Customer Accounts
References to customers mean customer accounts, which are unique e-mail addresses, established either when a customer places an order or when a customer orders from other sellers on our websites. Customer accounts exclude certain customers, including customers associated with certain of our acquisitions, Amazon Payments customers, AWS customers, and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. Customers are considered active when they have placed an order during the preceding twelve-month period.
Seller Accounts
References to sellers means seller accounts, which are established when a seller receives an order from a customer account. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.
AWS Customers
References to AWS customers mean unique AWS customer accounts, which are unique e-mail addresses that are eligible to use AWS services. This includes AWS accounts in the AWS free tier. Multiple users accessing AWS services via one account are counted as a single account. Customers are considered active when they have had AWS usage activity during the preceding one-month period.
The study was conducted based on a survey of 305 buy-side professionals, who largely expect that greater investment in digital video will come from overall rising ad budgets this year and as funds shift away from broadcast and cable TV. 67% said they anticipate their broadcast and cable TV ad spend to stay the same or decrease in the next year.
67% also believe that original digital video will become as important as original TV programming within the next 3 to 5 years.
Across the automotive, CPG, financial services, retail, and telecommunications categories, advertisers expect to spend more on digital video. 67% expect to move a portion of spend out of TV to do so. CPG, financial services, and telecommunications marketers expect the biggest impact to be on their cable TV budgets. 63% in the automotive category expect to get the funding from expanding budgets.
“This study demonstrates unequivocally that digital video is a fierce competitor for advertising dollars,” said Sherrill Mane, SVP, Research, Analytics, and Measurement at the IAB.
A separate study from Visible Measures is out, which looks at video campaigns on Facebook and YouTube. It finds that “alternative video platforms” like Facebook have become more important to brands and that Facebook has not only grown “tremendously” for total viewing, but that it’s also now the most powerful tool for driving immediate growth in viewership for timely video content.
That study found that for brands that post their campaigns on both Facebook and YouTube, Facebook dominates viewership immediately following a campaign’s release. For the campaigns it looked at in March, Facebook reached 85 percent of its viewership in the first week after launch, while YouTube only reached 63 percent of its viewership during that time. But don’t let that fool you. It also found that YouTube still dominates reach in the long run. It just takes longer.
They credit both YouTube’s functionality and consumer behavior for making YouTube more effective in the long term. According to Visible Measures CEO Brian Shin, the decrease in Facebook’s share of viewership over the course of time highlights how differently Facebook and YouTube function for both consumers and brands.
“If something is hot and of the moment, such as a newly released campaign, the Super Bowl, or even a cultural phenomenon like Fifty Shades of Grey, Facebook and similar social media sites are incredibly effective for driving the spread of timely content due to the trending nature of the News Feed,” he said. “But the strength of Facebook to promote trending content also highlights how powerful YouTube remains as a platform for continued viewership.”
“Content discovery on Facebook is very much dependent on the Facebook News Feed, which is a function of what a user’s friends are sharing, as well as recommendations based on trends and a user’s interests. Because discovery is so dependent on sharing, viewership soon after content gets hot’ is strongest on Facebook,” says Visible Measures. “Conversely, YouTube acts as a depository for video and millions of users go there first, or arrive via Google search, to find video content. This user paradigm enables videos to have a much longer shelf-life on YouTube.”
“While Facebook can be counted on for viral lift, if your video doesn’t ‘pop’ on Facebook it will vanish pretty quickly, whereas slow and steady evergreen content can pay dividends for a long time on YouTube,” marketing consultant Brian Honigman told us in January.
According to Shin, Facebook will have to amp up its video discovery and search options if it wants to compete with YouTube for the long term.
“If you think about the overall web, there’s a lot of public content that’s out there that any web search engine can go index and provide,” he said. “But a lot of what we can get at are recommendations on products and travel and restaurants and things that your friends have shared, they haven’t shared publicly, and knowing different correlations, or interesting things about what your friends are interested in, and that’s the type of stuff, those are questions that we can answer that no one else can answer, and that’s probably going to be what we continue to focus on doing first. And I think what you’re seeing is that as we enable more use cases and as we just get a lot of the basics right around performance and bringing the mobile features into parity and beyond what we’ve been able to do on desktop, the volume is growing quickly.”
Though he wasn’t talking specifically about video with regard to search, the huge increase in video sharing on Facebook will only add pressure on Facebook to handle video search better. Right now, Facebook’s search feature doesn’t even include a video option. That definitely needs to change, and I have no doubt that it will in time.
Facebook has been testing some functionality, which could help in the discoverability department. It’s trying a feature that automatically plays another video once the one the user is currently watching ends. This is something YouTube started doing a while back.
Earlier this year, Facebook announced that video on the social network had increased 75% over the past year. Socialbakers, at the time, found that for the first time, brands were sharing Facebook videos on the social network more than YouTube videos. And with good reason. Facebook is said to give more weight to native videos in News Feed ranking.
Socialbakers also recently found that Facebook video tends to get better organic reach than regular status updates, links, or photos.
“The real growth point today is in videos,” it said. “While they are relatively more promoted than photos – 27% of all videos are promoted, compared to 17% of photos – there are so many more photos than videos that the new format is still far more effective at reaching audiences.”
Facebook expects video specifically to bring it more mobile ad dollars.
“Looking ahead, we believe video will play a significant role in bringing more marketers to mobile,” said COO Sheryl Sandberg during the earnings call. “More than 75% of global video views on Facebook occur on mobile – and we believe mobile video will become more important to marketers over time.”
Asked about video ad pricing, CFO David Wehner said, ”Video is effectively winning in the auction if it’s higher priced. So if somebody’s willing to pay more for a video, it’s going to get served before another type of format ad. But there’s not really a price differential you’re paying for a video, it’s just what are you willing to pay into the system. So there’s not differential pricing by product, it’s just what are you willing to bid for the format that you want to show to the people that you want to show it to and that’s how the system works.”
Last week, Facebook announced the launch of Anthology, a new marketing program that gives brands access to a group of well-known video publishers to improve the quality of video ads.
Amazon just reported its financial results for the first quarter, including a 15% year-over-year increase in net sales at $22.72 billion.
With this report, Amazon has begun giving more financial details about its Amazon Web Services (AWS) business. And the financials on that are looking pretty good.
CEO Jeff Bezos said: “Amazon Web Services is a $5 billion business and still growing fast — in fact it’s accelerating. Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence. We manage by two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term. We are so grateful to our AWS customers and remain dedicated to inventing on their behalf.”
The company recently made a handful of AWS announcements including Amazon Machine Learning, AWS Marketplace for Desktop Apps, AWS Lambda, the Amazon EC2 Container Service, the latest generation of EC2 Dense-storage instances, and faster EBS volumes.
Here’s the release in its entirety:
SEATTLE–(BUSINESS WIRE)–Apr. 23, 2015– Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its first quarter ended March 31, 2015.
Operating cash flow increased 47% to $7.84 billion for the trailing twelve months, compared with $5.35 billion for the trailing twelve months ended March 31, 2014. Free cash flow increased to $3.16 billion for the trailing twelve months, compared with $1.49 billion for the trailing twelve months ended March 31, 2014.
Common shares outstanding plus shares underlying stock-based awards totaled 483 million on March 31, 2015, compared with 476 million one year ago.
Net sales increased 15% to $22.72 billion in the first quarter, compared with $19.74 billion in first quarter 2014. Excluding the $1.3 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 22% compared to first quarter 2014.
Operating income increased 74% to $255 million in the first quarter, compared with operating income of $146 million in first quarter 2014.
Net loss was $57 million in the first quarter, or $0.12 per diluted share, compared with net income of $108 million, or$0.23 per diluted share, in first quarter 2014.
“Amazon Web Services is a $5 billion business and still growing fast — in fact it’s accelerating,” said Jeff Bezos, founder and CEO of Amazon.com. “Born a decade ago, AWS is a good example of how we approach ideas and risk-taking atAmazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence. We manage by two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term. We are so grateful to our AWS customers and remain dedicated to inventing on their behalf.”
Highlights
Amazon launched Dash Button — a small button that Prime customers can place in their home and use to reorder frequently used household items. Today, customers can chose from 18 popular brands, such as Bounty, Huggies, and Clorox.
Amazon announced the Dash Replenishment Service (DRS), a new service that enables connected devices to order goods from Amazon when supplies are running low — like a coffee maker that automatically orders more coffee beans. By using DRS, device makers are able to leverage Amazon’s authentication and payment systems, customer service, and fulfillment network. Early adopters of DRS include Whirlpool, Quirky, Brother, and Brita.
Amazon announced new features for Amazon Fire TV and Fire TV Stick, including X-Ray (now available directly on your HDTV), support for a captive portal to connect to Wi-Fi at a hotel or dorm room, and new shortcuts. Amazon Fire TV also added expandable USB storage and private listening with support for Bluetooth headphones.
In just one year, Amazon Fire TV apps and games selection is up 5x, including Sling TV, Fox Sports Go, Flappy Birds Family, TED, WSJ Live, Crossy Road, and Game of Thrones – A Telltale Game Series.
Fire TV Stick launched in the U.K. and Germany, joining Amazon Fire TV. Pre-orders for Fire TV Stick on Amazon.co.uk and Amazon.de broke all previous records for Amazon devices in the first week of availability.
Amazon Echo continues to get smarter as more customers use it and provide feedback — new features include Pandora integration, home automation, support for sports scores and schedules, traffic reports and route suggestions, and voice control for customers if listening to music via Bluetooth. Amazon has released a limited preview of the Alexa SDK to enable developers, content creators, and service providers to build apps and experiences for Echo.
Amazon launched unlimited cloud storage with Amazon Cloud Drive — two new storage plans for customers to securely store new and existing content collections. The Unlimited Everything Plan provides unlimited storage for photos, videos, movies, music, and files, and the Unlimited Photos Plan provides unlimited photo storage plus 5 GB of additional storage for videos, documents, or other files — all for a low annual fee. Customers can sign up for a free 3-month trial on either plan.
Prime Now has expanded to Miami, Baltimore, Dallas, Atlanta, and Austin. Prime members can choose from tens of thousands of daily essentials through a mobile app. With Prime Now, two-hour delivery is free and one-hour delivery is available for $7.99.
Amazon Prime celebrated its 10-year anniversary with tens of millions of Prime members around the world. Prime members in the U.S. enjoy unlimited Free Two-Day Shipping on more than 20 million items, unlimited streaming of tens of thousands of movies and TV episodes with Prime Instant Video, more than one million songs and hundreds of playlists with Prime Music, unlimited photo storage with Prime Photos, and access to more than 800,000 books to borrow with the Kindle Owners’ Lending Library.
Amazon Studios announced that full seasons of Mad Dogs, The Man in the High Castle, The New Yorker Presents, and children’s shows Just Add Magic and The Stinky & Dirty Show will debut exclusively for Prime members in the U.S., U.K., and Germany. Amazon Studios also greenlit second seasons of Mozart in the Jungleand Bosch, as well as original kids series Tumble Leaf, Creative Galaxy, Annedroids, and Gortimer Gibbon’s Life on Normal Street.
Amazon introduced Amazon@Purdue, our first staffed on-campus pickup and drop-off location at Purdue University. Amazon Student and Amazon Prime members get Free One-Day Shipping on textbooks and Free One-Day Pickup on over one million items when shipped to the Amazon@Purdue location.
Amazon officially launched Write On by Kindle, an online community where writers and readers share in the creative process. Readers can check out works-in-progress — from short stories to novels — and offer feedback, or they can try their hand at writing a story themselves.
Amazon launched Amazon Home Services, a new marketplace for on-demand professional services, backed by Amazon’s Happiness Guarantee. Customers can browse, purchase, and schedule hundreds of professional services directly on Amazon.com in less than 60 seconds. Amazon Home Services features handpicked pros offering upfront pricing on pre-packaged services with helpful reviews from customers that have made verified purchases.
Poppy J. Anderson became the first German author to sell over one million Kindle books using Kindle Direct Publishing (KDP), joining the Kindle Million Club with many other internationally successful KDP authors such asJohn Locke, J.A. Konrath, and Tina Folsom.
Amazon expanded public fulfillment center tours to the U.K., Germany, France, and Poland. Visitwww.amazon.com/fctours for information on available tour locations, dates, and times.
Amazon Prime members in Spain now receive Free One-Day Shipping with their Prime subscription.
Amazon Fashion, which has emerged as a top category on Amazon.in, partnered with the Fashion Design Council of India as the official title sponsor of the 25th edition of India Fashion Week.
Amazon.in launched the Amazon Seller App, a best-in-class mobile app for sellers in India, which makes it easy and convenient for sellers to update inventory, source and list new items on Amazon.in, and respond faster to customer queries.
Amazon.in launched Kirana Now, a pilot service that delivers everyday essentials to customers within two to four hours. This local service utilizes India’s vast network of small and medium businesses to achieve quick, easy, and convenient delivery for Amazon.in customers.
Amazon China opened an Amazon international brand flagship store on Tmall, which features thousands of Amazon China’s popular, directly imported products. Additionally, Amazon Global Store selection on Amazon.cn has grown to over one million items.
AWS announced Amazon Machine Learning, a fully managed service that makes it easy for any developer to use historical data to build predictive models that can be used for a broad array of purposes, including detecting problematic transactions, preventing customer churn, and improving customer support. Amazon Machine Learning is based on the same proven, highly scalable machine learning technology used by developers acrossAmazon to generate more than 50 billion predictions a week.
AWS announced AWS Marketplace for Desktop Apps, a new category on the AWS Marketplace that makes it easy for customers to search for and buy applications for their Amazon WorkSpaces cloud-based desktops. Customers can choose from a broad selection of more than 100 applications in eleven categories, and pay by the month for the applications they use. To simplify deployment of these desktop applications, AWS also announced Amazon WorkSpaces Application Manager (Amazon WAM), a new service that packages and delivers applications to Amazon WorkSpaces.
AWS announced the general availability of AWS Lambda, a compute service that runs developers’ code in response to events and automatically manages the required compute resources, making it easy to build and manage applications that respond quickly to new information. AWS also launched several new features to make it easy for mobile developers to use Lambda for mobile, tablet, and Internet of Things applications.
AWS announced the general availability of the Amazon EC2 Container Service, a high-performance container management service that makes it easy to run distributed applications using Docker containers on AWS. AWS also added the ability to use Elastic Block Store (“EBS”) and Elastic Load Balancing (“ELB”) with the EC2 Container Service, as well as a new, flexible container scheduler that combine to make the EC2 Container Service the best place to run containers in production.
AWS introduced the latest generation of Amazon EC2 Dense-storage (D2) instances, and larger, faster Amazon Elastic Block Storage (Amazon EBS) volumes. To support very large transactional databases and big data analytics, the new Amazon EC2 D2 instances offer up to 48 TB of storage and up to 3,500 MB per second of disk read throughput, while the new Amazon EBS volumes store up to 16 TB and process up to 20,000 input/output operations per second (IOPS).
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of April 23, 2015, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as 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, and the various factors detailed below.
Second Quarter 2015 Guidance
Net sales are expected to be between $20.6 billion and $22.8 billion, or to grow between 7% and 18% compared with second quarter 2014.
Operating income (loss) is expected to be between $(500) million and $50 million, compared to $(15) million in second quarter 2014.
This guidance includes approximately $600 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.
A conference call will be webcast live today at 2:30 p.m. PT/5:30 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.
These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, 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, sortation, delivery, and data center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains, and develops commercial agreements, acquisitions and strategic transactions, payments risks, 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, 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 (“SEC”), including its most recent Annual Report on Form 10-K and subsequent filings.
Our investor relations website is www.amazon.com/ir and we encourage investors to use it as a way of easily finding information about us. We promptly make available on this website, free of charge, the reports that we file or furnish with the SEC, corporate governance information (including our Code of Business Conduct and Ethics), and select press releases and social media postings, which may contain material information about us, and you may subscribe to be notified of new information posted to this site.
About Amazon
Amazon.com opened on the World Wide Web in July 1995. The company is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS,Kindle Direct Publishing, Kindle, Fire phone, Fire tablets, and Fire TV are some of the products and services pioneered by Amazon.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended March 31,
Twelve Months Ended March 31,
2015
2014
2015
2014
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
$
14,557
$
8,658
$
5,074
$
4,481
OPERATING ACTIVITIES:
Net income (loss)
(57
)
108
(405
)
299
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs
1,426
1,010
5,162
3,563
Stock-based compensation
407
321
1,582
1,226
Other operating expense (income), net
44
35
139
117
Losses (gains) on sales of marketable securities, net
1
—
(3
)
2
Other expense (income), net
91
(50
)
203
48
Deferred income taxes
(2
)
(185
)
(136
)
(261
)
Excess tax benefits from stock-based compensation
(22
)
(121
)
94
(199
)
Changes in operating assets and liabilities:
Inventories
721
699
(1,172
)
(1,245
)
Accounts receivable, net and other
441
727
(1,324
)
(849
)
Accounts payable
(4,249
)
(4,675
)
2,184
1,400
Accrued expenses and other
(940
)
(731
)
500
708
Additions to unearned revenue
1,803
1,092
5,144
3,100
Amortization of previously unearned revenue
(1,163
)
(732
)
(4,123
)
(2,564
)
Net cash provided by (used in) operating activities
(1,499
)
(2,502
)
7,845
5,345
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software and website development
(871
)
(1,080
)
(4,684
)
(3,854
)
Acquisitions, net of cash acquired, and other
(365
)
—
(1,345
)
(208
)
Sales and maturities of marketable securities
375
593
3,131
2,299
Purchases of marketable securities
(986
)
(437
)
(3,091
)
(2,487
)
Net cash provided by (used in) investing activities
(1,847
)
(924
)
(5,989
)
(4,250
)
FINANCING ACTIVITIES:
Excess tax benefits from stock-based compensation
22
121
(94
)
199
Proceeds from long-term debt
183
65
6,478
426
Repayments of long-term debt
(316
)
(70
)
(760
)
(272
)
Principal repayments of capital lease obligations
(502
)
(249
)
(1,537
)
(863
)
Principal repayments of finance lease obligations
(39
)
(42
)
(132
)
(47
)
Net cash provided by (used in) financing activities
(652
)
(175
)
3,955
(557
)
Foreign-currency effect on cash and cash equivalents
(322
)
17
(648
)
55
Net increase (decrease) in cash and cash equivalents
(4,320
)
(3,584
)
5,163
593
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
10,237
$
5,074
$
10,237
$
5,074
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt
$
17
$
18
$
90
$
102
Cash paid for income taxes (net of refunds)
55
38
194
121
Property and equipment acquired under capital leases
954
716
4,246
2,243
Property and equipment acquired under build-to-suit leases
103
126
897
852
AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months Ended March 31,
2015
2014
Net product sales
$
17,084
$
15,705
Net service sales
5,633
4,036
Total net sales
22,717
19,741
Operating expenses (1):
Cost of sales
15,395
14,055
Fulfillment
2,759
2,317
Marketing
1,083
870
Technology and content
2,754
1,991
General and administrative
427
327
Other operating expense (income), net
44
35
Total operating expenses
22,462
19,595
Income (loss) from operations
255
146
Interest income
11
11
Interest expense
(115
)
(42
)
Other income (expense), net
(130
)
5
Total non-operating income (expense)
(234
)
(26
)
Income (loss) before income taxes
21
120
Provision for income taxes
(71
)
(73
)
Equity-method investment activity, net of tax
(7
)
61
Net income (loss)
$
(57
)
$
108
Basic earnings per share
$
(0.12
)
$
0.23
Diluted earnings per share
$
(0.12
)
$
0.23
Weighted average shares used in computation of earnings per share:
Basic
465
460
Diluted
465
468
_____________
(1) Includes stock-based compensation as follows:
Fulfillment
$
90
$
81
Marketing
35
27
Technology and content
233
169
General and administrative
49
44
AMAZON.COM, INC.
Consolidated Statements of Comprehensive Income (Loss)
(in millions)
(unaudited)
Three Months Ended March 31,
2015
2014
Net income (loss)
$
(57
)
$
108
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $(1) and $0
(243
)
27
Net change in unrealized gains on available-for-sale securities:
Unrealized gains, net of tax of $0 and $(1)
1
1
Reclassification adjustment for losses included in “Other income (expense), net,” net of tax of $0 and $0
1
—
Net unrealized gains on available-for-sale securities
2
1
Total other comprehensive income (loss)
(241
)
28
Comprehensive income (loss)
$
(298
)
$
136
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
Three Months Ended March 31,
2015
2014
North America
Net sales
$
13,406
$
10,808
Segment operating expenses (1)
12,889
10,518
Segment operating income (loss)
$
517
$
290
International
Net sales
$
7,745
$
7,883
Segment operating expenses (1)
7,821
7,916
Segment operating income (loss)
$
(76
)
$
(33
)
AWS
Net sales
$
1,566
$
1,050
Segment operating expenses (1)
1,301
805
Segment operating income (loss)
$
265
$
245
Consolidated
Net sales
$
22,717
$
19,741
Segment operating expenses (1)
22,011
19,239
Segment operating income (loss)
706
502
Stock-based compensation
(407
)
(321
)
Other operating income (expense), net
(44
)
(35
)
Income (loss) from operations
255
146
Total non-operating income (expense)
(234
)
(26
)
Provision for income taxes
(71
)
(73
)
Equity-method investment activity, net of tax
(7
)
61
Net income (loss)
$
(57
)
$
108
Segment Highlights:
Y/Y net sales growth:
North America
24
%
23
%
International
(2
)
18
AWS
49
69
Consolidated
15
23
Net sales mix:
North America
59
%
55
%
International
34
40
AWS
7
5
Consolidated
100
%
100
%
______________________________
(1) Excludes stock-based compensation and “Other operating expense (income), net,” which are not allocated to segments.
AMAZON.COM, INC.
Supplemental Net Sales Information
(in millions)
(unaudited)
Three Months Ended March 31,
2015
2014
Net Sales:
North America
Media
$
2,969
$
2,825
Electronics and other general merchandise
10,250
7,829
Other (1)
187
154
Total North America
$
13,406
$
10,808
International
Media
$
2,320
$
2,642
Electronics and other general merchandise
5,378
5,188
Other (1)
47
53
Total International
$
7,745
$
7,883
Year-over-year Percentage Growth:
North America
Media
5
%
12
%
Electronics and other general merchandise
31
28
Other
22
18
Total North America
24
23
International
Media
(12
)%
4
%
Electronics and other general merchandise
4
27
Other
(12
)
13
Total International
(2
)
18
Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:
North America
Media
5
%
13
%
Electronics and other general merchandise
31
28
Other
22
19
Total North America
24
23
International
Media
2
%
4
%
Electronics and other general merchandise
21
26
Other
2
11
Total International
14
18
______________________________
(1) Includes sales from non-retail activities, such as certain advertising services and our co-branded credit card agreements.
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
March 31, 2015
December 31, 2014
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
10,237
$
14,557
Marketable securities
3,544
2,859
Inventories
7,369
8,299
Accounts receivable, net and other
4,772
5,612
Total current assets
25,922
31,327
Property and equipment, net
17,736
16,967
Goodwill
3,491
3,319
Other assets
2,926
2,892
Total assets
$
50,075
$
54,505
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
11,917
$
16,459
Accrued expenses and other
8,840
9,807
Unearned revenue
2,420
1,823
Total current liabilities
23,177
28,089
Long-term debt
8,257
8,265
Other long-term liabilities
7,768
7,410
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares — 500
Issued and outstanding shares — none
—
—
Common stock, $0.01 par value:
Authorized shares — 5,000
Issued shares — 489 and 488
Outstanding shares — 466 and 465
5
5
Treasury stock, at cost
(1,837
)
(1,837
)
Additional paid-in capital
11,565
11,135
Accumulated other comprehensive loss
(752
)
(511
)
Retained earnings
1,892
1,949
Total stockholders’ equity
10,873
10,741
Total liabilities and stockholders’ equity
$
50,075
$
54,505
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
Operating income — TTM Y/Y growth (decline), excluding F/X
7
%
(11
)%
(94
)%
(79
)%
(56
)%
N/A
Operating margin — TTM % of WW net sales
0.9
%
0.8
%
0.1
%
0.2
%
0.3
%
N/A
Net income (loss)
$
108
$
(126
)
$
(437
)
$
214
$
(57
)
(153
)%
Net income (loss) per diluted share
$
0.23
$
(0.27
)
$
(0.95
)
$
0.45
$
(0.12
)
(152
)%
Net income (loss) — TTM
$
299
$
181
$
(216
)
$
(241
)
$
(405
)
(236
)%
Net income (loss) per diluted share — TTM
$
0.64
$
0.39
$
(0.47
)
$
(0.52
)
$
(0.88
)
(234
)%
______________________________
(1)
“Free cash flow” is defined as net cash provided by operating activities less cash expenditures for purchases of property and equipment, including internal-use software and website development.
(2)
Average Total Assets minus Current Liabilities (excluding current portion of Long-Term Debt) over five quarter ends.
(3)
TTM Free Cash Flow divided by Invested Capital.
(4)
“Free cash flow less lease principal repayments” is defined as net cash provided by operating activities, less (i) purchases of property and equipment, including internal-use software and website development, (ii) principal repayments of capital lease obligations, and (iii) principal repayments of finance lease obligations. Free cash flow less lease principal repayments approximates the actual payments of cash for our capital and finance leases.
(5)
“Free cash flow less finance principal lease repayments and capital acquired under capital leases” is defined as net cash provided by operating activities, less (i) purchases of property and equipment, including internal-use software and website development, (ii) principal repayments of finance lease obligations, and (iii) property and equipment acquired under capital leases. In this measure, property and equipment acquired under capital leases is reflected as if these assets had been purchased for cash, which is not the case as these assets have been leased.
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
Operating income — TTM Y/Y growth (decline), excluding F/X
20
%
14
%
(12
)%
(10
)%
(1
)%
N/A
Operating margin — TTM % of Consolidated net sales
2.6
%
2.5
%
1.9
%
2.0
%
2.2
%
N/A
______________________________
(6)
Represents cost of sales, fulfillment, marketing, technology and content, and general and administrative operating expenses, excluding stock-based compensation.
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except inventory turnover, accounts payable days and employee data)
(unaudited)
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Y/Y % Change
Supplemental
Supplemental North America Segment Net Sales:
Media
$
2,825
$
2,464
$
2,734
$
3,544
$
2,969
5
%
Media — Y/Y growth, excluding F/X
13
%
14
%
5
%
1
%
5
%
N/A
Media — TTM
$
11,121
$
11,411
$
11,536
$
11,567
$
11,711
5
%
Electronics and other general merchandise
$
7,829
$
8,366
$
8,793
$
13,529
$
10,250
31
%
Electronics and other general merchandise — Y/Y growth, excluding F/X
28
%
29
%
31
%
27
%
31
%
N/A
Electronics and other general merchandise — TTM
$
31,686
$
33,575
$
35,636
$
38,517
$
40,938
29
%
Electronics and other general merchandise — TTM % of North America net sales
73
%
74
%
74
%
76
%
77
%
N/A
Other
$
154
$
164
$
172
$
260
$
187
22
%
Supplemental International Segment Net Sales:
Media
$
2,642
$
2,380
$
2,510
$
3,406
$
2,320
(12
)%
Media — Y/Y growth, excluding F/X
4
%
4
%
3
%
(1
)%
2
%
N/A
Media — TTM
$
11,004
$
11,160
$
11,246
$
10,938
$
10,615
(4
)%
Electronics and other general merchandise
$
5,188
$
4,912
$
5,160
$
7,109
$
5,378
4
%
Electronics and other general merchandise — Y/Y growth, excluding F/X
26
%
20
%
19
%
19
%
21
%
N/A
Electronics and other general merchandise — TTM
$
19,919
$
20,894
$
21,737
$
22,369
$
22,559
13
%
Electronics and other general merchandise — TTM % of International net sales
64
%
65
%
65
%
67
%
68
%
N/A
Other
$
53
$
49
$
41
$
60
$
47
(12
)%
Balance Sheet
Cash and marketable securities
$
8,666
$
7,986
$
6,883
$
17,416
$
13,781
59
%
Inventory, net — ending
$
6,716
$
6,644
$
7,316
$
8,299
$
7,369
10
%
Inventory turnover, average — TTM
9.1
9.1
8.9
8.6
8.8
(3
)%
Property and equipment, net
$
12,267
$
14,089
$
15,702
$
16,967
$
17,736
45
%
Accounts payable — ending
$
10,590
$
10,457
$
11,811
$
16,459
$
11,917
13
%
Accounts payable days — ending
68
71
74
73
70
3
%
Other
WW shipping revenue
$
849
$
889
$
1,048
$
1,701
$
1,299
53
%
WW shipping costs
$
1,829
$
1,812
$
2,020
$
3,049
$
2,309
26
%
WW net shipping costs
$
980
$
923
$
972
$
1,348
$
1,010
3
%
WW net shipping costs — % of net sales (7)
5.2
%
5.0
%
5.0
%
4.8
%
4.8
%
N/A
Employees (full-time and part-time; excludes contractors & temporary personnel)
124,600
132,600
149,500
154,100
165,000
32
%
______________________________
(7) Includes North America and International segment net sales.
Amazon.com, Inc. Certain Definitions
Customer Accounts
References to customers mean customer accounts, which are unique e-mail addresses, established either when a customer places an order or when a customer orders from other sellers on our websites. Customer accounts exclude certain customers, including customers associated with certain of our acquisitions, Amazon Payments customers, AWS customers, and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. Customers are considered active when they have placed an order during the preceding twelve-month period.
Seller Accounts
References to sellers means seller accounts, which are established when a seller receives an order from a customer account. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.
AWS Customers
References to AWS customers mean unique AWS customer accounts, which are unique e-mail addresses that are eligible to use AWS services. This includes AWS accounts in the AWS free tier. Multiple users accessing AWS services via one account are counted as a single account. Customers are considered active when they have had AWS usage activity during the preceding one-month period.
AMAZON.COM, INC. Supplemental Segment Financial Information
Effective Q1 2015, Amazon.com, Inc. has three segments: North America, International, and AWS. These segments reflect changes in the way Amazon.com, Inc. evaluates its business performance and manages its operations. Historical results for 2014 and 2013 for the North America, International, and AWS segments are presented below.
The North America segment consists primarily of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused websites such as www.amazon.com, www.amazon.ca, and www.amazon.com.mx. This segment includes export sales from these websites.
The International segment consists primarily of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally-focused websites. This segment includes export sales from these internationally-focused websites (including export sales from these sites to customers in the U.S. and Canada), but excludes export sales from our North American websites.
The AWS segment consists of amounts earned from sales of compute, storage, database, and other AWS service offerings for start-ups, enterprises, government agencies, and academic institutions.
We allocate to segment results the operating expenses “Fulfillment,” “Marketing,” “Technology and content,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred. In conjunction with creating a separate reportable segment for AWS, we have made other allocation changes among the North America and International segments to reflect the relative contribution provided to both segments. The majority of technology infrastructure costs are allocated to the AWS segment based on usage. The majority of the remaining non-infrastructure technology costs are incurred in the U.S. and are allocated to our North America segment. We exclude from our allocations the portions of these operating expense lines attributable to stock-based compensation. We do not allocate the line item “Other operating expense (income), net” to our segment operating results. There are no internal revenue transactions between our reportable segments.
AMAZON.COM, INC.
Supplemental Segment Financial Information
Two years of historical financial information on reportable segments and reconciliation to consolidated net income (loss) using the new segment presentation are as follows (in millions):
Year Ended
Three Months Ended
Year Ended
December 31, 2014
December 31, 2014
September 30, 2014
June 30, 2014
March 31, 2014
December 31, 2013
North America
Net sales
$
50,834
$
17,333
$
11,699
$
10,994
$
10,808
$
41,410
Segment operating expenses (1)
49,542
16,600
11,759
10,665
10,518
40,244
Segment operating income (loss)
$
1,292
$
733
$
(60
)
$
329
$
290
$
1,166
International
Net sales
$
33,510
$
10,575
$
7,711
$
7,341
$
7,883
$
29,934
Segment operating expenses (1)
33,654
10,510
7,885
7,343
7,916
29,780
Segment operating income (loss)
$
(144
)
$
65
$
(174
)
$
(2
)
$
(33
)
$
154
AWS
Net sales
$
4,644
$
1,420
$
1,169
$
1,005
$
1,050
$
3,108
Segment operating expenses (1)
3,984
1,180
1,071
928
805
2,435
Segment operating income
$
660
$
240
$
98
$
77
$
245
$
673
Consolidated
Net sales
$
88,988
$
29,328
$
20,579
$
19,340
$
19,741
$
74,452
Segment operating expenses (1)
87,180
28,290
20,715
18,936
19,239
72,459
Segment operating income (loss)
1,808
1,038
(136
)
404
502
1,993
Stock-based compensation
(1,497
)
(408
)
(377
)
(391
)
(321
)
(1,134
)
Other operating income (expense), net
(133
)
(39
)
(31
)
(28
)
(35
)
(114
)
Income (loss) from operations
178
591
(544
)
(15
)
146
745
Total non-operating income (expense)
(289
)
(162
)
(90
)
(12
)
(26
)
(239
)
Benefit (provision) for income taxes
(167
)
(205
)
205
(94
)
(73
)
(161
)
Equity-method investment activity, net of tax
37
(10
)
(8
)
(5
)
61
(71
)
Net income (loss)
$
(241
)
$
214
$
(437
)
$
(126
)
$
108
$
274
Segment Highlights:
Y/Y net sales growth:
North America
23
%
21
%
23
%
25
%
23
%
26
%
International
12
3
14
18
18
14
AWS
49
47
43
43
69
69
Consolidated
20
15
20
23
23
22
Net sales mix:
North America
57
%
59
%
57
%
57
%
55
%
56
%
International
38
36
37
38
40
40
AWS
5
5
6
5
5
4
Consolidated
100
%
100
%
100
%
100
%
100
%
100
%
_________________
(1) Excludes stock-based compensation and “Other operating expense (income), net” which are not allocated to segments.
AMAZON.COM, INC.
Supplemental Segment Financial Information
Segment Assets
Total segment assets exclude corporate assets, such as cash and cash equivalents, marketable securities, other long-term investments, corporate facilities, goodwill and other acquired intangible assets, capitalized internal-use software and website development costs, and tax assets. Technology infrastructure assets are allocated among the segments based on usage, with the majority allocated to the AWS segment. Total segment assets reconciled to consolidated amounts are as follows (in millions):
December 31,
2014
2013
North America (1)
$
13,257
$
9,991
International (1)
6,747
6,199
AWS (2)
6,981
3,840
Corporate
27,520
20,129
Consolidated
$
54,505
$
40,159
_____________________________
(1) North America and International segment assets primarily consist of inventory, accounts receivable, and property and equipment.
(2) AWS segment assets primarily consist of property and equipment and accounts receivable.
Property and Equipment, Net
Property and equipment, net by segment is as follows (in millions):
December 31,
2014
2013
North America
$
5,373
$
3,477
International
2,000
1,549
AWS
6,043
3,253
Corporate
3,551
2,670
Consolidated
$
16,967
$
10,949
Property and Equipment Additions
Total property and equipment additions by segment are as follows (in millions):
December 31,
2014
2013
North America (1)
$
2,833
$
2,326
International (1)
767
851
AWS (2)
4,295
2,215
Corporate
1,586
981
Consolidated
$
9,481
$
6,373
___
_
____________
(1)
Includes property and equipment added under capital leases of $887 million and $555 million in 2014 and 2013, and under other financing arrangements of $599 million and $715 million in 2014 and 2013.
(2)
Includes property and equipment added under capital leases of $3.0 billion and $1.3 billion in 2014 and 2013, and under other financing arrangements of $62 million and $67 million in 2014 and 2013.
AMAZON.COM, INC.
Supplemental Segment Financial Information
Depreciation Expense
Depreciation expense, including amortization of capitalized internal-use software and website development costs and other corporate property and equipment depreciation expense, are allocated to all segments based on usage. Total depreciation expense, by segment, is as follows (in millions):
Back in July, Apple and IBM announced a partnership to bring the latter’s big data and analytics capabilities to iPhone and iPad with over 100 industry-specific enterprise solutions. These would include native apps for both devices, IBM cloud services specifically optimized for iOS (device management, security, analytics, mobile integration), a new AppleCare service, a support offering for the enterprise, and new packaged offerings from IBM for device activation, supply and management.
Apple just announced the availability of the first apps from the partnership. IBM MobileFirst for iOS solutions are now available to enterprise customers in banking, retail, insurance, financial services, telecommunications and for governments and airlines. Citi, Air Canada, Sprint and Banorte are already announcing support.
“What we’re delivering aims directly at the new quest of business—smart technologies that unlock new value at the intersection of big data and individual engagement,” said Bridget van Kralingen, senior vice president of IBM Global Business Services. “Our collaboration combines IBM’s industry expertise and unmatched position in enterprise computing, with Apple’s legendary user experience and excellence in product design to lift the performance of a new generation of business professionals.”
“This is a big step for iPhone and iPad in the enterprise, and we can’t wait to see the exciting new ways organizations will put iOS devices to work,” said Philip Schiller, Apple’s senior vice president of Worldwide Marketing. “The business world has gone mobile, and Apple and IBM are bringing together the world’s best technology with the smartest data and analytics to help businesses redefine how work gets done.”
Apple runs down the new apps (more of which are coming) by industry:
Plan Flight (Travel and Transportation) addresses the major expense of all airlines—fuel—permitting pilots to view flight schedules, flight plans, and crew manifests ahead of time, report issues in-flight to ground crews, and make more informed decisions about discretionary fuel.
Passenger+ (Travel and Transportation) empowers flight crews to offer an unmatched level of personalized services to passengers in-flight—including special offers, re-booking, and baggage information.
Advise & Grow (Banking and Financial Markets) puts bankers on premise with their small business clients, with secure authorization to access client profiles and competitive analyses, gather analytics-driven insights to make personalized recommendations, and complete secure transactions.
Trusted Advice (Banking and Financial Markets) allows advisors to access and manage client portfolios, gain insight from powerful predictive analytics—in the client’s kitchen or at the local coffee shop, rather than the advisor’s office—with full ability to test recommendations with sophisticated modeling tools all the way to complete, secure transactions.
Retention (Insurance) empowers agents with access to customers’ profiles and history, including an analytics-driven retention risk score as well as smart alerts, reminders, and recommendations on next best steps and facilitation of key transactions like collection of e-signatures and premiums.
Case Advice (Government) addresses the issue of workload and support among caseworkers who are making critical decisions, one family or situation at a time, on the go. The solution adjusts case priorities based on real-time analytics-driven insights, and assesses risk based on predictive analysis.
Incident Aware (Government) converts an iPhone into a vital crime prevention asset, presenting law enforcement officers with real-time access to maps and video-feeds of incident locations; information about victim status, escalation risk, and crime history; and improved ability to call for back-up and supporting services.
Sales Assist (Retail) enables associates to connect with customer profiles, make suggestions based on previous purchases and current selections, check inventory, locate items in-store, and ship out-of-store items.
Pick & Pack (Retail) combines proximity-based technology with back-end inventory systems for transformed order fulfillment.
Expert Tech (Telecommunications) taps into native iOS capabilities including FaceTime® for easy access to expertise and location services for route optimization to deliver superior on-site service, more effective issue resolution and productivity as well as improved customer satisfaction.
Let’s not forget how remarkable it actually is to see this big partnership between the two companies. Apple and IBM have famously had a long rivalry. Bloomberg even has a list of Steve Jobs “disses” of IBM, one of which includes this photo of Jobs flipping off the company’s logo.
How the times have changed.
“iPhone and iPad are the best mobile devices in the world and have transformed the way people work with over 98 percent of the Fortune 500 and over 92 percent of the Global 500 using iOS devices in their business today,” said Apple CEO Tim Cook when the partnership was announced. “For the first time ever we’re putting IBM’s renowned big data analytics at iOS users’ fingertips, which opens up a large market opportunity for Apple. This is a radical step for enterprise and something that only Apple and IBM can deliver.”
The Samsung Galaxy Note 4, like clockwork, released six months after this year’s disappointing Galaxy S 5. Like every note before it, the Note 4 is positioned as the phablet alternative to Samsung’s mainstream S series. The concern this time around is that the Note 4, much like the S 5, isn’t changing enough to keep up with the competition. Well, now that the phone has been out on the market for more than a month, what do the professionals think?
To start, the Samsung Galaxy Note 4 is a beast of a device. It sports a 2.7GHz quad-core CPU, 3GB of RAM, a 1440×2560 5.7-inch display, 32GB of on-board memory and a 32 MP rear camera. In other words, you’re not going to find yourself lacking in power with the device. Its power was pretty much a given at this point though. What about everything else?
In reviews, the Note 4 is praised for its display, included software and power. Much the same could be said of the Galaxy Note 3. What sets this phone apart from the previous device besides the bump in specs? Trusted Review draws attention to the build quality and additional hardware, such as the fingerprint scanner and heart rate monitor, as the major additions over its previous incarnation. Other publications agree that the Note 4 is a worthy successor to the Note 4 and definitely worth the upgrade.
When compared to other devices, it isn’t as clear. It’s not that any one phone is obviously superior to the other, but rather a matter of preference. Does it bother you that Samsung still uses plastic on the backs of its phones? While the company has made some improvements to the back of the Note 4, it still lacks the full metal backing of the iPhone 6 Plus. When compared to other Android devices, the Note 4 comes a bit more favorable as its closest competition – the LG G3 – has an inferior display and cameras.
If you found yourself disappointed by the Galaxy S 5, the Galaxy Note 4 may be the Android phone for you this year. It has improved upon everything found in the Galaxy Note 3 while retaining everything that makes the Note line shine. Besides, Samsung is marketing the device with cute animals – everybody loves cute animals:
Twitter and IBM announced a new partnership to give enterprises Twitter data through IBM tools and services. Essentially, it’s a combination of Twitter’s “public pulse” of real-time data and IBM’s cloud-based analytics, customer engagement platforms, and consulting services.
IBM will offer Twitter data as part of IBM Watson Analytics, Watson Developer Cloud and IBM Bluemix. There will also be joint solutions from the companies including one that will integrate Twitter data with IBM ExperienceOne customer engagement solutions for sales, marketing, and customer service purposes.
IBM Global Business Services users will be abel to access Twitter data , and the two companies will collaborate on solutions for specific industries like banking, consumer products, retail, travel, and transportation.
IBM President and CEO Ginni Rometty said, “Twitter provides a powerful new lens through which to look at the world – as both a platform for hundreds of millions of consumers and business professionals, and as a synthesizer of trends. This partnership, drawing on IBM’s leading cloud-based analytics platform, will help clients enrich business decisions with an entirely new class of data. This is the latest example of how IBM is reimagining work.”
“When it comes to enterprise transformation, IBM is an undisputed global leader in enabling companies to take advantage of emerging technologies and platforms,” added Twitter CEO Dick Costolo. “This important partnership with IBM will change the way business decisions are made – from identifying emerging market opportunities to better engaging clients, partners and employees.”
In a blog post, Twitter says the announcement has been “years in the making,” as its data efforts started when it first made its public data available for analysis. It cites its recent acquisition of Gnip as a significant milestone in its enterprise efforts.
Adam Richman has made some controversial decisions lately, and one of them is getting some attention this week after a blogger called the former Travel Channel star out on it.
Richman’s Travel Channel show Man Finds Food was shelved after the star posted a rant on Twitter aimed at some followers who were upset over his use of the hashtag “thinspiration”–which is often associated with pro-anorexia groups–but he has found a new home at NBC with Food Fighters, and is also endorsing Walmart beef. The endorsement isn’t sitting well with blogger Alexander Villeneuve.
“Richman spun off his work as America’s most beloved binge eater into a job endorsing questionable food choices from Wal-Mart, disguised under the cloak of summer grilling tips courtesy of America’s largest retailer. In this paradoxical ad, a noticeably slimmer Richman uses his “burger lover” credentials to sell the public some of the artery-filling red meat he’s clearly been cutting back on,” Villeneuve wrote.
Richman has defended backing the retail giant’s products, saying he wouldn’t do it if it wasn’t something he believed in.
“People are going to hate if they’re going to hate, and I can’t control that. I met with ranchers, I met with the head of the beef program, I realized that they really have made profound steps to make their beef program a solid one,” he said. “If it were a product I didn’t believe in, if it were an approach I didn’t believe in, I wouldn’t do it.”
In an attempt to help brick-and-mortar bookstores unable to offer the deep discounts and free shipping that has made Amazon so successful, France enacted a law last year disallowing the online retailer from offering a five percent discount and free shipping on books.
That law recently went into effect, and Amazon, professional trolls, have come up with a pretty ingenious screw you solution to the problem.
No free shipping huh? Ok, we’ll ship for a penny.
The announcement via Amazon.fr (translated) explains that they will stop offering the five percent discount and free shipping, as the law requires, but instead “set the shipping costs to the minimum permitted by law, or just 1 penny per order containing books shipped by Amazon.”
Amazon Prime members in France will continue to get completely free shipping.
And this, my friends, is how you render legislation basically pointless.
Deciding what the best in-ear headphones are is a contentious topic. After all, sound quality and comfort is largely subjective for a lot of people. That doesn’t mean professional critics can’t try to sort out the best from the junk though.
Consumer Reports recently put out a list of what it thinks are the best in-ear headphones available today. The exhaustive test saw the critics at Consumer Reports looking at over 150 wired in-ear headphones to determine which one is the best. While a winner is chosen, the magazine does offer a variety of excellent options for all kinds of budgets.
Starting off, Consumer Reports says the best in-ear headphones are the Polk Audio Nue Era. The magazine cites the headphones excellent sound quality and lightweight as standout features. The magazine also says it likes the tortoise shell design. The Polk Audio Nue Era headphones are a little on the pricey side at $100, but you can usually get a pair cheaper via Amazon or eBay.
If you want something a little more extravagant, Consumer Reports recommends the Bose QuietComfort 20i. It also has excellent audio quality, but the real standout feature is the noise canceling hardware. Like all things Bose, you’re going to have to spend a lot more than what you’re accustomed to. The QuietComfort 20i retails for $300.
Let’s say that the above two in-ear headphones are too rich for your tastes. It’s understandable. After all, not everybody has a few Benjamins lying around to spend on some headphones. You want good audio quality at an affordable price, and Consumer Reports has just that. The magazine rated the $10 Panasonic RP-TCM125 rather highly saying that it has excellent sound quality for the price. The only thing it’s lacking is an integrated volume control button so those using these in-ear headphones on a mobile device will have to adjust the volume via the device.
On a personal note, I highly recommend the Sennheiser CX 300-II in-ear headphones. Out of all the in-ear headphones I’ve used, it packs the best bass. It also comes with three different sizes of rubber cushions so that it fits all ear sizes. The only downside compared to the in-ear headphones above is that it doesn’t have any hardware control buttons or built-in mic. If you need any of that, you’ll want to consider one of the above options. If you put sound quality above all, Sennheiser is an excellent alternative.
Apple just released its earnings report for its fiscal 2014 second quarter, ended March 29th with revenue of $45.6 billion and quarterly net profit of $10.2 billion. That’s compared to $43.6 billion and net profit of $9.5 billion, respectively for the same period last year.
CEO Tim Cook said, “We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services. We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market.”
The company beat analysts’ expectations.
It expects revenue for its third quarter to be between $36 billion and $38 billion.
Apple also announced that its board of directors has authorized another “significant increase” to Apple’s program to return capital to shareholders, utilizing a total of over $130 billion of cash by the end of next year.
“We’re confident in Apple’s future and see tremendous value in Apple’s stock, so we’re continuing to allocate the majority of our program to share repurchases,” Cook said. “We’re also happy to be increasing our dividend for the second time in less than two years.”
Here’s the earnings release in its entirety:
Apple® today announced financial results for its fiscal 2014 second quarter ended March 29, 2014. The Company posted quarterly revenue of $45.6 billion and quarterly net profit of $10.2 billion, or $11.62 per diluted share. These results compare to revenue of $43.6 billion and net profit of $9.5 billion, or $10.09 per diluted share, in the year-ago quarter. Gross margin was 39.3 percent compared to 37.5 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter’s revenue.
“We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services”
“We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services,” said Tim Cook, Apple’s CEO. “We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market.”
“We generated $13.5 billion in cash flow from operations and returned almost $21 billion in cash to shareholders through dividends and share repurchases during the March quarter,” said Peter Oppenheimer, Apple’s CFO. “That brings cumulative payments under our capital return program to $66 billion.”
Apple is providing the following guidance for its fiscal 2014 third quarter:
• revenue between $36 billion and $38 billion
• gross margin between 37 percent and 38 percent
• operating expenses between $4.4 billion and $4.5 billion
• other income/(expense) of $200 million
• tax rate of 26.1 percent
Apple will provide live streaming of its Q2 2014 financial results conference call beginning at 2:00 p.m. PDT on April 23, 2014 atwww.apple.com/quicktime/qtv/earningsq214. This webcast will also be available for replay for approximately two weeks thereafter.
This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue, gross margin, operating expenses, other income/(expense), and tax rate. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company’s reaction to those factors, on consumer and business buying decisions with respect to the Company’s products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company’s gross margin; the inventory risk associated with the Company’s need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company’s business currently obtained by the Company from sole or limited sources; the effect that the Company’s dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company’s international operations; the Company’s reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company’s dependency on the performance of distributors, carriers and other resellers of the Company’s products; the effect that product and service quality problems could have on the Company’s sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of other legal proceedings. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 28, 2013, its Form 10-Q for the quarter ended December 28, 2013, and its Form 10-Q for the quarter ended March 29, 2014 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.
NOTE TO EDITORS: For additional information visit Apple’s PR website (www.apple.com/pr), or call Apple’s Media Helpline at (408) 974-2042.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except number of shares which are reflected in thousands and per share amounts)
Three Months Ended
Six Months Ended
March 29, 2014
March 30, 2013
March 29, 2014
March 30, 2013
Net sales
$
45,646
$
43,603
$
103,240
$
98,115
Cost of sales (1)
27,699
27,254
63,447
60,706
Gross margin
17,947
16,349
39,793
37,409
Operating expenses:
Research and development (1)
1,422
1,119
2,752
2,129
Selling, general and administrative (1)
2,932
2,672
5,985
5,512
Total operating expenses
4,354
3,791
8,737
7,641
Operating income
13,593
12,558
31,056
29,768
Other income/(expense), net
225
347
471
809
Income before provision for income taxes
13,818
12,905
31,527
30,577
Provision for income taxes
3,595
3,358
8,232
7,952
Net income
$
10,223
$
9,547
$
23,295
$
22,625
Earnings per share:
Basic
$
11.69
$
10.16
$
26.31
$
24.09
Diluted
$
11.62
$
10.09
$
26.16
$
23.90
Shares used in computing earnings per share:
Basic
874,757
939,629
885,415
939,273
Diluted
879,528
946,035
890,490
946,626
Cash dividends declared per common share
$
3.05
$
2.65
$
6.10
$
5.30
(1) Includes share-based compensation expense as follows:
Cost of sales
$
110
$
87
$
219
$
172
Research and development
$
300
$
239
$
589
$
463
Selling, general and administrative
$
286
$
249
$
569
$
485
Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands)
March 29, 2014
September 28, 2013
ASSETS:
Current assets:
Cash and cash equivalents
$
18,949
$
14,259
Short-term marketable securities
22,401
26,287
Accounts receivable, less allowances of $88 and $99, respectively
9,700
13,102
Inventories
1,829
1,764
Deferred tax assets
4,014
3,453
Vendor non-trade receivables
6,120
7,539
Other current assets
7,528
6,882
Total current assets
70,541
73,286
Long-term marketable securities
109,239
106,215
Property, plant and equipment, net
15,120
16,597
Goodwill
2,055
1,577
Acquired intangible assets, net
3,928
4,179
Other assets
5,106
5,146
Total assets
$
205,989
$
207,000
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable
$
18,914
$
22,367
Accrued expenses
15,984
13,856
Deferred revenue
8,310
7,435
Total current liabilities
43,208
43,658
Deferred revenue – non-current
3,164
2,625
Long-term debt
16,962
16,960
Other non-current liabilities
22,476
20,208
Total liabilities
85,810
83,451
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 1,800,000 shares authorized; 861,745 and 899,213 shares issued and outstanding, respectively
21,496
19,764
Retained earnings
98,934
104,256
Accumulated other comprehensive income/(loss)
(251)
(471)
Total shareholders’ equity
120,179
123,549
Total liabilities and shareholders’ equity
$
205,989
$
207,000
Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Six Months Ended
March 29, 2014
March 30, 2013
Cash and cash equivalents, beginning of the period
$
14,259
$
10,746
Operating activities:
Net income
23,295
22,625
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization
4,031
3,280
Share-based compensation expense
1,377
1,120
Deferred income tax expense
2,059
1,957
Changes in operating assets and liabilities:
Accounts receivable, net
3,401
3,846
Inventories
(65)
(454)
Vendor non-trade receivables
1,419
1,510
Other current and non-current assets
14
1,269
Accounts payable
(2,375)
(4,422)
Deferred revenue
1,414
1,541
Other current and non-current liabilities
1,638
3,658
Cash generated by operating activities
36,208
35,930
Investing activities:
Purchases of marketable securities
(90,360)
(81,163)
Proceeds from maturities of marketable securities
10,869
9,243
Proceeds from sales of marketable securities
80,241
49,188
Payments made in connection with business acquisitions, net
(559)
(299)
Payments for acquisition of property, plant and equipment
(3,367)
(4,325)
Payments for acquisition of intangible assets
(163)
(429)
Other
(23)
(93)
Cash used in investing activities
(3,362)
(27,878)
Financing activities:
Proceeds from issuance of common stock
341
275
Excess tax benefits from equity awards
363
502
Taxes paid related to net share settlement of equity awards
(430)
(588)
Dividends and dividend equivalents paid
(5,430)
(4,984)
Repurchase of common stock
(23,000)
(1,950)
Cash used in financing activities
(28,156)
(6,745)
Increase in cash and cash equivalents
4,690
1,307
Cash and cash equivalents, end of the period
$
18,949
$
12,053
Supplemental cash flow disclosure:
Cash paid for income taxes, net
$
5,369
$
4,258
Cash paid for interest
$
161
$
0
Apple Inc.
Q2 2014 Unaudited Summary Data
(Units in thousands, Revenue in millions)
Q2’14
Q1’14
Q2’13
Sequential Change
Year/Year Change
Operating Segments
Revenue
Revenue
Revenue
Revenue
Revenue
Americas
$14,310
$20,098
$14,052
– 29%
2%
Europe
10,230
13,073
9,800
– 22%
4%
Greater China (a)
9,289
8,844
8,213
5%
13%
Japan
3,963
4,948
3,135
– 20%
26%
Rest of Asia Pacific
2,627
3,633
3,162
– 28%
– 17%
Retail
5,227
6,998
5,241
– 25%
0%
Total Apple
$45,646
$57,594
$43,603
– 21%
5%
Q2’14
Q1’14
Q2’13
Sequential Change
Year/Year Change
Product Summary
Units
Revenue
Units
Revenue
Units
Revenue
Units
Revenue
Units
Revenue
iPhone (b)
43,719
$26,064
51,025
$32,498
37,430
$22,955
– 14%
– 20%
17%
14%
iPad (b)
16,350
7,610
26,035
11,468
19,477
8,746
– 37%
– 34%
– 16%
– 13%
Mac (b)
4,136
5,519
4,837
6,395
3,952
5,447
– 14%
– 14%
5%
1%
iPod (b)
2,761
461
6,049
973
5,633
962
– 54%
– 53%
– 51%
– 52%
iTunes/Software/Services (c)
4,573
4,397
4,114
4%
11%
Accessories (d)
1,419
1,863
1,379
– 24%
3%
Total Apple
$45,646
$57,594
$43,603
– 21%
5%
(a)
Greater China includes China, Hong Kong and Taiwan.
(b)
Includes deferrals and amortization of related non-software services and software upgrade rights.
(c)
Includes revenue from sales on the iTunes Store, the App Store, the Mac App Store, and the iBooks Store, and revenue from sales of AppleCare, licensing and other services.
(d)
Includes sales of hardware peripherals and Apple-branded and third-party accessories for iPhone, iPad, Mac and iPod.
The final countdown for Windows XP support is upon us (There’s literally a countdown. You can see it here). It’s had a good twelve-year run, but on April 8th, Microsoft will support the OS no more.
This means there will be no more security updates or technical support.
“Security updates patch vulnerabilities that may be exploited by malware and help keep users and their data safer,” says Microsoft. “PCs running Windows XP after April 8, 2014, should not be considered to be protected, and it is important that you migrate to a current supported operating system – such as Windows 8.1 – so you can receive regular security updates to protect their computer from malicious attacks.”
The company notes that antivirus software will not be able to fully protect your PC when the operating system itself is unsupported.
“Businesses that are governed by regulatory obligations such as HIPAA may find that they are no longer able to satisfy compliance requirements,” the company says.
Windows XP will still be able to be installed and activated, and activations will still be required for retail installations. Existing updates will still be available via Windows Update.
Microsoft is also ending support for the following: Office 2003, Windows XP Mode in Windows 7, Windows XP used with MED-V, Microsoft Security Essentials for Windows XP, System Center, Windows Intune and the Microsoft Deployment Toolkit for Windows XP
Microsoft’s Malicious Software Removal Tool will be provided for Windows XP through July 14th, 2015.
People using machines with Windows XP Home and Windows XP Professional, who receive updates via Windows Update, will be notified about the end of support.
GlaxoSmithKline this week recalled all alli-branded weight loss products from store shelves in the U.S. The company believes that production of the diet pills may have been tampered with.
“Safety is our first priority and we are asking retailers and pharmacies to remove all alli from their shelves immediately,” said Colin Mackenzie, president of consumer healthcare North America at GlaxoSmithKline. “We have posted a Consumer Alert on our website, www.myalli.com, and issued a news release with information and photographs to help consumers determine if their alli is authentic.”
The alli recall is due to reports from consumers that their bottles of alli contained capsules that were not alli, but something else. Consumers have reported tablets and capsules of varying shape and color found inside bottles of what was supposed to be alli.
GlaxoSmithKline now believes that some alli containers were tampered with and therefore may not contain alli at all. Some of the bottles containing pills other than alli were found to have been missing labels and to have inauthentic tamper-evident seals. All of these tampered-with products were found to have been bought in retail stores throughout the U.S. The company is working with the U.S. Food and Drug Administration to research the cause of the misplaced pills and recall all alli products.
According to GlaxoSmithKline, alli capsules are blue with dark blue bands and have the text “60 Orlistat” printed on them. They should be found within bottles that have a foil seal reading “Sealed for Your Protection” imprinted on it.
The company is urging customers to confirm their alli is authentic and to not use any capsules that they are unsure about. For consumers who may have ingested something out of an alli bottle that they believe is questionable, GlaxoSmithKline suggests contacting a healthcare professional.
“We are committed to finding out what happened and to doing everything possible to prevent future issues with alli,” said Mackenzie. “We regret any inconvenience caused by this retailer recall.”
Infamous weight loss drug Alli, known for keeping dieters on track for fear of messy side effects, has been voluntarily recalled in the United States and Puerto Rico by producer GlaxoSmithKline Consumer Healthcare (GSK) on account of possible product tampering. “Safety is our first priority and we are asking retailers and pharmacies to remove all Alli from their shelves immediately,” said Colin Mackenzie, President of Consumer Healthcare North America.
Authentic Alli pills are turquoise pills with a dark blue band, however consumers in seven states (Alabama, Florida, Louisiana, Mississippi, New York, North Carolina and Texas) have reported purchasing Alli pills of different shapes and colors as well as bottles with dysfunctional safety seals, missing labels, and mismatched expiration dates on the pill bottle and the carton.
Alli is manufactured in the United States and Puerto Rico, and the exact source of the possible tampering is currently unknown. However, GSK is investigating and fully cooperative with the FDA. “We are committed to finding out what happened and to doing everything possible to prevent future issues with Alli. We regret any inconvenience caused by this retailer recall,” said Mackenzie.
Alli first hit the shelves in 2007 amongst high expectations as the first FDA approved over-the-counter weight loss pill, a form of the prescription weight loss drug Xenical. Reports subsequently surfaced that while Alli is clinically proven to aid in weight loss in conjunction with a low-fat, low-calorie diet, it also can cause diarrhea in users who don’t stick to their health plan.
Consumers who encounter any irregularity in their Alli product are encouraged to carefully examine the pills and labels for adherence to the standard Alli features, including a labeled bottle and safety seal printed with “Sealed for your protection,” and matching expiration dates on both bottle and carton. If uncertain about product authenticity, contact GSK. If any inauthentic Alli pills are ingested, contact a healthcare professional.
Thus far, there have been no reports of negative side effects from consumption of the inauthentic Alli pills, however when consuming authentic Alli, users are advised, as always, to refrain from fatty foods to avoid digestive complications.
Demand Media reported its financial results for Q4 and fiscal 2013 on Tuesday. The company continues to suffer at the hands of Google algorithm changes (it just so happens that this week marks the three-year anniversary of the Panda update).
While things seemed to be going better for Demand Media after it navigated around its initial Panda obstacles, somewhere down the line, Google’s algorithm caught up with the company’s properties (specifically eHow) once again. Last quarter, the company reported revenue decline thanks to the lost of search referrals, and this report paints a similar picture.
Revenue declined by 6% to $96.7 million for the quarter, and the outlook isn’t looking much better.
On top of that, parking revenue and domain sales are down 33% for the year, compared to 2012.
Interim CEO Shawn Colo said, “The fourth quarter was highlighted by solid performance from Society6, Content Solutions and our registrar business, offset by continued declines in the Company’s core eHow business. Additionally, we have made steady progress against key initiatives, such as product improvements on Society6 and relaunching the Livestrong.com website, while continuing to prepare for our upcoming spin-off of Rightside Group. I continue to be excited about long-term strategic opportunities within our large and growing markets.”
Demand Media stock is down nearly 10% on Wednesday morning.
Since the earnings call, the company has announced a new strategic advertising partnership with Healthline, which will see the latter creating digital ad solutions and exclusively representing key categories for LiveStrong.com.
Here’s the release in its entirety:
SANTA MONICA, Calif.–(BUSINESS WIRE)– Demand Media, Inc. (NYSE: DMD), a leading digital content & media and domain name services company, today reported financial results for the fourth quarter and fiscal year ended December 31, 2013.
“The fourth quarter was highlighted by solid performance from Society6, Content Solutions and our registrar business, offset by continued declines in the Company’s core eHow business. Additionally, we have made steady progress against key initiatives, such as product improvements on Society6 and relaunching the Livestrong.com website, while continuing to prepare for our upcoming spin-off of Rightside Group,” said Shawn Colo , Interim CEO of Demand Media. “I continue to be excited about long-term strategic opportunities within our large and growing markets.”
Financial Summary
In millions, except per share amounts
Three months ended December 31,
Year ended December 31,
2013
2012
Change
2013
2012
Change
Total Revenue
$
96.7
$
103.1
(6
%)
$
394.6
$
380.6
4
%
Content & Media Revenue ex-TAC(1)
$
55.4
$
62.3
(11
%)
$
230.4
$
227.0
1
%
Registrar Revenue
38.6
34.5
12
%
148.2
134.2
10
%
Total Revenue ex-TAC(1)
$
94.0
$
96.8
(3
%)
$
378.6
$
361.2
5
%
Income (loss) from Operations
$
(11.3
)
$
6.1
NA
$
(18.5
)
$
8.7
NA
Adjusted EBITDA(1)
$
18.0
$
29.4
(39
%)
$
88.4
$
103.4
(15
%)
Net income (loss)
$
(11.5
)
$
4.7
NA
$
(20.2
)
$
6.2
NA
Adjusted net income(1)
$
3.0
$
10.8
(72
%)
$
23.2
$
34.3
(32
%)
EPS – diluted
$
(0.13
)
$
0.05
NA
$
(0.23
)
$
0.07
NA
Adjusted EPS – diluted(1)
$
0.03
$
0.12
(75
%)
$
0.26
$
0.39
(33
%)
Cash Flow from Operations
$
9.7
$
26.0
(63
%)
$
76.2
$
91.0
(16
%)
Free Cash Flow(1)
$
8.3
$
17.1
(51
%)
$
44.4
$
62.3
(29
%)
____________________
(1)
These non-GAAP financial measures are described below and reconciled to their comparable GAAP measures in the accompanying tables.
Q4 2013 Financial Summary:
Total revenue ex-TAC declined 3% year-over-year, with 12% year-over-year growth in Registrar revenue offset by an 11% decline in Content & Media revenue ex-TAC. Excluding the acquisitions of Society6 and Name.com, total revenue ex-TAC decreased 15%.
Registrar revenue grew 12% year-over-year, primarily due to the addition of Name.com, which was acquired at the end of Q4 2012. Excluding the acquisition of Name.com, Registrar revenue increased 2%.
Owned & Operated revenue decline of 5% was driven primarily by reductions in search engine referral traffic, offset by revenue of $8.4 million from Society6, which was acquired at the end of Q2 2013. Excluding the acquisition of Society6, Owned & Operated revenue decreased 23%.
Network revenue ex-TAC declined 31% due primarily to $3.5 million less revenue from the Company’s YouTube Channels as well as declines in the Company’s Social Media and Network Monetization businesses, offset partially by growth in Content Solutions.
Adjusted EBITDA decreased 39% year-over-year, primarily reflecting the negative impact from search engine referral traffic on high-margin revenues and a mix shift to lower margin commerce and Registrar revenue.
“We generated over $8 million of free cash flow in the fourth quarter and over $44 millionfor the year,” said Demand Media’s CFO Mel Tang . “We will continue to invest our free cash flow into our strategic content, commerce and new gTLD initiatives.”
Business Highlights:
Content & Media:
January 2014 US and Worldwide comScore Rankings:
On a consolidated basis, Demand Media ranked as the #19 US web property and Demand Media’s properties reached more than 88 million unique users worldwide.
eHow.com ranked as the #27 website in the US and reached more than 50 million unique users worldwide.
Livestrong / eHow Health ranked as the #3 Health property in the US, with more than 20 million unique users worldwide.
Cracked ranked as the #5 Humor property in the US, with more than 8 million unique users worldwide.
In Q4 2013, our Content Solutions business, which delivers custom and hosted content marketing services to partners, grew revenue ex-TAC 50% year-over-year to$2.8 million.
During Q4 2013, Society6 had a record $8.4 million of revenue and its sales on Cyber Monday increased 73% year-over-year. Society6 also expanded its product line-up to include mugs, baby onesies, kids T-shirts and a calendar created in collaboration with the artist community.
Domain Name Services:
Launched our back-end registry platform in Q4 2013, powering the launch for over 60 new gTLDs and over 150,000 domain registrations to date.
Signed our first registry operator agreements with ICANN in Q4 2013, and have signed 14 agreements to date, including .dance, .democrat, .immobilien and .ninja, which are currently in their ‘sunrise’ launch phase.
Our registry entered into its first agreements with registrars to distribute our owned gTLDs, with over 40 signed to date.
Our eNom and Name.com registrar channels signed agreements with new registry operators to distribute new gTLDs and have launched over 80 new gTLDs to date.
Operating Metrics:
Three months ended December 31,
Year ended December 31,
2013
2012
% Change
2013
2012
% Change
Content & Media Metrics:
Owned and operated websites
Page views(1) (in millions)
4,054
3,354
21
%
16,348
13,192
24
%
RPM(2)
$
11.38
$
14.55
(22
)%
$
11.96
$
13.53
(12
)%
Network of customer websites
Page views(1) (in millions)
2,245
4,530
(50
)%
16,793
18,989
(12
)%
RPM(2)
$
5.30
$
4.38
21
%
$
3.03
$
3.58
(15
)%
RPM ex-TAC(3)
$
4.12
$
2.98
38
%
$
2.08
$
2.55
(18
)%
Registrar Metrics:
End of Period # of Domains(4) (in millions)
15.0
13.7
9
%
15.0
13.7
9
%
Average Revenue per Domain(5)
$
10.47
$
10.09
4
%
$
10.36
$
10.19
2
%
____________________
(1)
Page views represent the total number of web pages viewed across (a) our owned and operated websites and/or (b) our network of customer websites, to the extent that the viewed customer web pages host the Company’s monetization, social media and/or content services.
(2)
RPM is defined as Content & Media revenue per one thousand page views.
(3)
RPM ex-TAC is defined as Content & Media revenue ex-TAC per one thousand page views.
(4)
A domain is defined as an individual domain name registered by a third-party customer on our platform for which we have begun to recognize revenue.
(5)
Average revenue per domain is calculated by dividing Registrar revenue for a period by the average number of domains registered in that period. Average revenue per domain for partial year periods is annualized.
Q4 2013 Operating Metrics:
Owned & Operated page views increased 21% year-over-year to 4.1 billion, driven primarily by mobile page view growth on our core Owned & Operated sites, which more than offset significant declines in search engine referral traffic. Owned & Operated RPM decreased 22% year-over-year, reflecting the mix shift to lower yielding mobile page views as well as lower direct display advertising, offset partially by increased revenue from Society6.
Revenue per visit to our Owned & Operated Content sites was $0.05, up 25% year-over-year.
Network page views decreased 50% year-over-year to 2.2 billion, reflecting the Company’s decision in Q3 2013 to focus its monetization efforts on its Owned & Operated properties. Additionally, there were lower reported page views from its Pluck customers. Network RPM ex-TAC increased 38% year-over-year, reflecting higher monetization of our Social Media and Monetization page views.
End of period domains increased 9% year-over-year to 15.0 million, driven by the acquisition of Name.com, with average revenue per domain up 4% year-over-year, due to higher average revenue per domain on Name.com.
Business Outlook:
The following forward-looking information includes certain projections made by management as of the date of this press release. The Company does not intend to revise or update this information, except as required by law, and may not provide this type of information in the future. Due to a variety of factors, actual results may differ significantly from those projected.The factors that may affect results include, without limitation, the factors referenced later in this announcement under the caption “Cautionary Information Regarding Forward-Looking Statements.” These and other risk factors are discussed in more detail in the Company’s filings with the Securities and Exchange Commission.
Due to the planned separation of the Company’s domain name services business and evolution of its content and media business, the Company is replacing quarterly and annual guidance with a discussion of expected short and long term trends.
In 2014, the Company expects the following:
Slightly declining revenue year-over-year driven by the Company’s shift away from traditional branded display sales and continued declines in eHow coupled with product and ad format changes to improve user experience, offset partially by growth in Society6, Content Solutions and Registrar revenue.
Adjusted EBITDA margins in the mid-teens, reflective of the inclusion of $8-$10 million of annual gTLD operating expenses post the launch of our first gTLDs inFebruary 2014, $10-$15 million of operating expense related to content remediation and infrastructure ramp for Society6 and Content Solutions, and a revenue mix shift to lower margin commerce and domain name services revenue.
Significant free cash flow generation.
Longer term, the Company expects the following:
Demand Media standalone revenue driven by a return to growth in eHow, as well as our growing Content Solutions and commerce businesses contributing a significantly higher percentage of total revenue.
Rightside revenue driven by growth in domain name services revenue from the new gTLD opportunity, partially offset by continued declines in domain parking revenue.
For both businesses, we expect margin expansion and to continue to generate significant free cash flow.
Conference Call and Webcast Information
Demand Media will host a corresponding conference call and live webcast at 5:00 p.m. Eastern time today. To access the conference call, dial 877.430.7751 and reference conference ID 51526222. To participate on the live call, analysts should dial-in at least 10 minutes prior to the commencement of the call. A live webcast also will be available on the Investor Relations section of the Company’s corporate website athttp://ir.demandmedia.com and via replay beginning approximately two hours after the completion of the call.
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we use certain non-GAAP financial measures described below. The presentation of this additional financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of Non-GAAP Measures” included at the end of this release.
The non-GAAP financial measures presented in this release are the primary measures used by the Company’s management and board of directors to understand and evaluate its financial performance and operating trends, including period-to-period comparisons, to prepare and approve its annual budget and to develop short and long term operational plans. Additionally, Adjusted EBITDA has been the primary measure used by the compensation committee of the Company’s board of directors to establish the funding targets for and fund its annual bonus pool for the Company’s employees and executives. We believe our presented non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) management frequently uses them in its discussions with investors, commercial bankers, securities analysts and other users of its financial statements.
Revenue ex-TAC is defined by the Company as GAAP revenue less traffic acquisition costs (TAC). TAC comprises the portion of Content & Media GAAP revenue shared with the Company’s network customers. Management believes that Revenue ex-TAC is a meaningful measure of operating performance because it is frequently used for internal managerial purposes and helps facilitate a more complete period-to-period understanding of factors and trends affecting the Company’s underlying revenue performance of itsContent & Media service offering.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is defined by the Company as net income (loss) before income tax expense, interest and other income (expense), depreciation, amortization, stock-based compensation, as well as the financial impact of acquisition and realignment costs, the formation expenses directly related to its gTLD initiative, net gains or losses on withdrawals of interest in gTLD applications, and any gains or losses on certain asset sales or dispositions. Acquisition and realignment costs include such items, when applicable, as (1) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (2) legal, accounting and other professional fees directly attributable to acquisition activity, (3) employee severance payments attributable to acquisition or corporate realignment activities and (4) expenditures related to the separation of Demand Media into two distinct publicly traded companies. Management does not consider these expenses to be indicative of the Company’s ongoing operating results or future outlook.
Management believes that this non-GAAP financial measure reflects the Company’s business in a manner that allows for meaningful period-to-period comparisons and analysis of trends. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the Company’s underlying recurring revenue and operating costs, which is focused more closely on the current costs necessary to utilize previously acquired long-lived assets. In addition, management believes that it can be useful to exclude certain non-cash charges because the amount of such expenses is the result of long-term investment decisions in previous periods rather than day-to-day operating decisions. For example, due to the long-lived nature of a majority of its media content, the revenue generated by the Company’s media content assets in a given period bears little relationship to the amount of its investment in media content in that same period. Accordingly, management believes that content acquisition costs represent a discretionary long-term capital investment decision undertaken at a point in time. This investment decision is clearly distinguishable from other ongoing business activities, and its discretionary nature and long-term impact differentiate it from specific period transactions, decisions regarding day-to-day operations, and activities that would have an immediate impact on operating or financial performance if materially changed, deferred or terminated.
Adjusted Earnings Per Share (Adjusted EPS) is defined by the Company as Adjusted Net Income divided by the weighted average number of shares outstanding. Adjusted Net Income is defined by the Company as net income (loss) before the effect of stock-based compensation, amortization of intangible assets acquired via business combinations, accelerated amortization of content intangible assets removed from service, acquisition and realignment costs, the formation expenses directly related to its gTLD initiative, net gains or losses on withdrawals of interest in gTLD applications, and any gains or losses on certain asset sales or dispositions, and is calculated using the application of a normalized effective tax rate. Acquisition and realignment costs include such items, when applicable, as (1) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (2) legal, accounting and other professional fees directly attributable to acquisition activity, (3) employee severance payments attributable to acquisition or corporate realignment activities, and (4) expenditures related to the separation of Demand Mediainto two distinct publicly traded companies. Management does not consider these expenses to be indicative of the Company’s ongoing operating results or future outlook.
Management believes that Adjusted Net Income and Adjusted EPS provide investors with additional useful information to measure the Company’s underlying financial performance, particularly from period to period, because these measures are exclusive of certain non-cash expenses not directly related to the operation of its ongoing business (such as amortization of intangible assets acquired via business combinations, as well as certain other non-cash expenses such as purchase accounting adjustments and stock-based compensation) and include a normalized effective tax rate based on the Company’s statutory tax rate.
Discretionary Free Cash Flow is defined by the Company as net cash provided by operating activities excluding cash outflows from acquisition and realignment activities, including expenditures related to the separation of Demand Media into two distinct publicly traded companies, and the formation expenses directly related to its gTLD initiative, less capital expenditures to acquire property and equipment. Free Cash Flow is defined by the Company as Discretionary Free Cash Flowless investments in intangible assets and is not impacted by net payments for gTLD applications, which were $3.9 million and $18.2 million for the twelve months ended December 31, 2013 and 2012, respectively, or net proceeds from the withdrawal of interest in gTLD applications, which were $5.6 million for the year ended December 31, 2013. Management believes that Discretionary Free Cash Flow and Free Cash Flow provide investors with additional useful information to measure operating liquidity because they reflect the Company’s underlying cash flows from recurring operating activities after investing in capital assets and intangible assets. These measures are used by management, and may also be useful for investors, to assess the Company’s ability to generate cash flow for a variety of strategic opportunities, including reinvestment in the business, pursuing new business opportunities, potential acquisitions, payment of dividends and share repurchases.
The use of these non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense, or cash flows that affect the Company’s operations. An additional limitation of these non-GAAP financial measures is that they do not have standardized meanings, and therefore other companies may use the same or similarly named measures but exclude different items or use different computations. Management compensates for these limitations by reconciling these non-GAAP financial measures to their most comparable GAAP financial measures within its financial press releases. Non-GAAP financial measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with GAAP. Further, these non-GAAP financial measures may differ from the non-GAAP financial information used by other companies, including peer companies, and therefore comparability may be limited. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. The accompanying tables have more details on the GAAP financial measures and the related reconciliations.
About Demand Media
Demand Media, Inc. (NYSE: DMD) is a leading digital media and domain name services company that informs and entertains one of the internet’s largest audiences, helps advertisers find innovative ways to engage with their customers and enables publishers, individuals and businesses to expand their online presence. Headquartered in Santa Monica, CA, Demand Media has offices in North America, South America and Europe. For more information about Demand Media, please visit www.demandmedia.com.
About Rightside
Rightside™ inspires and delivers new possibilities for consumers and businesses to define and present themselves online. The company, with its affiliates, is a leading provider of domain name services, offering one of the industry’s most comprehensive platforms for the discovery, registration, development, and monetization of domain names. This includes 15 million names under management, the most widely used domain name reseller platform, more than 20,000 distribution partners, an award-winning retail registrar, the leading domain name auction service through its NameJet joint venture and an interest in more than 100 new Top Level Domain registry operator agreements or applications through Rightside affiliate, United TLD Holdco Limited, trading as Rightside Registry. Following its planned separation from Demand Media, Rightside will be home to some of the most admired brands in the industry, including eNom, Name.com, andNameJet (in partnership with Web.com). Headquartered in Kirkland, WA, Rightside has offices in North America, Europe and Australia. For more information please visitwww.rightside.co.
Cautionary Information Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements involve risks and uncertainties regarding the Company’s future financial performance, and are based on current expectations, estimates and projections about our industry, financial condition, operating performance and results of operations, including certain assumptions related thereto. Statements containing words such as guidance, may, believe, anticipate, expect, intend, plan, project, projections, business outlook, and estimate or similar expressions constitute forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Potential risks and uncertainties that could affect our operating and financial results are described in our annual report on Form 10-K for the fiscal year ending December 31, 2012 filed with the Securities and Exchange Commission (http://www.sec.gov) on March 5, 2013,as such risks and uncertainties may be updated in our annual and quarterly reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, without limitation, information under the captions Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations. These risks and uncertainties include, among others: our ability to complete a separation of our business into two separate public companies and unanticipated developments that may delay or negatively impact such a transaction; the possibility that we may decide not to proceed with the separation of our business as previously announced if we determine that alternative opportunities are more favorable to our stockholders; the impact and possible disruption to our operations from pursuing the separation transaction; the expectation that the separation transaction will be tax-free; revenue and growth expectations for the two independent companies, and the ability of each company to operate as an independent entity, following the separation transaction;changes in the methodologies of internet search engines, including ongoing algorithmic changes made by Google as well as possible future changes, and the impact such changes may have on page view growth and driving search related traffic to our owned & operated websites and the websites of our network customers; the impact of product and ad format changes to improve user experience; changes in our content creation and distribution platform, including the possible repurposing of content to alternate distribution channels, reduced investments in intangible assets or the sale or removal of content; our ability to successfully grow adjacent lines of business such as commerce and content solutions as part of our growth strategy; the effects of shifting consumption of media content from desktop to mobile; our ability to successfully pursue and implement our gTLD initiative; our dependence on material agreements with a specific business partner for a significant portion of our revenue; changes in amortization or depreciation expense due to a variety of factors; potential write downs, reserves against or impairment of assets including receivables, goodwill, intangibles (including media content) or other assets; and our ability to retain key personnel. From time to time, we may consider acquisitions or divestitures that, if consummated, could be material. Any forward-looking statements regarding financial metrics are based upon the assumption that no such acquisition or divestiture is consummated during the relevant periods. If an acquisition or divestiture were consummated, actual results could differ materially from any forward-looking statements. The Company does not intend to revise or update the information set forth in this press release, except as required by law, and may not provide this type of information in the future.
Demand Media, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three months ended December 31,
Year endedDecember 31,
2013
2012
2013
2012
Revenue
$
96,661
$
103,142
$
394,598
$
380,578
Operating expenses:
Service costs (exclusive of amortization of intangible assets shown separately below)(1) (2)
55,127
48,865
204,763
181,018
Sales and marketing (1) (2)
9,587
12,823
46,445
46,501
Product development (1) (2)
10,920
9,719
44,187
40,708
General and administrative (1) (2)
18,677
16,171
73,277
63,025
Amortization of intangible assets
13,685
9,460
44,409
40,676
Total operating expenses
107,996
97,038
413,081
371,928
Income (loss) from operations
(11,335
)
6,104
(18,483
)
8,650
Interest income
5
8
21
42
Interest expense
(668
)
(157
)
(1,642
)
(622
)
Other income (expense), net
(12
)
(34
)
(61
)
(111
)
Gain on sale of assets
1,666
–
4,232
–
Income (loss) before income taxes
(10,344
)
5,921
(15,933
)
7,959
Income tax expense
(1,177
)
(1,172
)
(4,241
)
(1,783
)
Net income (loss)
$
(11,521
)
$
4,749
$
(20,174
)
$
6,176
(1) Stock-based compensation expense included in the line items above:
Service costs
$
700
$
679
$
2,778
$
2,820
Sales and marketing
851
1,597
5,328
6,118
Product development
1,084
1,283
5,186
6,452
General and administrative
3,120
3,823
14,092
15,978
Total stock-based compensation expense
$
5,755
$
7,382
$
27,384
$
31,368
(2) Depreciation expense included in the line items above:
Service costs
$
3,352
$
3,663
$
14,213
$
14,452
Sales and marketing
84
108
379
453
Product development
203
238
865
1,025
General and administrative
1,527
1,025
5,044
3,728
Total depreciation expense
$
5,166
$
5,034
$
20,501
$
19,658
Net income (loss) per share – basic
$
(0.13
)
$
0.06
$
(0.23
)
$
0.07
Net income (loss) per share – diluted
$
(0.13
)
$
0.05
$
(0.23
)
$
0.07
Weighted average number of shares – basic
90,310
86,140
88,534
84,553
Weighted average number of shares – diluted
90,310
88,444
88,534
87,237
Demand Media, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
December 31, 2013
December 31, 2012
Assets
Current assets
Cash and cash equivalents
$
153,511
$
102,933
Accounts receivable, net
33,301
45,517
Prepaid expenses and other current assets
7,826
6,041
Deferred registration costs
66,273
57,718
Total current assets
260,911
212,209
Property and equipment, net
42,193
35,467
Intangible assets, net
88,766
91,746
Goodwill
347,382
266,349
Deferred registration costs, less current portion
12,514
11,320
Other long-term assets
25,322
20,906
Total assets
$
777,088
$
637,997
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
$
12,814
$
10,471
Accrued expenses and other current liabilities
34,679
40,489
Deferred tax liabilities
22,415
18,892
Current portion of long-term debt
15,000
–
Deferred revenue
84,955
75,142
Total current liabilities
169,863
144,994
Deferred revenue, less current portion
16,929
15,965
Long-term debt
81,250
–
Other liabilities
13,041
4,847
Stockholders’ equity
Common stock and additional paid-in capital
611,039
562,703
Treasury stock
(30,767
)
(25,932
)
Accumulated other comprehensive income
502
15
Accumulated deficit
(84,769
)
(64,595
)
Total stockholders’ equity
496,005
472,191
Total liabilities and stockholders’ equity
$
777,088
$
637,997
Demand Media, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Three months ended December 31,
Year ended December 31,
2013
2012
2013
2012
Cash flows from operating activities:
Net income (loss)
$
(11,521
)
$
4,749
$
(20,174
)
$
6,176
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
18,851
14,494
64,910
60,334
Stock-based compensation
5,755
7,382
27,384
31,368
Gain on other assets, net
(1,666
)
–
(4,232
)
–
Other
691
1,134
3,038
1,717
Net change in operating assets and liabilities, net of effect of acquisitions
(2,375
)
(1,722
)
5,237
(8,612
)
Net cash provided by operating activities
9,735
26,037
76,163
90,983
Cash flows from investing activities:
Purchases of property and equipment
(3,986
)
(5,283
)
(26,746
)
(17,708
)
Purchases of intangibles
(3,509
)
(4,647
)
(16,772
)
(13,237
)
Proceeds from gTLD withdrawals, net
2,740
–
5,616
–
Payments for gTLD applications, net
(3,546
)
(16,200
)
(3,949
)
(18,202
)
Cash paid for acquisitions
(397
)
–
(73,626
)
(17,480
)
Change in restricted cash
–
–
–
(855
)
Other
473
–
942
–
Net cash used in investing activities
(8,225
)
(26,130
)
(114,535
)
(67,482
)
Cash flows from financing activities:
Long-term debt borrowings
50,000
–
120,000
–
Long-term debt repayments
(3,750
)
–
(23,750
)
–
Debt issuance costs
–
–
(1,936
)
(144
)
Repurchases of common stock
–
(4,913
)
(4,835
)
(8,869
)
Proceeds from exercises of stock options and contributions to ESPP
253
1,451
4,746
12,467
Net taxes paid on RSUs vesting and options exercised
(834
)
(6,151
)
(4,575
)
(9,496
)
Other
(180
)
(258
)
(620
)
(524
)
Net cash provided by (used in) financing activities
45,489
(9,871
)
89,030
(6,566
)
Effect of foreign currency on cash and cash equivalents
(17
)
(19
)
(80
)
(37
)
Change in cash and cash equivalents
46,982
(9,983
)
50,578
16,898
Cash and cash equivalents, beginning of period
106,529
112,916
102,933
86,035
Cash and cash equivalents, end of period
$
153,511
$
102,933
$
153,511
$
102,933
Demand Media, Inc. and Subsidiaries
Reconciliations of Non-GAAP Measures
(In thousands, except per share amounts)
Three months ended December 31,
Year ended December 31,
2013
2012
2013
2012
Revenue ex-TAC:
Content & Media revenue
$
58,022
$
68,633
$
246,397
$
246,399
Less: traffic acquisition costs (TAC)
(2,644
)
(6,332
)
(15,989
)
(19,441
)
Content & Media Revenue ex-TAC
55,378
62,301
230,408
226,958
Registrar revenue
38,639
34,509
148,201
134,179
Total Revenue ex-TAC
$
94,017
$
96,810
$
378,609
$
361,137
Adjusted EBITDA:
Net income (loss)
$
(11,521
)
$
4,749
$
(20,174
)
$
6,176
Income tax expense
1,177
1,172
4,241
1,783
Interest and other expense, net
675
183
1,682
691
Gain on gTLD application withdrawals, net(1)
(1,666
)
–
(4,232
)
–
Depreciation and amortization
18,851
14,494
64,910
60,334
Stock-based compensation
5,755
7,382
27,384
31,368
Acquisition and realignment costs(2)
1,880
314
6,113
446
gTLD expense(3)
2,875
1,061
8,428
2,650
Adjusted EBITDA
$
18,026
$
29,355
$
88,352
$
103,448
Discretionary and Total Free Cash Flow:
Net cash provided by operating activities
$
9,735
$
26,037
$
76,163
$
90,983
Purchases of property and equipment
(3,986
)
(5,283
)
(26,746
)
(17,708
)
Acquisition and realignment cash flows(2)
2,861
25
4,587
25
gTLD expense cash flows(3)
3,239
974
7,152
2,198
Discretionary Free Cash Flow
11,849
21,753
61,156
75,498
Purchases of intangible assets
(3,509
)
(4,647
)
(16,772
)
(13,237
)
Free Cash Flow
$
8,340
$
17,106
$
44,384
$
62,261
Adjusted Net Income and Adjusted EPS:
Net income (loss)
$
(11,521
)
$
4,749
$
(20,174
)
$
6,176
(a) Stock-based compensation
5,755
7,382
27,384
31,368
(b) Amortization of intangible assets – M&A
3,872
2,572
13,162
10,904
(c) Content intangible assets removed from service
2,387
237
2,453
2,055
(d) Acquisition and realignment costs(2)
1,880
314
6,113
446
(e) Gain on gTLD application withdrawals, net(1)
(1,666
)
–
(4,232
)
–
(f) gTLD expense(3)
2,875
1,061
8,428
2,650
(g) Income tax effect of items (a) – (f) & application of 38% statutory tax rate to pre-tax income
(632
)
(5,473
)
(9,962
)
(19,262
)
Adjusted Net Income
$
2,951
$
10,842
$
23,173
$
34,337
Adjusted EPS – diluted
$
0.03
$
0.12
$
0.26
$
0.39
Shares used to calculate Adjusted EPS – diluted
90,911
88,444
89,428
87,237
(1)
Net gains on withdrawals of interest in gTLD applications, included in gain on other assets, net.
(2)
Acquisition and realignment costs include such items, when applicable, as (a) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (b) legal, accounting and other professional fees directly attributable to acquisition activity, (c) employee severance payments attributable to acquisition or corporate realignment activities and (d) expenditures related to the separation of Demand Media into two distinct publicly traded companies. Management does not consider these costs to be indicative of the Company’s core operating results.
(3)
Comprises formation expenses directly related to the Company’s gTLD initiative that did not generate associated revenue in 2013 or 2012.
Demand Media, Inc. and Subsidiaries
Unaudited GAAP Revenue, by Revenue Source
(In thousands)
Three months ended December 31,
Year ended December 31,
2013
2012
2013
2012
Content & Media:
Owned and operated websites
$
46,127
$
48,796
$
195,546
$
178,511
Network of customer websites
11,895
19,837
50,851
67,888
Total Revenue – Content & Media
58,022
68,633
246,397
246,399
Registrar
38,639
34,509
148,201
134,179
Total Revenue
$
96,661
$
103,142
$
394,598
$
380,578
Three months ended December 31,
Year ended December 31,
2013
2012
2013
2012
Content & Media:
Owned and operated websites
48
%
48
%
49
%
47
%
Network of customer websites
12
%
19
%
13
%
18
%
Total Revenue – Content & Media
60
%
67
%
62
%
65
%
Registrar
40
%
33
%
38
%
35
%
Total Revenue
100
%
100
%
100
%
100
%
Source: Demand Media, Inc.
Images via Demand Media
Square is reportedly looking to offer more merchants custom rates.
According to TechCrunch, the company is “aggressively working to do more custom pricing for merchants, especially chains and big names” as a move to get bigger brands using its services.
Last week, Square announced its first major partnership since the big Starbucks deal a year and a half ago, with entry into Whole Foods Markets. While it’s certainly a major brand, Whole Foods hasn’t entirely committed to Square (which got some bad press from a pissed off small business last week as well).
Square Register and Square Stand will be used in Whole Foods sandwich counters, juice and coffee bars, pizzerias, and beer and wine bars, but apparently not in the regular grocery checkout lines, at least for now. Some of the stores will serve as “lab stores” testing additional Square integrations, so perhaps Square will make it into these lines in such locations.
As TechCrunch notes, Square’s deal with Starbucks included custom pricing, and it’s likely that this is the case for Whole Foods as well. Leena Rao writes:
Now, any larger chain merchant can apply for custom pricing via Square’s site. For example, Square tells TechCrunch that the Butterfly Studio Salon in New York City is processing millions in payments per year, and has negotiated a custom rate of 2 percent for each swipe using Square. The custom pricing allows merchants who are growing to stay with Square instead of moving to a POS system with better rates.
Indeed, Square offers a form for “larger businesses with growing sales” here, noting that pricing starts at 2.75% and gets lower as you grow.
“We want to make sure you know exactly how Square can meet your business’ unique needs,” it says.
Service options include Beauty and Personal Care; Charities, Education and Membership; Food and Drink; Health Care and Fitness; Home and Repair; Leisure and Entertainment; Professional Services; Retail; Transportation; and Casual Use.
Businesses are then prompted to select their estimated annual revenue, and enter their email address, phone number business name and name.
According to Rao, Square is also ramping up its sales force, which will be used to seek out more of these custom deals.
Last week, Square launched a new feature for its Square Cash product, which lets users easily email money to one another. Now, users can also request money from those who owe using a similar format.
Have you made losing weight and getting into shape your New Year’s resolution? One of the best ways to exercise at home is by running on a treadmill. When it comes to buying a treadmill, you have a lot of options. If you want to make sure you are getting the best machine for your money and fitness level, there are a few things you should consider.
One of the first things you should consider is the price you are willing to pay or can afford for a treadmill. If you are serious about fitness and know you will use the treadmill on a regular basis and for several years, than you may want to pay a little more for one. If you are just getting started, a cheaper model may be a better option to start out with.
Higher end treadmills such as the The Landice L7 are designed for professionals and retail for about $3,500. They have a variety of features and are well worth the price for those who are devoted to staying in shape. A cheaper model that also has great features is the the Horizon T101-04.
Another thing to consider is where you will store your treadmill when you are not using it. If you are lucky enought to have a gym or fitness area in your home or garage, you may not have to worry about this, but for most people, smaller is better.
Many treadmills fold up so they can easily be stored in closets or the corner of rooms. Others break down so they can be slid under beds for easy storage. The Weslo Cardio Stride 3.0 is a manual treadmill that folds up nicely and is also only $150.
If you are more concerned about features than price and storage, the LifeSpan TR1200-DT5 may be the right option for you. If you like to work out for long periods of time and also want to work, read or do other things while walking on your treadmill, the desk that attaches to this treadmill may be extremely beneficial to you. It costs around $2,000.
When it’s time to get in shape for the new year, take your time choosing your treadmill so you can ensure that you are getting one that you will use and love.
After administrators Moorfields Corporate Recovery failed to secure a buyer for Blockbuster UK’s 91 remaining stores, the company has announced that they will be all be shut down next week.
All remaining Blockbuster stores in the UK will be closed, forever, on December 16th. This is a move that will cause a loss of 808 jobs. All remaining stock will be sold off on Sunday the 15th at huge discounts.
On November 11th, Simon Thomas and Nicholas O’Reilly of Moorfields Corporate Recovery LLP were appointed Joint Administrators.
“It is with regret that we have to make today’s announcement, we appreciate this is a difficult time for all concerned and would like to thank staff for their professionalism and support over the past month. Unfortunately, we were unable to secure a buyer for the group as a going concern and as a result had to take the regrettable action to close the remaining stores,” said Thomas and O’Reilly
Of course, Blockbuster UK’s closure comes a little more than a month after Blockbuster shuttered all domestic retail operations in the US. Its corporate owner, DISH Network, closed the final 300 company-owned Blockbuster US stores in early November. Franchised and licensed stores in the US remained open for business.
And exactly one month ago today, someone rented the last movie ever from a company-owned Blockbuster store – and it was just perfect.
