Amazon - Earnings Call - Q3 2011

Transcript

Speaker 2

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com third quarter 2011 financial results teleconference. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question and answer session. Today's call is being recorded. For opening remarks, I would like to turn the call over to the Director of Investor Relations, Mr. John Sultan. Please go ahead, sir.

Speaker 4

Hello, and welcome to our Q3 2011 financial results conference call. Joining us today is Thomas Szkutak, our CFO. We will be available for questions after our prepared remarks. The following discussion and responses to your questions reflect management views as of today, October 25, 2011 only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our findings with the SEC, including our most recent annual report on Form 10-K. As you listen to this conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. During this call, we will discuss certain non-GAAP financial measures.

In our press release, slides accompanying this webcast, and our findings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2010. Now, I'll turn the call over to Tom.

Speaker 2

Thanks, John. I'll begin with comments on our third quarter financial results. Trailing 12-month operating cash flow increased 19% to $3.11 billion. Trailing 12-month free cash flow decreased 17% to $1.53 billion. Return on invested capital was 17%, down from 28%. Return on invested capital was TTM free cash flow divided by average total assets minus current liabilities, excluding the current portion of long-term debt over five quarter ends. The combination of common stock and stock-based awards outstanding was 469 million shares compared with 465 million shares. Worldwide revenue grew 44% to $10.88 billion, or 39% excluding the $371 million favorable impact from year-over-year changes in foreign exchange. We're grateful to our customers who continue to take advantage of our low prices, fast selection, and shipping offers. Media revenue increased to $4.15 billion, up 24%, or 19% excluding foreign exchange.

EGM revenue increased to $6.32 billion, up 59%, or 54% excluding foreign exchange. Worldwide EGM increased to 58% of worldwide sales, up from 53%. Worldwide paid unit gross was 53%. Active customer accounts exceeded 152 million. Worldwide active sellers were more than 2 million. Now, we'll discuss operating expenses, excluding stock-based compensation. Cost of sales was $8.32 billion, or 76.5% of revenue, consistent with the prior year period. Fulfillment, marketing, technology, and content in G&A combined was $2.29 billion, or 21.1% of sales, up approximately 290 basis points year-over-year. Fulfillment was $1.09 billion, or 10% of revenue compared with 8.7%. Tech and content was $694 million, or 6.4% of revenue compared with 5.1%. Marketing was $360 million, or 3.3% of revenue compared with 3.1%. Now, I'll talk about our segment results, and consistent with prior periods, we did not allocate segments or stock-based compensation or other operating expense line item.

In the North America segment, revenue grew 44% to $5.93 billion. Media revenue grew 21% to $1.93 billion. EGM revenue grew 56% to $3.64 billion, representing 61% of North America revenues, up from 56%. North America segment operating income decreased 23% to $144 million, a 2.4% operating margin. In the international segment, revenue grew 44% to $4.94 billion, adjusting for the $367 million year-over-year favorable foreign exchange impact. Revenue growth was 33%. Media revenue grew 27% to $2.23 billion, or 17% excluding foreign exchange. In EGM, revenue grew 63% to $2.68 billion, or 51% excluding foreign exchange. EGM now represents 54% of international revenues, up from 48%. International segment operating income decreased 46% to $116 million, a 2.4% operating margin. Excluding the favorable impact from foreign exchange, international segment operating income decreased 55%.

Consolidated segment operating income decreased 35% to $260 million, or 2.4% of revenue, down approximately 290 basis points year-over-year. Excluding the $14 million favorable impact from foreign exchange, CSY decreased 38%. Unlike CSY, our GAAP operating income includes stock-based compensation expense and other operating expense. GAAP operating income decreased 71% to $79 million, or 0.7% of net sales. Our income tax expense was $67 million in Q3, resulting in a 52% rate for the quarter and a 31% rate year to date. GAAP net income was $63 million, or $0.14 per diluted share, compared with $231 million and $0.51 per diluted share. Turning to the balance sheet, cash and marketable securities increased $441 million year-over-year to $6.33 billion. Inventory increased 50% to $3.77 billion, and inventory turns were 10.8, down from 11.8 turns a year ago, as we expanded selection, improved in-stock levels, and introduced new product categories.

Accounts payable increased 42% to $6.55 billion, and accounts payable days decreased to 72 from 73 in the prior year. Our Q3 2011 capital expenditures were $529 million. The increase in capital expenditures reflects additional investments in support of continued business growth, including investments in technology infrastructure, including Amazon Web Services, and capacity to support our fulfillment operations. I'll conclude my portion of today's call with guidance. Incorporated into the guidance are the trends that we've seen to date and what we believe today to be appropriately conservative assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including a high level of uncertainty surrounding exchange rate fluctuations, as well as the global economy and consumer spending. It's not possible to accurately predict demand, and therefore our actual results could differ materially from our guidance.

As we describe in more detail in our public filings, issues such as settling intercompany balances and foreign currencies amongst our subsidiaries, unfavorable resolution of legal matters, and changes to our effective tax rates can all have a material effect on guidance. Our guidance further assumes that we don't conclude any additional business acquisitions or investments, record any further revisions to stock-based compensation estimates, and that foreign exchange rates remain approximately where they've been recently. For Q4 2011, we expect net sales between $16.45 billion and $18.65 billion, or growth between 27% and 44%. This guidance anticipates approximately 130 basis points of favorable impact from foreign exchange. GAAP operating income, or loss, to be between $200 million loss and $250 million of income, or between a 142% decline and 47% decline. This includes approximately $200 million for stock-based compensation and amortization of intangible assets.

We anticipate consolidated segment operating income, which excludes stock-based compensation and other operating expense, to be between $0 and $450 million, or between a 100% decline and 28% decline. We remain heads-down focused on driving a better customer experience through price, selection, and convenience. We believe putting customers first is the only reliable way to create lasting value for shareholders. Thanks, and with that, John, let's move to questions.

Speaker 4

Great, thanks, Tom. Let's move on to the Q&A portion of the call. Operator, will you please remind our listeners how to initiate a question?

Speaker 2

Absolutely. At this time, we will open the call for questions. In the interest of time, we ask that you limit yourself to one question. If you would like to ask a question, please press star one on your keypad. We ask that you pose your question and you pick up your handset to provide optimum sound quality. Once again, to initiate a question, please press star one on your touch-tone telephone at this time, and please hold while we pol

Speaker 5

I wonder if you would talk a little bit more about the revenue guide for the fourth quarter and just some basic factual things. Are you including contributions from the Kindle Fire shipments, and do you fully recognize all of that, or is there some ratable recognition? Is there any particular reason, in addition to that, that you're guiding for a deceleration? Are you seeing signs of softening consumer demand in European markets, for example? Thank you.

Speaker 4

Sure. In terms of the guidance for revenue for Q4, as we've done in previous years, we've given a wide range of guidance in Q4 just because of the seasonality and difficult to predict. We feel very good about the demand that we've seen to date, and certainly at the high end of the guidance, you can see there's an acceleration that's possible. It's reflected in that guidance, and we are giving a wide range consistent with what we've done in prior Q4s. In terms of the overall growth that we've seen so far to date, you saw very strong growth in Q3, up 39% on a local currency basis. That's consistent with what we've seen over the past 12 months, where we're up 39% also over the trailing 12 months. We really saw a step change two years ago, where last year we were four year-over-year.

So far, the last 12 months are up 39%. We feel very good about the growth that we're experiencing, and I've seen the data reflecting the guidance, and we're giving a wide range. In terms of Kindle, in our guidance, and certainly the largest portion of that would be reflected in our revenue.

Speaker 2

Thank you. We'll go next to Yusuf Squali with Jefferies and Company.

Speaker 7

Thank you very much. Tom, could you please speak to what's pressuring margins in Q3, and particularly Q4? I guess the implied margin for Q4 is effectively zero at the midpoint. It again begs the question, what's the financial model going forward? Is it to try to maximize growth at the top line, even at zero growth, zero margin? Thanks.

Speaker 4

What you're seeing, and again, it relates back to the growth, we're seeing really unprecedented growth. We're seeing the best growth rates we've seen since 2000, meaning in 2010 and so far over the past 12 months, ending September. With this strong growth, we're investing in a lot of capacity, and that's what we've been talking about over the past couple of quarters, and that's what you're seeing in our Q3 results specifically. If you take a look at our operating expenses in Q3 as a percentage of revenue, you see, and if you compare that to Q2 as a percentage of revenue, you're seeing very similar trends for marketing and G&A. You're seeing a slight uptick in tech content. It's up about 10 basis points, and then you're seeing fulfillment up approximately 80 basis points.

The reason why that's growing so much as a percentage of revenue is, again, the capacity that we've been talking about. Ninety days ago, I mentioned that we had announced 15 new fulfillment centers this year. That's on a base of 52 from last year, and that we'd likely open one or two more. We are actually going to be opening 17 new fulfillment centers, and you're seeing that impacting our fulfillment expense in Q3, as well as the bottom line in Q3. That's what's impacting us in Q3. We're also investing in a number of different areas. We're investing to support retail growth, Fulfilled by Amazon growth, fast-growing AWS business, as well as infrastructure to support our retail business. We're investing in our Kindle and digital business, and you're seeing that reflected in our Q4 guidance as well, all of these things.

If you take a look at our Kindle business, for example, we launched four new products at the end of September, and we're very, very excited about those products. They're at great prices, and they're certainly premium products. We're very excited about those, and we think about the economics of the Kindle business. We think about it in totality. We think about the lifetime value of those devices. We're not just thinking about the economics of the device and the accessories. We're thinking about the content. We are selling quite a bit of special offers devices, which includes ads. We're thinking about the advertisement and those special offers and those lifetime values. Those are the things certainly that are impacting, as well as investments in other areas, impacting our Q4 guidance.

We feel very good about where we are right now and the opportunities that we have in front of us.

Speaker 2

Thank you. We'll take our next question from Scott Devitt with Morgan Stanley.

Speaker 0

Hi, thanks, Tom. Just a bigger picture question on the retail business. I was wondering how you think about individual markets in cases where specific markets are highly competitive and markets where you may be positioned potentially as a number two. Do you, long term, in markets such as that, believe that the business should be positioned as a number one and that the scale advantages deteriorate if you're not a number one? Just wondering, given some of the emerging markets and the competitive landscape that's occurring, particularly in Asia, how you think about that. Thanks.

Speaker 4

Sure. Maybe to step back from it a bit, whenever we enter a new geography or even a new category, we're trying to make sure that it's something that we think we can add value to. For example, we like categories that have a lot of different SKUs that are complicated in a physical retail environment. We like categories where we think that we can add a lot of value from a service perspective. In each of the categories that we operate in, we're always trying to make sure that we think we can get great returns on invested capital over a period of time. I'm not directly answering your question, but we certainly look at it on a category-by-category basis. We look at it where we can add value. If you look back over our history, you can see where we've entered new categories, new geographies.

We've always started with the customer first. We've added selection usually first from a retail standpoint, sometimes with third parties at start, sometimes not, but we've added third parties as we've gone if we haven't done it when we've started. We think this model has worked very well for us. Again, we're looking always at ways that we can add value for customers and shareholders over time.

Speaker 2

Thank you. Next, we'll go to Jim Friedland with Cowen and Company.

Speaker 5

Thanks. I wanted to ask about, you know, with Netflix launching or announcing that they're launching in the UK and Ireland with streaming, you guys bought LoveFilm earlier in the year, and it doesn't seem like you've changed the streaming side of the business that much. Are there any plans to ramp up the investment in content outside the U.S., outside of what you're doing with Prime Video? Then on Quizzy, we've seen a lot of new announcements in terms of new brands and also new... Is that having a material impact on some of the lower operating profits, or is Quizzy just not big enough as a percentage of total to matter?

Speaker 4

In terms of LoveFilm, you know, actually, we have been investing in content since acquisition. That's something we have been doing, and we continue to invest there, and you'd expect us to continue to invest in LoveFilm. We think it's a great opportunity. The business is doing very well. We're very pleased with how the team is working, and we're very excited about that opportunity. That's something we have been doing since acquisition, and you should expect that to continue. In terms of Quidsi, yes, they are continuing to expand, doing a very nice job. That is certainly reflected in the guidance that we're giving for Q4. I wouldn't consider that a material impact.

Speaker 2

Thank you. We'll take our next question from Ross Sandler with RBC Capital Markets.

Speaker 1

Hi, thanks, guys. Just two quick questions. First on U.S. EGM. There was a bit more deceleration there than prior quarters. I know the comp was more challenging, but can you give us a little color on what's going on with the deceleration in domestic EGM? A question on mobile. Are smartphone and tablet users that are buying physical goods on the Amazon mobile app, how does their purchase behavior differ from the same users who are buying stuff on PC? Are they buying more physical goods or less? Not e-books or digital goods, but just specifically physical goods. Thank you.

Speaker 4

Sure. In terms of the first part of your question, we are very pleased with the growth rate we saw in North America EGM. It was up 56% year-over-year. You do have it right. It is a bit of a tough compare. If you look back to last year, we did grow 80%, which was certainly a high watermark for us, and we're overlapping that. We had very, very strong growth last year, Q3, but we are still very pleased with what we see in Q3 of this year in EGM specifically and our overall growth rates too. In terms of mobile, we actually haven't released a lot of details in that, so there's not much I can help you with there. We are seeing good trends in our mobile business. We like what we're seeing there, but there's not much I can help you with on that particular question.

Speaker 2

Thank you. We'll go next to Jino Patel with Deutsche Bank Securities.

Speaker 6

Great. A couple of questions. First of all, I guess on lifetime value, if you look at the Kindle kind of customer versus the core retail customer, can you talk about whether lifetime value is comparable or higher relative to that core business, if you can isolate it that way? Second, as you look at the third-party business, are you seeing an accelerated makeshift towards third party broadly, and is there any particular markets or kind of international that seems to be seeing a bigger pickup in the third-party side of the business?

Speaker 4

To answer your first part of your question, we're not breaking out a Kindle customer versus a non-Kindle customer, but I can talk a little bit about some of the dynamics related specifically to the Kindle customer. We have learned a lot over the past couple of years about, since launching Kindle, once a customer has purchased the device, obviously, what else do they buy? With the launch more recently of special offers and ad-supported models, we certainly have some data. We're still learning, but have some data there that we didn't have prior to launch. What we're seeing certainly is that once customers purchase a Kindle and are carrying around this really massive selection at their fingertips, they're buying more content. We've talked a lot about that on previous calls.

As we think about the lifetime value, we're thinking very specifically about the device itself, how to make sure that we get just the absolute best device in customers' hands and have the absolute best content on those devices. We look at the total economics, which include the device, the accessories, the content, as well as any of the ad-supported revenue and special offers. Those are the things that we're looking at as we think about the lifetime value of a device. We like what we see. Certainly, as you think about Q4 and you think about the guidance that we're giving, we expect to have a record quarter in terms of device sales. Because of the backend loading of it, you should assume that the content would obviously trail that device sale. The ad revenue would trail those device sales, as well as the special offers.

Those are things you should think about as you think about our Kindle business. We're extremely excited about it, both our electronic ink and Kindle Fire devices, and couldn't be more pleased to offer those for customers. We think that those will be great for shareholders over time. In terms of third party, we think the business is going very well. In terms of the numbers, our third-party units as a percentage of total units, these are paid units as a percentage of total units, is 38% this quarter, up from 35% last year. We're very pleased. Also, on top, have very strong overall unit growth. We're very pleased with what we're seeing there.

This is a trend that you've seen for a number of years now, where we're getting both great retail growth, as well as third-party growth, and certainly Fulfillment by Amazon and other things that are helping drive that growth rate.

Speaker 2

Thank you. As a reminder, in the interest of time, please limit yourself to one question. We'll go next to Spencer Wang with Credit Suisse.

Speaker 0

Thanks. Good afternoon, guys. I guess one question in a couple of parts related to digital content. Tom, I was wondering if you could just perhaps give us a sense of how much of the increase in operating costs in the fourth quarter you think will be driven by digital content rights. Should we expect that to continue to drag on into 2012? Just to clarify, how are you accounting for the streaming content rights? Is that under FAS 63? Thanks.

Speaker 4

In terms of content, we will be certainly purchasing content for both our U.S. business, which includes a paid piece, and a Prime Video, which would be an unpaid piece free, as long as you're a Prime member. The content is included in our Q4. In addition to that, we also have content costs, as we have with LoveFilm in Europe. Those are included in our guidance. We're not splitting out the specific dollar amount related to that in our guidance for Q4, but it's certainly impacting our guidance, along with certainly investing in our Kindle business and some of the other investments that I talked about. Those are the things that are impacting us, and we're excited for those opportunities.

Speaker 2

We will go next to Ben Schachter with Macquarie Group.

Speaker 0

My understanding is that Google will be the default search engine for the Kindle Fire, but will the Silk browser have any type of interface or search bar that links directly to either a physical product or media directly from Amazon? Separately, on the video distribution, you're still not on the game consoles. Any update on why, and would you consider deploying any device like a Roku Box or anything else directly to Prime customers so that they can get video content to a television? Thanks.

Speaker 4

It'll be very easy on Kindle Fire to access all of our digital content. That's first. It's a very integrated device. It's something that we've been working on. It's coming together over a long period of time in terms of being able to offer just a vast amount of paid and free content. In the case of video, we'll certainly have book content, music content. It'll be very easy to access our app store as well. It's very easy and very integrated, being able to access all of our digital content. It'll also be easy to access a physical product as well. Those are things that we're very excited about, and customers will be able to see when they receive their Kindle Fire. We think it's an incredible product. We're very excited about it. It's certainly a premium product, and at $199, it's certainly not a premium price.

We're very happy to offer that to customers. In terms of other things we might do, I don't have anything to speak of there.

Speaker 2

Thank you. We'll take our next question from Herman Leung with Susquehanna.

Speaker 3

Hi, thanks. Two quick questions. First, I guess on the target cost drop, I think target drop is dropping basically in August. I'm wondering what the impact of that is from a one-time cost standpoint in the third and fourth quarters. The second quick question is, on the distribution center ramp, the 17 new distribution centers that you're adding, how long would it take for those distribution centers to operate at normalized levels similar to your 52 other distribution centers? Thanks.

Speaker 4

In terms of Target, we're not breaking out any specific partner relationship, but certainly, you have the timing right in terms of that did happen during Q3. We're very fortunate to be able to partner with Target over a number of years. We're very happy to have done that, and I'm sure that relationship ended from powering their website in Q3, and any associated impact has been reflected in our actual results for Q3 and our guidance for Q4. In terms of the FCs, the way you should think about it is just the sheer ramp-up of going from 52 to 69 FCs in a year. It's happening very fast. We have a fantastic team around the world who's been working very hard, making sure that we're up and running, and we have all of our associates trained.

That being said, as you can imagine, we're having people come in well before starting fulfillment for training. We are signing leases and getting product available for shipment well before doing so. Consequently, just as a result of having a ramp-up where there'll be no output for some period of time, even though we'll have people in buildings in place and receiving product in, is productive downtime. There's a timeframe where it takes to ramp up from a distribution standpoint. All of these things will take time. It's something that we have been doing since the start of Amazon. It's something that I think we understand very well, and it takes a period of time depending upon the FC and how automated it is or non-automated it is.

All of those factors we certainly understand well, and we certainly feel very good about deploying those assets and getting great returns on invested capital in those assets over time.

Speaker 2

Thank you. We'll take our next question from Brian Nowak with UBS.

Speaker 6

Great, thanks. Two quick questions. Would you provide any color on current traction with the cloud player and/or usage of Prime Video? Going forward, is there any chance that we could see the video service unbundled from Prime, perhaps with a standalone fee? I know it's kind of a forward look, but just how can we think about that? Thanks.

Speaker 4

We're happy with the traction we're getting from both the cloud player and Prime Video. Both are very early. In terms of Prime Video, customers absolutely love it. It's free video. We're adding a lot of content there. We have a lot of customers who are requesting free trials and then they're converting based on those free trials. This is the Prime trials. It's very early, and it's something that we'll be adding to certainly over the course of the next 12 months, and we feel very good about that. We're also monitoring it very carefully, and we're watching all of the customer-facing metrics that we can, as well as looking at the economics of it. We feel that it's very early, but we like what we see so far.

Speaker 2

Thank you. Our next question will come from Doug Anmuth with J.P. Morgan.

Speaker 0

Thanks for taking the question. Two things. First, Tom, we've seen in the past sometimes when companies make changes to the site in terms of the UI, that it can take customers a little time to get adjusted to those. Can you comment on what you're seeing in the early impact on your site and how that plays into the 4Q, if it does at all? Secondly, can you comment on whether you're paying any royalties around the Kindle Fire? Thanks.

Speaker 4

In terms of the UI, there's not a lot I can say there. It's certainly that probably the most recent data would be to look at our Q3 results. We didn't have the new UI at 100% for the full quarter. Again, we saw a very strong growth rate in Q3, as I'd mentioned earlier, up 39%. We feel very good about it, and it's certainly reflected in our actual results and our guidance, as I mentioned earlier. If you think about Q4, we think we'll have certainly, we've added a lot of selection over the past 12 months, a lot of great unique selection. We think we're well positioned for Q4 from a selection standpoint. We continue to make sure that our prices are sharp, so we have great values for customers.

We continue to work on improving service levels, and that comes in a number of different forms, but certainly getting goods to customers fast is important, and Prime is playing a key role in that. We have certainly a lot more Prime members this year than we have previously. All of those things, we have four new Kindle products at just great prices for customers. All those attributes set up Q4 for a nice growth quarter. We feel very, very good about the growth that we're seeing over the past quarter and our prospects for the holiday season. That's reflected in the guidance that we're giving. In terms of specifics on royalties and everything, we certainly wouldn't talk to that.

Speaker 2

Thank you. We'll go next to Colin Sebastian with RW Baird.

Speaker 1

Great, thanks very much. Just one follow-up on the fulfillment centers, Tom. I think you mentioned before that you might need to increase beyond the 15 new centers if revenue growth were faster than originally expected. If you could confirm that that was the thought process here as well, looking into Q4. Just on the Kindle Fire and e-ink devices, based on your comments on sales trends thus far, is there any potential supply constraint that you foresee for the holiday period? Thanks.

Speaker 4

In terms of the first part in terms of fulfillment centers, yes. As I mentioned 90 days ago, we've given a range of guidance for the top line for Q3. We hadn't given guidance for Q4. We were very excited about the growth that we were seeing through the first half of the year, but we wanted to get through Q3. I had mentioned 90 days ago that we had announced that we were opening 15 and potentially one or two more, and that reality is coming true. We are actually opening up 17. That illustrates how we feel about not the growth that's happened in the past. That's certainly impacting how we're thinking about it, but it impacts the fulfillment we're adding is about growth going forward.

We feel very good about the growth that we're experiencing, and we're looking at a number of different factors, including our most recent historical growth rates. In terms of supply, you probably saw the release, but in the first three weeks since launch, orders for our e-ink Kindles are double the previous launch. We're also seeing extremely strong Kindle Fire preorders, and we're increasing the capacity and building millions more than we've already planned. That's what we're doing from a production standpoint, and we're getting ready, as you'd expect, for just a great holiday season for customers overall and for Kindle customers.

Speaker 2

Thank you. We'll go next to Matt Niemer with Wells Fargo.

Speaker 0

Thanks for taking my question. First, your employee count is up about 19% sequentially versus a move of about 10% over the last few years. I'm wondering, is this quarter and next quarter when you hire a lot of temporary workers sort of the apex of the pain that you'll feel on all these new fulfillment centers, or do you think that employee growth could actually accelerate in the first half of next year? Secondly, your shipping costs were also up pretty significantly. How much of that is Prime usage versus Prime customer acquisition cost? Thanks.

Speaker 4

In terms of employment, we're not guiding or giving estimates beyond the quarter, but you're right. We're seeing a large sequential increase in employment and a large year-over-year increase in employment, and it's across many different areas that we're adding. Certainly, the most notable, both from a year-over-year and sequential, and certainly represents the majority of the additions, would be our operations and customer service associates. Those are certainly growing fast, and we're also, given the opportunities that we have to grow, we're also investing in other areas. Again, the majority of the sequential and year-over-year increase is coming from operations and customer service associates. In terms of the ship margin, as you're mentioning, Prime is certainly having a big impact there, as well as our free shipping offers. That's certainly what's driving it.

Speaker 2

Thank you. With time for one final question, we'll go to Carrie Rice with Needham & Company.

Speaker 0

Thanks a lot for fitting me in here. I know that you guys launched in Spain this quarter or towards the end of Q3, beginning of Q4. Can you talk a little bit about maybe the additional international strategy? Shall we think of that as the first step further into Europe or maybe into Latin America?

Speaker 4

Sure. In terms of the two most recent country launches, certainly Spain and Italy, it's very early. We're very happy to be serving those geographies. We're very excited about it and think they're very interesting long-term opportunities. We're able to take advantage of our European infrastructure and leadership team to launch those two geographies, and we're very excited about it.

Speaker 2

Great. Thank you for joining us on the call today and for your questions. A brief update will be available on our investor relations website at least through the end of the quarter. We appreciate your interest in Amazon.com Inc. and look forward to talking to you again next quarter.

Speaker 0

That does conclude today's call.

Speaker 2

Thank you for your participation.