Amazon Conference Call Highlights

Amazon.com, Inc. AMZN reported its third quarter earnings on Thursday. Shares of the company are down 8 percent.

Below are some key highlights and takeaways from its conference call.

Financial Performance:

• Trailing twelve month operating cash flow increased 15% to $5.71 billion.
• Trailing twelve month free cash flow increased to $1.08 billion.
• Trailing twelve month capital expenditures were $4.63 billion.
• Return on invested capital was 6%, up from 3%.
• Turning to the balance sheet, cash and marketable securities decreased $806 million year-over-year to $6.88 billion.
• Inventory increased 21% to $7.32 billion.
• Accounts payable increased 18% to $11.81 billion.

Segment Highlights:

• The combination of common stock and stock-based awards outstanding was 481 million shares compared with 475 million shares one year ago.
• Worldwide revenue grew 20% to $20.58 billion or 20% excluding the $13 million favorable impact from year-over-year changes in foreign exchange.
• Media revenue increased to $5.24 billion.
• EGM revenue increased to $13.95 billion, up 26%.
• Worldwide EGM increased to 68% of worldwide sales, up from 65%.
• Worldwide paid unit growth was 21%, active customer accounts was approximately 260 million, and worldwide active seller accounts were more than 2 million.
• Seller units represented 42% of paid units.
• North America segment operating income decreased 70% to $88 million, a 0.7% operating margin.
• In the International segment, revenue grew 14% to $7.71 billion.
• Media revenue grew 4% to $2.51 billion or 3% excluding foreign exchange and EGM revenue grew 20% to $5.16 billion, or 19%.
• EGM now represents 67% of international revenues up from 64%.
• International segment operating loss was $224 million compared to International segment operating loss of $28 million.

Guidance:

• For Q4 2014, we expect net sales of between $27.3 billion and $30.3 billion or growth between 7% and 18%.
• This guidance anticipates approximately 250 basis points of unfavorable impact from foreign exchange rates.
• GAAP operating income or loss to be between $570 million loss and $430 million income compared to $510 million of income in the fourth quarter of 2013.
• This includes approximately $470 million for stock-based compensation and amortization of intangible assets.
• We anticipate consolidated segment operating or income or loss which excludes stock-based compensation expense and other operating expense to be between $100 million loss and $900 million in income, compared to $876 million in income in the fourth quarter of 2013.