Amazon.com Becomes #1 Online Music Retailer with Sales of $14.4 Million;
First Quarter to Add More Than 1 Million Customers
SEATTLE, WA-(October 28, 1998)-Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for the third quarter of 1998. Net sales were $153.7 million, an increase of 306 percent over net sales of $37.9 million for the third quarter of 1997. Amazon.com also became the #1 online music retailer in its first full quarter of music sales.
Amazon.com reported a third quarter pro forma operating loss of $21.0 million, or 14 percent of net sales, compared to an operating loss of $10.3 million, or 27 percent of net sales, in the prior year. Pro forma net loss of $24.7 million, or $0.49 per share, compared with a net loss of $9.6 million, or $0.21 per share, in the third quarter of 1997. On a GAAP basis, reported third-quarter net loss was $0.90 per share, and included $20.5 million of merger- and acquisition-related costs.
Amazon.com announced that cumulative customer accounts increased by over 1.2 million during the third quarter to nearly 4.5 million at September 30, 1998, an increase of over 377 percent from 940,000 customer accounts at September 30, 1997. Repeat customer orders represented more than 64 percent of orders placed during the quarter ended September 30, 1998.
"We are very grateful to our customers for choosing Amazon.com as their online music store so quickly," said Jeff Bezos, Amazon.com founder and chief executive officer. "We work hard to earn the confidence of our customers. We're known for service, ease of use, selection, and everyday low prices, and these are the reasons our customers have made us the leading online music retailer. Though pleased with these results, we know our growth initiatives will continue to require aggressive investment and entail significant execution challenges."
Recent Highlights
Amazon.com Becomes the #1 Online Music Store, Adds Classical
Third-quarter music sales were $14.4 million, the first full quarter following the June launch of Amazon.com's music store. Amazon.com exited the quarter as the leading online retailer of music less than four months after its launch. Customer response was strong, augmented by the September launch of its classical-music store.
Adding to the success of its overall music store, Amazon.com opened the classical section of this store in early September. The classical section has added more than 47,000 classical and opera CDs to the existing Amazon.com music store, pushing the store's total number of CDs to more than 225,000--25 times the selection of the average physical music store. Amazon.com also introduced a variety of classical-specific features to help shoppers find and discover exactly the right CD, regardless of their familiarity with classical music. Among those features are thousands of classical-music reviews, editors' recommendations for more than 1,000 essential classical and opera CDs, and more than 1,000 narrow-niche classical and opera bestseller lists.
Amazon.com Formally Enters European Book Market
In October Amazon.com formally entered the European market with the launch of new stores in Germany and the United Kingdom. Amazon.de and Amazon.co.uk replaced sites once operated by Telebook in Germany and Bookpages in the U.K. Amazon.com purchased both companies in April. For the first time on a local basis, the stores make available to Europeans a vast selection of titles, guaranteed safety of transactions, unparalleled convenience, and electronic gift certificates for worry-free gift giving. The two sites will significantly reduce the cost and shipping time for thousands of U.S. titles, thanks to a large supply of popular U.S. titles ready for immediate shipment from the U.K. and Germany.
Amazon.de is headquartered and has a distribution center in Regensburg, Germany, with editorial and marketing offices in Munich, Germany. The store initially features over 400,000 titles from German publishers, as well as fast and easy access to nearly 500,000 U.S. titles. Amazon.co.uk is headquartered and has a distribution center in Slough, England. The store carries a complete catalog of over 1.2 million titles from U.K. publishers, along with fast and easy access to over 200,000 U.S. titles. Each store offers speedy delivery and an array of personalization features to better serve book buyers, including instant recommendations.
You can find these sites at www.amazon.de and www.amazon.co.uk.
Amazon.com Acquisitions of PlanetAll and Junglee
In August Amazon.com acquired two companies: PlanetAll and Junglee. PlanetAll provides a unique Web-based address book, calendar, and reminder service. Junglee is the leading provider of advanced Web-based virtual database (VDB) technology that can help shoppers find and discover products on the Internet. Together, these acquisitions are intended to speed Amazon.com's enhancement of the e-commerce experience for its customers.
Amazon.com acquired 100 percent of Junglee and PlanetAll in exchange for equity having an aggregate value of approximately $280 million. The PlanetAll acquisition was accounted for as a pooling-of-interests and, as a result, Amazon.com's financial statements have been restated for all periods presented. The Junglee acquisition was accounted for under the purchase method of accounting, with substantially all of the approximately $180 million purchase price allocated to goodwill and other purchased intangibles. The goodwill and other purchased intangible assets will be amortized on a straight-line basis over lives averaging approximately 3 years.
Growing Associate Relationships
In early September Amazon.com augmented its growing list of Associate relationships when it announced one of the most extensive global merchant programs on the Internet, featuring Amazon.com as the premier book merchant throughout many of Yahoo!'s World sites. Amazon.com Associates now number more than 140,000. Web-site operators continue to prefer Amazon.com for the powerful benefits they receive from Amazon.com's leading traffic, content, customer experience, brand, service, and cross-product capabilities.
About Amazon.com, Inc.
Amazon.com, Inc., Earth's biggest book and music store (NASDAQ: AMZN), opened its virtual doors on the World Wide Web in July 1995. Today, the Amazon.com store offers more than 3 million books, CDs, audiobooks, DVDs, computer games, and other titles, plus easy-to-use search-and-locate features, secure credit-card payment, personalized recommendations, streamlined ordering through 1-Click(SM) technology, and direct shipping. In addition to its U.S.-based bookstore, www.amazon.com, Amazon.com operates two European bookstore Web sites: www.amazon.co.uk in the United Kingdom and www.amazon.de in Germany. Amazon.com also operates PlanetAll (www.planetall.com), a Web-based address book, calendar, and reminder service, and the Internet Movie Database (www.imdb.com), the Web's comprehensive and authoritative source of information on more than 150,000 movies and entertainment programs and 500,000 cast and crew members dating from the birth of film in 1892 to the present.
This announcement contains forward-looking statements that involve risks and uncertainties that include, among others, Amazon.com's limited operating history, anticipated losses, the unpredictability of its future revenues, competition, risks associated with system development and operation risks, management of potential growth, and risks of new business areas, international expansion, business combinations, and strategic alliances. 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, including its Annual Report on Form 10-K for the year ended December 31, 1997, as amended by the Form 8-K filed September 11, 1998 and quarterly reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998.
Note on Financial Presentation
GAAP financial results are prepared in accordance with generally accepted accounting principles. All of the charges associated with Amazon.com's merger and acquisition activities have been included in the single-income-statement line item titled "merger- and acquisition-related costs" in order to enhance the informational value of the financials and to present the most comparable classifications in the other line items. Among items included in merger- and acquisition-related costs are one-time merger-related costs and purchase-price elements, including amortization of goodwill and other purchased intangibles. Pro forma financial results exclude these merger- and acquisition-related costs.
Amazon.com, Earth's Biggest Bookstore, and 1-Click are either registered trademarks or trademarks of Amazon.com, Inc. All other names mentioned herein may be trademarks of their respective owners.
AMAZON.COM, INC.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Quarter Ended Nine Months Ended September 30 September 30, 1998 1997 1998 1997 (Unaudited) (Unaudited) Net sales $153,698 $37,887 $357,103 $81,747Cost of sales 118,823 30,717 276,679 65,842Gross profit 34,875 7,170 80,424 15,905Operating expenses: Marketing and sales 37,517 11,516 84,522 23,596 Product development 13,374 3,998 29,526 8,650 General and administrative 4,978 1,972 10,342 4,930 Merger and acquisition related costs 20,512 - 25,925 - Total operating expenses 76,381 17,486 150,315 37,176 Loss from operations (41,506) (10,316) (69,891) (21,271)Interest income 4,754 688 9,789 1,118 Interest expense (8,419) (19) (18,017) (59) Net interest income (expense) (3,665) 669 (8,228) 1,059 Net loss $(45,171) $(9,647) $(78,119) $(20,212)Basic and diluted loss per share $(0.90) $(0.21) $(1.60) $(0.48)Shares used in computation of basic and diluted loss per share 50,234 45,865 48,700 42,438Pro Forma Results Excluding Merger and Acquisition Related CostsPro forma loss from operations, excluding merger and acquisition related costs $(20,994) $(10,316) $(43,966) $(21,271)Pro forma net loss, excluding merger and acquisition related costs $(24,659) $(9,647) $(52,194) $(20,212)Pro forma basic and diluted loss per share, excluding merger and acquisition related costs $(0.49) $(0.21) $(1.07) $(0.48)Shares used in computation of pro forma basic and diluted loss per share 50,234 45,865 48,700 42,438 Note: Pro forma results for the quarter and nine months endedSeptember 30, 1998 and 1997 are presented for informational purposes only.These results present the operating results of Amazon.com, excluding chargesof $20.5 million and $25.9 million for the quarter and nine months endedSeptember 30, 1998, respectively, for merger and acquisition related costsarising from Amazon.com's April 1998 acquisitions of Bookpages, Telebook andInternet Movie Database, and the August 1998 acquisitions of Junglee andPlanetAll, and are not prepared in accordance with generally acceptedaccounting principles. AMAZON.COM, INC. Consolidated Balance Sheets (in thousands, except share data) September 30, December 31, 1998 1997 (Unaudited) (Audited) ASSETS Current Assets: Cash $14,856 $1,876 Marketable securities 322,404 123,499 Inventories 19,772 8,971 Prepaid expenses and other 17,625 3,363 Total current assets 374,657 137,709 Fixed assets, net 23,821 9,726 Deposits and other 582 169 Goodwill and other purchased intangibles, net 213,064 -Deferred charges 7,590 2,240 Total assets $619,714 $149,844 LIABILITIES & STOCKHOLDERS' EQUITYCurrent Liabilities: Accounts payable $60,046 $33,027 Accrued advertising 11,857 3,454 Other liabilities and accrued expenses 26,868 6,570 Current portion of long-term debt 684 1,500 Total current liabilities 99,455 44,551 Long-term debt 340,392 76,521 Long-term portion of capital lease obligation 103 181 Stockholders' Equity: Preferred stock, $0.01 par value: Authorized shares -- 10,000,000 Issued and outstanding shares -- none - -Common stock, $0.01 par value: Authorized shares -- 300,000,000 Issued and outstanding shares -- 52,725,622 and 48,302,958 shares, respectively 527 483 Additional paid-in capital 298,322 67,552 Note receivable from officer for common stock (1,099) -Deferred compensation (2,943) (1,930)Other gains (losses) 590 -Accumulated deficit (115,633) (37,514) Total stockholders' equity 179,764 28,591 Total liabilities & stockholders' equity $619,714 $149,844