Quick Look:

Amazon (AMZN) 10Q 3.31.23

Taking a look at the latest 10Q (Quarterly) of the company. Within the quarterly report, there are several sections that investors should carefully read and analyze. Below are some to the sections I found that stood out.

Net income

During the three-month period ending on March 31, 2022, there was a negative difference of 3.8 billion. In contrast, for the same period in 2023, it was positive at 3.1 billion. This represents a year-over-year increase of 181%.

Opinion: That is a huge jump when comparing the same period in 2022 and 2023. This substantial jump is generally a positive sign for the company during that time frame, indicating that it is moving in the right direction and generating income successfully (at least thus far).

Zooming out viewing the twelve-month period ending on March 31, it reveals a similar picture. In 2022, the net income stood at 21.4 billion, whereas in 2023, it decreased significantly to 4.3 billion, reflecting a decline of 79%.

Opinion: This metric provides a comprehensive assessment of the business performance over an extended period. While there are significant decline between 2022 and 2023, this is not unexpected given the change of the economic landscape throughout 2022. It would be wise to monitor whether this decline continues and, if so, its magnitude, considering the ongoing economic environment. This metric will assist investors in evaluating how the company is adapting and adjusting to potential shifts in customer and enterprise spending habits.

Inventories (Cash flow statement)

For the three-month period ending on March 31, 2022, there was a negative difference of 2.6 billion. In contrast, during the same period in 2023, the difference turned positive, amounting to 371 million. Looking at the twelve-month period ending on March 31, the situation remained consistent. In 2022, there was a negative difference of 11.7 billion, while in 2023, the difference become positive, reaching 393 million.

Opinion: There is neither good or bad news. A negative number could indicate that the company sold more than what was recorded, while a positive number might suggest an increase in inventory due to potential sales challenges, although this is not guaranteed. It would be wise to monitor this metric closely in the next quarter, particularly considering the potential of a slowing economy. It could serve as a warning sign and conformation (slowing economy) if the numbers continue to rise.

Acquisitions

Over the three-month period ending on March 31, the acquisition costs amounted to 6.3 billion, whereas in 2023, it decreased to 3.5 billion. A difference of 44%.

Examining the twelve-month period ending on March 31, a similar trend emerges. In 2022, the company’s acquisition cost was 7.7 billion, while in 2023, it decreased to 5.4 billion. A difference of 29.8%. 1Life Healthcare, Inc (One Medical) was purchased on February 22, 2023 in cash for 3.5 billion. In August 2022 there was an agreement to acquire iRobot Corporation in cash approximately 1.7 billion (including its debt) but is waiting on customary closing conditions. Also in 2022 the company made a acquisitions of MGM Holding Inc.

Opinion: In addition to the positive aspect of making strategic acquisitions, another positive is cash being used to complete these acquisitions. Once the acquisition of iRobot receives full approval, it will provide the company with essential technology to complement their existing products, including Ring, within their portfolio. If iRobot can stay true to this mission within the Amazon ecosystem, the company could potentially establish itself as the frontrunner in an emerging sector that shows promising prospects for the future.

Stock Buybacks

During the three-month period ending on March 31, in 2022, the company made stock purchases worth 2.6 billion. However in the corresponding period of 2023, the company did not spend any money on stock purchases.

Looking at the twelve-month period ending on March 31, in 2022, the company invested 2.6 billion in stocks. In contrast, in 2023, the company increased its stock purchases to a total of 3.3 billion. A increase of 26.9%.

Opinion: It appears the company made most of it buybacks during 2022, likely influenced by the overall decline in equities during that period. The recent increase in the company’s share price throughout this year might provide an explanation for the absence of any purchases during the first quarter of 2023. It could be seen as the company actively preserving capital or anticipating a potentially challenging horizon in the near future.

Purchases of marketable securities

In the three-month period ending on March 31, the company’s amount spent was 1.7 billion. However, in 2023, the company’s spending decreased significantly to 338 million during the same period, resulting in a difference of 99.9%.

Purchases of marketable securities (continued)

Examining the twelve-month period of March 31, in 2022 the company’s amount spent was 47.2 billion. In contrast, in 2023, the company’s spending dropped significantly to 1.1 billion, reflecting a difference of 97.6%.

Opinion: Reading this I had some questions: Are they spending less to conserve cash? Or if there no viable opportunities to place cash in sectors that have potential growth. Or both? The upcoming quarterly reports will could provide valuable insights into how the company perceives the state of the economy.

Technology and content

When comparing the three-month periods ending in March for 2022 and 2023, the company increased it spending. In 2022, the company spent 14.8 billion, whereas in 2023, the spending rose to 20.4 billion, representing an increase of 37%.

Opinion: Charges are added from severance costs related to planned role eliminations. There isn’t a clear number on how many jobs were cut in this department. It will be interesting to see what new technologies and content the company puts out with a leaner headcount. And if there are more potential job cuts within the department.

Assets

Total asset snapshot for December 31, 2022 was 442 billion compared to the a snapshot for March 31, 2023 was 441 billion. An decrease of .23%. Side note: Goodwill/Intangible Assets was not included in the total Assets. The largest sector of decrease was Accounts receivable, net and other.

Opinion: The decrease in Accounts receivable, net and other, is a good sign. It suggests that they are effectively converting credit extended for their services or products into cash. This improvement indicates that customers are paying their outstanding balance in a timely manner, resulting in a healthier cash flow for the company. Overall, The Total assets have held steady, which is a good sign given the economic environment the past year.

Liabilities

Total liabilities snapshot for December 31, 2022 was 316.6 billion compared to the snapshot for March 31, 2023 was 309.8 billion. And decrease of 2.14%. The largest section of decrease being Accounts payable.

Opinion: The decrease in accounts payable is a positive sign as it signifies that the company is fulfilling its obligations to vendors and suppliers. The decrease in total liabilities is also a positive sign. However, it is important to closely monitor the upcoming quarterly reports to determine if this reduction is a consistent trend of if it stems from specific changes in the company’s practices in response to the economic uncertainties. Which could provide valuable insights into the company’s financial management and its ability to navigate potential challenges in the future.

Revolving and Unsecured Credit Facility and Short-term credit

Revolving Credit Facility: 1.5 billion available until August 2025. As of March 31, 2023, 972 million was outstanding.

Unsecured 364 day Credit Facility: 10 billion available until November 2023 that can be extended an additional 364 days. As of March 31, 2023 there were no outstanding borrowings.

Short-term credit: As of March 31, 2023, 1.1 billion was borrowings for working capital purposes.

Opinion: It’s reassuring to observe that the company possesses multiple lines of credit at its disposal. The presence of an Unsecured 364-day Credit Facility, without any borrowings, could indicate that the company is generating sufficient cash to support its operations. It also may suggest that the company has confidence in its management practices and does not currently require access to the line of credit. Demonstrating that the company is effectively managing its cash flow and maintaining a healthy financial position.

Rivian

As of March 31, 2023 the company held 158 million shares of Class A common stock. This represent 17% ownership with a 16% voting interest.

Opinion: The company stands to potentially gain significant benefits in the long term. As Rivian continues to grow in valuation, it has the potential to increase the company’s initial investment, resulting in a substantial payoff. Also, by leveraging Rivian’s transportation network and gaining access to their electric vans, the company could reduce its liabilities in the future. By being an early adopter in the electric van Markey and utilizing these vehicles for last-mile delivery or other departments within the company, they can enhance their product delivery capabilities and potentially streamline operations. This strategic move positions the company favorably and opens up opportunities for efficient and sustainable transportation solutions.

Segments

For the three months ended for March 31, 2023. North America is the company’s largest segment in sales, representing 60.3%. International represented 22.8% and finally AWS represented 16.7%. Of the sectors of sales, Online stores was the largest sector representing 40.1%. With Third-party seller services coming in second representing 23.4%.

Opinion: North America continues to hold significant importance as the primary focus for the company. However, this also presents an opportunity for them to expand into other markets with robust economic growth. The growing cloud industry is vital for the future, offering ample potential for the company. This segment has the potential to surpass the International segment and move up from third place to second in sales.

Online stores remain the company’s cash cow, driving substantial revenue. It will be interesting to see if this number continues to grow or remains stable, especially as other companies, including small businesses, are increasingly venturing into selling products online. From pivots to maintain its market share in the online retail space to continuing to capitalizing on their third-party seller services due to increase online demand.

Capital Expenditures

Comparing Q1’s for the year 2022 and 2023. In 2022 the company spent 13.7 billion. While in 2023 the company spent 13.1 billion. The bulk was spent on technology infrastructure, with the majority of that going to AWS business growth. And additional capacity to support their fulfillment network. It is anticipated that the company’s expenditures will decrease in 2023 due to lower spending on their fulfillment network.

Opinion: Pay attention to the upcoming quarterly reports to determine if there is growth in AWS (Amazon Web Services) revenues, due to the company’s strategic investments. Also, look for an correlation to a decrease in spending on the fulfillment network in 2023 and an negative or positive impact in the company’s financial performance. If negative, it may indicate that the company requires additional capital expenditures. On the other hand, if positive, it could signify that the previous capital expenditures are paying dividends, resulting in improved operational efficiency and reduced capital requirements.