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Actually the biggest key is a distinction between profitability and cash flow. Amazon has been cash flow positive since 2001. Sure, it spent huge number of year

by xkjkls 8y ago

Actually the biggest key is a distinction between profitability and cash flow. Amazon has been cash flow positive since 2001. Sure, it spent huge number of years burning cash building it's revenue from $2 billion in 2001 to $200 billion today, but because they have a structure where they don't have to pay their suppliers until close to 3-4 months after the collect from their customers, they can sustain that without needing to raise outside cash. That's a huge distinction, if you start having to raise more debt or equity in order to fund your growth it's going to negatively impact the long term free cash flow per share of your business and will make it harder for your to generate outsized returns.

maoistinquisitr 8y ago
Amazon makes weird non-GAAP claims. In terms of GAAP, Amazon had negative free cash flow of $4.2 billion in Q1.
- xkjkls 8y ago
  I'm talking on a yearly basis, not a quarterly basis. Due to the seasonal nature of their business, I'm sure the quarterly numbers are more choppy. I think the general point, that they've been able to self-finance this enormous growth (save for some certain real estate purchases or acquisitions), stands.
  - kgwgk 8y ago
    “Self-finance” may not be the best term to use, given that their asset growth of $90bn (from $40bn in 2013 to $131bn in 2017) is mostly coming from the increase in liabilities (equity has increased less than $20bn, from $10bn to $28bn). Long-term debt was $3bn in 2013, increasing to $8bn in 2014 and $25bn in 2017. Capital leases have also gradually increased from $2bn in 2013 to $8bn in 2016 and $13bn in 2017.
- mediaman 8y ago
  If you are referring to the cash flow statement, which I think you are, there are no "weird non-GAAP claims" involved. Their latest 10Q shows GAAP pretax income of $1.9 billion. If you're referring to total change in cash which was -$4.2 billion, that's because they reduced their accounts payable by $10.2 billion from paying all the suppliers after the holiday season. Looking at the consolidated statement of cash flows of a seasonal business very, very easily leads to misunderstanding the business. Operating cash flow was $18 billion for the year ending 3/31.
- kgwgk 8y ago
  Free cash flow is a non-GAAP metric. Amazon provides three different free cash flow calculations (depending on how leases are accounted for). In 2015-2017 the corresponding figures are $26.4bn (7.5+10.5+8.4), $14.8bn (4.9+6.5+3.4) and $5.8bn (2.6+4.7-1.5).
  - kgwgk 8y ago
    A 2015 commentary on this issue: https://www.ft.com/content/cfb6975d-4503-3fb5-85f4-5c11c142b67b https://www.ft.com/content/cfb6975d-4503-3fb5-85f4-5c11c142b... The three different cash flow calculations in 2012-2015 were $4.4bn (0.4+2+2), $1.7bn (-0.1+1.3+0.5) and -$2.4bn (-0.4+0.2-2.2). As forecasted, the divergence of these metrics has continued.

by xkjkls 8y ago

maoistinquisitr 8y ago

Amazon makes weird non-GAAP claims. In terms of GAAP, Amazon had negative free cash flow of $4.2 billion in Q1.

xkjkls 8y ago
I'm talking on a yearly basis, not a quarterly basis. Due to the seasonal nature of their business, I'm sure the quarterly numbers are more choppy. I think the general point, that they've been able to self-finance this enormous growth (save for some certain real estate purchases or acquisitions), stands.
- kgwgk 8y ago
  “Self-finance” may not be the best term to use, given that their asset growth of $90bn (from $40bn in 2013 to $131bn in 2017) is mostly coming from the increase in liabilities (equity has increased less than $20bn, from $10bn to $28bn). Long-term debt was $3bn in 2013, increasing to $8bn in 2014 and $25bn in 2017. Capital leases have also gradually increased from $2bn in 2013 to $8bn in 2016 and $13bn in 2017.
mediaman 8y ago
If you are referring to the cash flow statement, which I think you are, there are no "weird non-GAAP claims" involved. Their latest 10Q shows GAAP pretax income of $1.9 billion. If you're referring to total change in cash which was -$4.2 billion, that's because they reduced their accounts payable by $10.2 billion from paying all the suppliers after the holiday season. Looking at the consolidated statement of cash flows of a seasonal business very, very easily leads to misunderstanding the business. Operating cash flow was $18 billion for the year ending 3/31.
kgwgk 8y ago
Free cash flow is a non-GAAP metric. Amazon provides three different free cash flow calculations (depending on how leases are accounted for). In 2015-2017 the corresponding figures are $26.4bn (7.5+10.5+8.4), $14.8bn (4.9+6.5+3.4) and $5.8bn (2.6+4.7-1.5).
- kgwgk 8y ago
  A 2015 commentary on this issue: https://www.ft.com/content/cfb6975d-4503-3fb5-85f4-5c11c142b67b https://www.ft.com/content/cfb6975d-4503-3fb5-85f4-5c11c142b... The three different cash flow calculations in 2012-2015 were $4.4bn (0.4+2+2), $1.7bn (-0.1+1.3+0.5) and -$2.4bn (-0.4+0.2-2.2). As forecasted, the divergence of these metrics has continued.