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After having read so much about how Amazon does not really lose money but constantly grows without reporting too much of a profit, I decided to finally take a dive into its financials over the last 15 years. In only about 20 minutes, my mind is already blown. 1/n #amazon
I started at 2003. Their financial statements start with cash flows. I'm not sure if that's the US GAAP convention but if it isn't, right out of the gate it says something about management's priorities. 2/n
In 2003, Amazon reported a net income of $35m. But operating cash flows of an incredible $392m. Two important bits stand out for me in there. Stock based comp. of $87.7m and an increase in accounts payables of $167m. That's ~$254m of cash you get to expense. 3/n
The pattern continues (except in 2004). By the time you get to 2009, the gap swells to $902m in net income and net operating cash of $3.29B with a stunning $1.8B coming from an increase in accounts payable. Another $470m comes from unearned revenues. 4/n
So now I switch to the balance sheet. And lo and behold, a total balance sheet of $13.8B is supported $5.6B in accounts payable. That's fully 40% of the total assets on the balance sheet! Add in $1.7B of accrued (but unpaid) expenses, and you're at 53%. 5/n
Fast forward to 2018. Total assets stand at a phenomenal $162.6B - still supported to the tune of 42% by accounts payable, unearned revenue and accrued expenses. That's $68B of cash which isn't really its own. That's some serious fire power to be getting on with! 6/n
And finally (for now), a net income of $2.3B with net operating cash flows of $17.2B. That's a $15B spread in net income and operating cash. On this though, I do suspect that AWS's massive depreciation has a big role to play and that "investment" in the servers... 7/n
...in Amazon's data centers probably properly belong straight up in operating cash expense. So there's that. However, still reeling from the scale of this thing. #amazon #FinancialManagement #Investing
And there's obviously the tax advantage of getting to expense all of these while still holding on to the cash (accounts payable and accrued expenses). Similarly, with unearned revenues. You've got the cash and you don't pay taxes on it for some time. Beautiful.
