CEOs Discuss e-Commerce: Amazon, Sabre, Monster Worldwide

Quotes from CEOs and CFOs on recent earnings conference calls, discussing their companies and markets:

Amazon

Anthony Noto - Goldman Sachs

Yes. I'm really just trying to understand, I know that 2006 was an investment year, and I think a lot of investors, including us, were hoping for some leverage in 2007. But now it appears that your operating income margins will be down in 2007 at the midpoint versus 2006 after an investment year. So I went back to 2005 and said, what has happened over that time period? It looks like you revenue will grow almost $5 billion, but your operating income would not have increased at all over that time period.

Amazon CFO Tom Szkutak

Right. What you're seeing is we had an increase in our cost base both in 2005 and 2006. Certainly, we spent a lot of time talking about technology and content over the past few calls. You've seen that that growth rate has slowed, and so when you look at 2007, you should expect that our growth from an annual basis will be significantly less than it was in 2006.

But what certainly has happened from 2006 to 2005 is on top of that, you had gross margins coming down. The primary reason for that, there's certainly a lot of different factors, but certainly lower prices, the mix of categories that we're in; we entered a lot of new categories with new selection, and so that is driving it, as well as we were certainly helped throughout the course of the year by third-party sales.

So as you think about it going forward, even though you have seen the gross margins come down, a lot of these newer categories are becoming much more meaningful for us and over time, we will be able to get those margins to be very solid within our business.

Today, as you can imagine, with some of the new categories that we have, what we're trying to do is get to scale. When we get to scale on those particular categories, good things happen. Think about particularly in international, where we are very, very small within EGM just a few years ago, and now it's become a much more meaningful part of our business.

When that happens, we're able to get a lot more traffic to those particular categories. When that happens, you get a lot more third-party sellers coming to sell on our detail pages. We also get better prices with suppliers as their volume grows. So again, our strategy is to grow those businesses. Even though you see the gross margin going down, and that being one contributor of it, it's something that we are very happy with, because we need to get the scale in those businesses. Over time, that will be very beneficial to shareholders.

• Excerpted from the full Amazon conference call transcript.

Sabre Holdings

CEO Sam Gilliland

Now, turning to Travelocity, the business made significant year-over-year adjusted EBITDA and margin improvement across the regions. While we did experience some softness in revenue due to the foiled terrorist attack in Europe and in packaging in North America, we hit on all cylinders on the cost discipline front, making improvements in areas like marketing spend and customer service operations. We continue to differentiate ourselves from the competition through initiatives such as our customer loyalty program and co-branded credit card.

CFO Jeff Jackson

As expected, Travelocity more than tripled adjusted operating income to reach $73 million with a 7% operating margin. And on a GAAP basis operating income was $5 million. As a reminder, we consolidated the IgoUgo business into Travelocity during the third quarter, which put a $4 million drag on Travelocity operating income for the year.

Now breaking out Travelocity's operating results regionally, North America adjusted operating income grew over 50% year-over-year to $82 million with an operating margin of 12%, 3 points better than 2005. On a GAAP basis, operating income was $64 million with a 9% operating margin.

Europe had an adjusted operating loss of $9 million, a $24 million improvement over the prior year and on a GAAP basis had an operating loss of $59 million. Travelocity grew adjusted EBITDA by more than $60 million to end the year at $109 million. North America was $103 million and Europe was $70 million.

• Excerpted from the full Sabre Holdings conference call transcript.

Monster Worldwide Inc.

Bill Pastore - President and CEO

Turning to the current results, we met our commitments and produced strong financial results top to bottom. Our overall revenue came in a bit above the high end of our expectations as global demand for our services increased. We continued to expand our operating margin through higher sales volume and improved efficiency. Diluted earnings per share from continuing operations grew at a healthy rate of 41%, including the effect of significant expenses related to the stock option review...

Our revenue growth in the quarter was balanced and once again, exceeded industry averages in the U.S. and overseas. In the fourth quarter, the international division achieved an outstanding 63% revenue increase. Monster Europe is the clear number one online career resource, operating in 18 countries and is the leading brand in this largely untapped market where the vast majority of helped wanted advertisers still use print. In the fourth quarter, Monster Europe had almost three times as much career-related traffic as our nearest competitor.

Our international results were fueled by the outstanding execution of our salesforce, which achieved higher productivity levels as our brand awareness and supply of job seekers increased. For the year, cash flow margin in International surpassed 10%, comfortably above the mid to high single-digit goal we committed to a year ago. And as excited as we are about our results, we still have not realized many of the operating efficiencies we expect to eventually achieve as the business across the continent fully scales.

Our Asian business also continues to grow at a very healthy rate. The more we dig into this opportunity in the region, the more excited we become about the longer term aspects for profitable growth in Asia. Today, we're in an investment mode in countries like India and China; however, we expect to benefit in the longer term from the combination of massive workforce formation and the Internet boom that defines much of Asia. The huge labor pools and strong economic growth that the Asia Pacific countries possess leave us little doubt that these markets will one day eclipse the domestic U.S. help wanted market.

• Excerpted from the full Monster Worldwide conference call transcript.