Q2 2020 Earnings Call
Good day, ladies and gentlemen, sake, we're standing by welcome to argue about the.
September quarter 29 results conference call.
This time, but you said I don't need it only mode. After managements prepared remarks, there will be acuity session.
The technical little bit <unk> head of Investor Relations.
Please go ahead.
Hello.
Welcome to Ali Baba groups September quarter, 2000, Nike results Conference call.
With us or in a dog executive chairman and CEO .
Joe tied executive Vice Chairman and Chief.
Chief Financial Officer.
Cool is also being webcast.
I asked section of the corporate website, a replay of the call will be available on the website later today.
So let me quickly cover to see Barbara.
Today's discussion will contain forward looking statements.
Forward looking statements evolved.
Uncertainties that may cause actual results could differ materially.
Or expectations.
Detailed discussions all these risks and uncertainties. Please refer to our lead its annual report on the form 20-F, and other documents filed with the U.S. FCC.
Any forward looking statements that we make up on this call or based on assumptions as of today.
Not undertakes no obligation to update you.
He said some court.
All.
We still that's up when it was measures that we use on this call such as adjusted EBITDA adjusted EBITDA margin, but just to keep it just would be probably margin marketplace core competency, but oh God net income no gets diluted earnings per share.
Free cash flow expressed on a non-GAAP basis.
And reconcile itself got to non-GAAP measures can be so.
Yes.
Otherwise ceded the growth rate.
Patrick mentioned during this call before it's too young your growth was the same quarter last year.
I would note.
So Joe.
Thanks, Rob Thank you all for joining us.
In past earnings calls, we have kicked off company management remarks, with my overall observations on strategic issues or macro trends, starting this quarter and going forward.
Who is the Sundar executive chairman.
Deliver the overall strategic a macro state of affairs as well as is usual discussion of business operations.
I will continue to make myself available for acuity after our prepared remarks.
Please go ahead.
That's true.
Hello, everyone and thank you for Tony Oh earnings call today.
In September body ballpark, just celebrated Oh, what twentys anniversary.
We truly appreciate I wish you a whole to support the policy years.
Today order to speak to you seem to roll off the executive Chairman of Ali Baba group for the first time.
I would like to take this opportunity to share my thoughts about the opportunities.
Our strategy over the next several years.
Our mission has not changed since the one.
It is to make it easy to do business.
Anywhere.
Good day.
Consumers merchants kinda partners.
Three new Jersey seem to digital era.
We will continue to create value for them.
By leveraging the power of the other technologies.
To make it easy to do business for them.
Anywhere for decades to come.
We have set a goal for the near term.
Over 1 billion.
Consumers.
At least.
Centered in RMB consumption by fiscal year to deepen before.
Geopolitical uncertainties.
Placed additional pressure global world.
We believe this is both the challenge and opportunity.
For the Chinese economy.
And the finding more opportunities.
And so the environment.
All of business and strategy.
I would like to point out too long to get vitamins, that's off all the ballbots flavor.
One is to consumers.
Let's see.
The other is to business.
To be.
In terms of the two c.
We see great potential domestic consumption has been important driver for Chinese economy.
The overall size of consumption keeps growing.
With increasing penetration digitalization.
Specifically I.
On the retail sales reached around 40, putting on the first nine months of 2019.
<unk> 8.2 person you over here.
This oh, please the overall GDP growth.
<unk> 0.2 person.
Well importantly.
<unk>.
<unk> E Commerce is doing the key driver.
On a consumption.
Well we fought for.
17%.
We are growing even faster than the overall only ecommerce sector.
How do you bought is the only possible to meet the diverse range of consumers the mens.
Pretty cool goods.
Consumer services, a digital entertainment.
As we disclosed <unk>, Oh, Oh, you must today.
<unk> consumer facing businesses as a whole already sort of southern sodium that in unique consumers.
All the ballpark digital economy.
Over the next several years.
Continue to grow our user base.
And at the same pod drug users seanergy by enabling merchants to fulfill portal and the services that digital economy.
Our new retail strategy.
Large.
Addressable market.
We aim to enable the digital transformation of brands and retailers empowering them with the other technology and the consumer insights.
The served there.
That is so good customers.
I know the secular growth fiber and the price digitalization.
He's spending being trying or for even a companys among two around 80 fit in.
I thought or.
Well the spin for public sectors and the various industries.
Over 300 bidding U.S. dollar.
According tall estimate.
This represents a huge opportunity in enterprise facing business.
We leveraged all the public cloud computing technology.
Say that insights, putting Paul the end to place.
The adoption of cloud services in China will be driven.
Why not only the need of lower <unk> costs, but also by digital transformation of business models on the processes.
As a digital technology company.
We are uniquely positioned to provide a businesses.
It was more intelligent at a cost effective close it services.
We call what solutions for enterprises.
Addis-ababa business operating system.
We provide not just technology from services.
While the business as a service solutions.
No I would tend to the highlights this quarter.
We had another outstanding quarter with excellent business performance.
We enjoyed robust revenue growth of 40 person.
As we capture significant growth opportunities.
Increasingly watch group of Chinese consumers.
The quarter.
We continue to invest user experience.
Two solutions to creates tremendous benefits for our customers.
We have developed or we have delivered solid profit growth for the quarter benefiting from that just improve operating efficiency.
We're trying to retail marketplaces.
Our strategy is very clear an unchanged.
We want to add value to consumers and the sellers through consumer sentiment.
It Richmond or the platform installations.
Yes.
This strategy has provided us ability to scale and to grow all consumer base.
In September 2019.
I was trying to retool Maki please.
Southern 85 million mobile and they use.
Quarterly net increase of 40 million.
Oh, and you'll have to consumers.
19 limited to 693 minute.
Consumers other cole of body ballpark digital economy.
The one point is the odd relevant.
I've got spending preferences autonomic.
Today, we are trying to only called as possible. The all for the board is and the deepest lingle goods and services for Chinese consumers.
We will further strengthen our suppliers he branded importing.
Lets sold and the long tail products.
During the quarter, we see strong user engagement, that's thickness as reflected higher blogging frequency and accelerating older girls.
We also notice the spending or new users from less developed through your views.
About.
Who sold an R&D easier first the you're all platform.
This is a result, all what diversified and a comprehensive part of supplies.
Well pogatetz recommendations to commit the right product within what consumers.
[noise].
All the ball, but did you put economy.
We also provide services and the entertainment <unk>, southern Saudi Muddy and you have to consumers.
The platforms.
We'll go to do.
We see do low penetration for you.
Local services users.
He would be just economy.
If we compare the overlap of consumers across the platforms.
But.
We see huge opportunities in terms of synergies between these groups.
We are identifying and executing new initiatives.
The users from all what kind of retail Multiplexes two uses of the local services and the digital entertainment platforms.
We believe these platforms will have a tremendous value to the digital economy.
Local consumer service segment as more consumption use cases.
He could use is more merchant liquid and on the men's delivery network.
Then if it more location, but commerce use cases.
Digital media and Hemus Seckman provides a portfolio of quality confidence.
Resonates with <unk>, Chinese consumers, and thereby creating opportunities digital advertising memberships and of course <unk> cost studying winning all he bought digital economy.
Let's turn to our cross border International businesses.
In September .
Acquired <unk> <unk> <unk> E Commerce platform Carla.
T mobile and call platforms have relatively low consumer overlap.
We will eat agreed areas, such as technology acumen, and the supply chain, who achieve optimization.
The call lot <unk> will continue to operate independently.
So you ensure legato is showing solid operational performance with older growth more than doubling for the fourth consecutive quarters.
Either <unk> or the Indonesian market.
The goes more than tripled.
Logo key priority is to maintain strong user growth and the user engagement.
Coming to you.
Our cloud computing business continues to exhibit strong growth.
Revenue grew 46% year over year to 9.3 billion RMB.
Well Murray Cubans bite and increased average revenue per customer.
Ali Baba close.
Serves customers frumpy, both lingle industries, the old Internet and media.
Boots on the most recent available data her.
Okay.
15, not 59% of trying to use your listed companies.
Customers of all the cloud.
The reason why we are widely recognized by the market is that we have developed proprietary technology and solutions, which makes a difference from other players in the title market.
To conclude.
We have a proven track record of inhalation pop 20 years.
In the coming decades, we will continue to innovate with the goal of fulfilling our mission.
Keep investing for the long term.
No.
To the coal over to Maggie who will walk you through the details of our financial results.
Thank you Daniel.
Thank you all for joining on.
We had another strong quarter.
For today's call I would start by going over financial highlights and end with how we view the coming quarters.
Now, let me go over to financial highlights.
In the September quarter 2019.
We delivered another strong quarter of used to close with a mobile I mean, reaching 785 million opt for hemophilia.
Compared to our June quarter.
User engagement continues team.
It's more about growing faster than I mean.
In the first six months.
Ended September the top <unk> you do your growth accelerated as a result of healthy organic traffic grows.
Can you sort of targeting.
Increasing engagement with interactive entertainment teachers.
For the September quarter, and you're asking consumers, our China retail marketplace, which this year.
16 night, a 693 million, which increased by 19 million compared to our June with her.
See increasing consumer blows reflected our continued penetration in those fees I loved and that's developed areas in China as we launched the more effective consumer segmentation she team.
These initiatives have you well received the consumers.
Evidence about accelerating organic growth from higher purchase frequency.
Our total revenue grew 40% year on year to 119 billion in September 4th here.
Excluding the facts and consolidated acquire businesses revenue would have grown and 77% Yahya feel very strong growth.
The increase was mainly driven by robust growth over China, commerce retail business and I'd backlog.
We are very pleased to see that are accretion is running a very efficient way.
Often make sense.
I'm very well controlled well our business has seen continuously grow fast fashion.
Let's turn.
To our business segments.
Our core calmer second continued to be very strong.
Quick comments revenues grew at 20% in years two <unk> one.
To fundamentally stuff I kinda retail business.
Continue to be strong customer management revenues grew attendance I pursing, the quarter, which commodity reflected increasing the average.
Hi personally and to a lesser extend the volume paid clicks.
Commission revenue increased by 24% young here.
Partly due to the close.
He most is because it's yen.
China retail auditors.
Wishes and then they do a new retail business Oh, My gosh chemo employed.
Oh, I wine and 25% year on year.
So this quarter, we acquired and consolidated Carla.
This is starting from September .
For International retail segment revenue was six feeling which school at 65% year on year.
Revenue growth was driven by I Express and that's why that's close.
For Lazada Afinion has mentioned, we continue to perform well for the fourth consecutive quarter.
She's over 100% Oh that flows.
Reflecting strong consumption the money in apparel accessory and FMCG categories.
I think French revenue grows remains strong <unk> numbers consumers and the building in flows.
It's an update on October nine we completed the formation of.
Social commerce joint venture in Russia with local partners.
In terms of the financial impact.
So this isn't a disease, Russia will be Deconsolidated next quarter, because we own just less than 50% of the team.
For a local consumer services revenue grew 36% year on year to 6.8 billion or.
So robust revenue growth was primarily driven by strong older about volume.
And increasing user order frequency.
We have also been penetrating into new markets.
C band of areas with strong growth potential.
During the quarter Jimmy from less event of areas.
5%.
Local consumer service segment.
<unk>.
And the we're committed to invest in a business and to create long term value.
We're focused on increasing every spending per consumer as well as efrain, you use and sell everything I said listen I've got a digital economy.
In the quarter about 69% of new food delivery customers came from Ivy painful bladder.
The potential for further penetrating uses yeah, I thought I teach the economy.
Significant has only 25% of and you actually consumer some are kinda retail marketplace have you started off with consumer services.
We're going to continue to take a targeted and systematic approach to messy.
Business.
Let's look at a profit then it.
You know calmer second we continue to generate strong market based marketplace based core common such as that you'd be time.
Compared to a year ago, we have increased adjusted EBITDA by 10 billion aren't.
Well the losses in four strategic areas only increased by 1.2 billion R&D.
So this reflects our targeted approach to allocate resources in key strategic growth areas, well also since systematically optimizing cost and putting patients.
After incorporating these losses core comments, it's just that you'd be top close scrutiny at 29% year on year to 38.6 billion.
Cloud computing revenue increased by 64% young here to 9.3 billion. This is primarily driven by increasing average revenue per customer.
Adjusted EBITDA as a with a loss of 521 million RMB, reflecting small widening.
Losses versus the same quarter last year, because we continue to invest in talent and technology infrastructure.
Revenue from the two media entertainment business increased about 23% year on year to 7.3 billion.
Excluding the consolidation abide by the pictures revenue would have increased 8% earlier.
Seaside industry, a rationalization and tighter regulation.
Okay.
We continue to reach our portfolio with original content.
With the Chinese audiences.
During the quarter, you, who is able to launch a popular drama in the variety shows with high viewership that resulted in 47% you know you close the average daily subscribers.
Adjusted EBITDA for the and was a loss of 2.2 billion RMB, which narrowed a year on year as we continued to focus on cost efficiency and we currently investments what comes in spending.
Revenue from innovation, these kids and others increased by 14% to 1.2 billion.
Adjusted EBITDA for you know they finished it was a loss of 1.9 billion.
Increasing loss was primarily due to our mezzanine technology research and new business initiative.
Decision seeing the chemo gene.
EMA.
Looking at the free cash flow and Capex, our business continued to show strong profitability and cash flow.
Since September 30 is cash cash equivalents and short term investments were 275 feeling RMB.
For September quarter free cash flow was 30.5, you know <unk>, which is a 4.3 binney U.S. dollar, which increased by 90% year <unk>.
The increasing free cash flow is due to robust process into people's time.
Jaime Katz kept expenditure spending and less content costs.
So lets quickly go over it a major items that impact.
GAAP and non-GAAP net income calculation.
GAAP net income during the quarter was 70.7 billion up 288% young here.
A year over year increase was primarily due to a onetime gain 69.2 billion recognized upon receipt of surgeons, who person I pretty interesting.
Partly offset by impairment charges and that losses from changes in fair value relating to certain investments and goodwill.
Excluding these gains and losses and certain other than our non-GAAP net income would have increased by 40% year on year.
Looking ahead.
Last year. This time genuine I spoke about our commitment to deliver robust revenue growth and healthy sustainable profit growth.
We have delivered.
In the first six months of fiscal year 2020 .
<unk> revenue grew for the 41 person that outpace global technology peers.
At the same time, we achieved 36% I just see because.
We were able to achieve these results achieved robust growth of act to consumers.
User experience.
And generating operating efficiencies through a synergies within the I thought they cogs.
Looking into the second half.
We will continue to execute our strategy.
Specifically, we will be very focused on three things.
Number one.
Poofy user experience, which will result in higher engagement and customer set.
Number two.
Great I simply reinvesting, our discretionary profits and strategic areas to further our competitive advantages.
Number three leveraging the synergies of icon to achieve operating efficiencies.
We believe a commitment to invest and deepen our mode, we'll ensure a robust revenue growth and deliver healthy profit growth in a long term.
Now, let's turn to queuing they session. Thank you.
Thank you were ready.
Yes. Thank you [laughter], they see jet amended and I'll begin to question and answer session and if you wish to ask a question Ses desktop wanting a telephone and wait they need to be announced if you wish to catching your request dispatch the panda hash key.
And to give more people at the upper today, just to ask questions peacekeepers House and no more than one question at a time.
Once again.
To ask a question. Please press star one on your telephone keypad.
Your first question comps have done I know you pay off of Citigroup. Please go ahead.
Hi, Good evening. Thanks for taking my question is congratulations on the strong quite Oh, my gosh interest related to the upcoming thing that Stacy share. So that's management view. These at any pick the French tend to prevent here for example on in comes off the countries and platforms that will be puppies.
Operating in the event.
And in comes off product category, a any specific product that management believes there'll be a big traction. This awful consumer and it's also seems like I don't be so many platforms patrolling I'm lucky cow to consumer this year. So do you think that the consumption demand will be they actually.
Okay, that's bad thing and allow all the platforms to lean and gain so any color on a the upcoming events would be helpful. Thank you.
So oh.
Yes. It then you it maybe on so this close for.
Everybody understand the we are approaching to the 11.
I was singles day.
Since the 11th 11 to 70.
So all to the POS 10 years of course, I think of course will I think this lumber 11 has become a.
<unk> consumers shopping to other people are widely recognized.
Shopping day, and the and that's why it's we have a very organic momentum to up to a full for the consumers to join.
We enjoy that they so people ready to shop on the day. So this is the basically this is a habits of people people for me the lost 10 10 years.
The other side of the the other side of the calling it the supply and the opt for 10 years offers on the older merchants older brand companies retailers. They are actively prepare a there could be preparing.
For these upcoming shopping day, a shopping festival. So they will provide the best products with us parts and services to the consumers and a commercial wise or they viewed as as more likely commercial audience became said everybody wants to be the trends there sector. So that's why we got the full.
Clinton from both demand and supply side.
But this year I'd seen could cause a week or the country. We have many you on tailor made products for this November 11.
Even a walk with many Brent companies to tailor made products exclusive for November .
Oh, but with limited edition. So this is not not only the shopping day, but also a marketing they.
Full parental market there, Brad and also engaged for new customers in terms of a market I think could not only China, but also our or cross border.
International marketplaces, but rather on all these first of all of them do participate this shopping festival, but Oh, we localize all patients to meet the local demand all the customers.
But we do see to see the synergies I mean, some go the part of supply because most of most of the supplies from trend or can be.
Consumed by the consists of.
By the people other markets as well for cross border exports.
Uh Huh, we apply that many many tech new technologies into these November 11 preparation and so for a we see a very good progress in terms of the warm up activities.
The we borrowed the active.
Features we create is Oh, we're a mobile taobao up and the other mobile obsolete Ali Baba ecosystem. We are we so far we have what she's a very good I mean user engagement.
For these I mean upcoming shopping festival, so what we offer a wheel well we are ready for that they and we will do all we can do to make sure. We have another success on that they thank you.
Thank you.
Thank you next question comes in denial of <unk>.
That doesn't that can they lynch. Please go ahead.
Hi, Thank you for me and get the picking my question I'm curious to hear go for R&D companionship, and Tom and I did you see today in D. I left because everybody is versus a few years ago when do compete against the LTL one not to see these.
No money it seems to have stopped all one costing the law, which he argues t. a hefty piece catalyst or not short term spend to fight. The products also just wondering how would you do compete hockey principally our today versus a few years ago I think it.
Actually if you look at our customer base today, though we have.
The 700 million I mean tend not to consumers a six month 93 million I know to consumers as of September being all are trying to retool marketplaces are these customers not only come from the top tier cities and many many of them all from low two cities. So we have got wide coverage and the I think before.
Oh today, I think for the new customers all platform and Oh wait vintages that we'd have to reach we have the rich or we have an in depth seductions covering all the categories covering all the price point plus range, which.
Available for all the customers. So in this case technology play a very important role in terms of matching or like demand Oh, we got right supplies. So so far.
So with you you my script.
For the new customers all platform within one year, we saw very very robust growth in the all pool and the that's very good signal a forced to show the power off all platform.
The Oh, let's say and the for the for the new comers. They spend a lot of so called marketing dollars to subs highly publicized the these customers publicize the merchants bugs marketplaces, I always believe that to the key thing is generate.
Sustainable value.
Bose Bertrand go to customers and as a platform if you.
For the bar a set of the truck transaction between each other but as a possible you always subsidized I don't see this is a single model out in the long run.
Oh I'm sure all talking about smoking will agree this a fault from our side, leading bucks for quite a new customers Oh as we always do and so that's why we see a very robust the user growth and we had another 40 million and they use this quarter, but the wheel we cared more about.
Retention on the customers and so technology plays will continue to play a very important role to pull the sickness, helping users.
Understood topic it doesn't it.
Thank you.
Next question comes from denial of Binnie Wong of HSBC. Please go ahead.
[noise] Hi, it's even a management. Thank you for taking my question. My question is also on the left if I look at market strategy I would call company just close the percentage, helping users coming from low and has been over 10% end up by several quarters I just wonder if that's an update and also where she is spending into didn't know what he has taught us a hockey.
He that our taobao appeal merchants spending on the advertising budget will behave differently.
And I guess I'll talk like from a follow up on 'em Nike's comment on that 25% cross selling on their local questions. My first [laughter], how do we tap in what is our strategy to tap into the incremental to 75% [laughter], calling from our China retail marketplace in California, So much of it. Thank you.
Okay, [laughter], Tencent and low tier two.
Ah user and.
Overall, we still are showing very strong and user acquisition. So after several quarters strive precisions onboard <unk>. If you look at the a user coming from lower <unk> as a percentage of total it come down little bit, but I think overall, it's very you know a strong.
Those were not owning a acquiring uses some noise here, but on top.
Top tier cities Oh, So you know continuously to add consumers I think a once it's very important inside.
It's not only the use of what was but also the ARPU growth is very healthy and.
One more thing is very important it's the retention so as I talk to your name that's a day if you look at.
Cannot our customers retention is fair high take an example, if our a high end customers, who you know spend over 10000 per annum, you know there like over 100 million I've done.
One 130 actually minutes for Fisher, and then a way look had a percentage stay our platform.
Yes.
You know, it's like 98%. So that's what's your sense that a weird that's not only fast growing but a more balanced more healthy wells.
[noise] was.
Cost so 75 person.
[noise] nothing but this is the synergies we are in the process of realizing.
The local consumer services, the we have a integrated consumer marketplaces and today are 25% healthy.
So I'm trying to do you see a that could use is from the trying to retail mall cpcs all the other other users purchases in local services always here, well, we see future synergies or to improve these penetration.
So that's why we make oh, we make continuous efforts to integrate our quota anymore.
Technology infrastructure, so because the whole platforms in our platforms. He already bought about these economies 40 integrated.
And and going forward, we will continue to up to have more food to strengthen our supplies from the located off from from.
From the local cities to have more coverage in the local cities or to make sure. We have the good supply to the low Cobiz took a little because your base consumers are which we know Oh, sorry Uh huh.
But it's really about their profile.
One other question was spending.
Although a small merchants.
Okay.
<unk>.
[noise] I think the fundamentals is still a user grows and you keep consumer experience.
And then like we said several times in past that you know our motto is that merchants that they themselves to make decisions on how much budget. They want to allocate today to the platform and they bid for the pricing they are willing to pay so that's a if you look at our revenue growth. It's a it's the ultimate proof of the value provided to not.
Only the consumers, but also the merchants. So I think it's it's not the alerts here sitting merchant <unk> merchants across the country right or the Brent I think they has been you know making decision to has affected and increased their spending our path.
Uh huh.
[noise]. Thank you.
Thank you next question is from that I know Grace Chan of Morgan Stanley . Please go ahead.
Thank you. Thank you for taking my question My question its about the differences and Ali Vos approaches to capitalize on opportunities in D. Athlon Middle class and urbanization law chair sees it would be great I'm imagining can talk about the difference is indeed to see my behaviors preferences.
Yes I.
In these two seconds and that's your strategies and also the difference is indeed compound landscaping. This ah two seconds. If possible can you used to come in government on promotion. As example to elaborate I you at shadow she's especially in the last evaluations.
And I followed by is that we see the growth of users have been coming from the incremental usually group having come in from did you give out lefty about areas well will be the implications on the financial numbers, our cost structure, which more users now coming travel that's about a area. Thank you very much.
I will say the if you look at the use a users habits from different different tier cities I think that this highly relevant to their local lifestyle under their addressable income so but a thing could that.
So in the different shopping.
Shopping events like especially like November 11, I think older people wanting to.
Yes, that's products even from a from a from the maybe some some of them they don't spin off but they did they own the other brand products. Both in the shopping festival they will because of the good of prices a nickel products available on the possible. So most all people will try.
Who is tied to explore.
The the branded products, but the thing Todd I think of for the people to necessities fought log off.
Categories, which are not focus people make shopping divisions sole focus all brands. So people will care more about a functions and the of course the pricing vantage. So that's why we wish we strongly believe the technology is so important to reflect this real reflect this customer.
Needs a real time basis, So I think that's the that's the.
<unk> successful factor.
Both of these are the operation and also in the big events like November 11.
Yeah in terms of spending found the lawyer two cities in high end. So a I talked about the high end consumer spending patterns, you know very strong spending power and a high retention Lilly to C.D., we actually have served that.
The ARPU or from the lower tier city consumers are not you know as a low as people imagine a.
You know the spending I think it's more tied to the user experience during the consumer experience experience also include a incruse and that they can find or whatever they want. So we talk about the taught us applied different supplies and are we talking about segmentation of the consumption I think we.
Have addressed the very well in our top five so it's a different a two month you can.
You know.
A leveling consumers.
Next question.
Thank you. My next question is from that I know the sack lease watchmen of RBC capital markets. It's called the has.
Great. Thank you.
Profit growth trends across the business has a whole and on the core core marketplaces stabilized or even accelerated I guess, giving you some more flexibility as you said in discretionary investing to strengthen your strategic much Maggie.
More on expense discipline and operating efficiencies as you expand some of the recently integrated businesses in core Commerce and then just to confirm it was there any change in priority here with your final comments in your prepared remarks for the second half of the year. Thank you.
Yeah, I mentioned that we're going to focus on three key things right. The improved user experience is always the most important thing and this will result heart engagement and and customer spending.
And so I also talking about reinvesting a back to these competitive areas just like what we did in previous years to expand our b to C market leadership I think a we have in various successful and that round of reinvestment.
And expand our our market share. So we're going to continue do that Oh. This strategic important areas and number three I also talking about the that basically right Oh, creating efficiency I think it's very important because Ah Ah Daniel mentioned that we don't believe you know continuing subsidizing.
Sure.
Just tremendous spending in the marketing with the screen assistant sustainable business, we gonna be you know smart.
Spend our money and a continuous to focus or emphasized on helping beaches.
Yeah.
And also was I agree I, just want to address a sort of.
The sort of the seeming conflict between expense operating efficiency with disciplined versus a being aggressive and you know reinvesting all profits into strategic areas.
The other discretionary.
I'll give you. An example, you know in terms of acquiring new users for example in lower tier cities. We can now acquire users up you know or Oh for the Taliban try to retail marketplace up at the same user could also potentially be user for local service business. So we only have to.
Spend the marketing dollars ones Oh to acquire that user, but then use or cross selling with on multiple platforms.
To.
Further penetrate those users that have not used for example, local services before so the disciplined is a result of the synergies because we have multiple platforms of multiple services targeting the same user base and a that creates those synergies Cree operating.
Deficiencies.
But but we could be at the same time aggressively investing into the low tier cities.
Next question.
And kids and next question.
It's from the line of Alex Yao of JP Morgan. Please go ahead.
Hi, Thank you management Oh for taking my question on the congratulations on a very strong quarter I.
I would like to follow up Wister previous question, specifically regarding Merck is coming to you guys tend to reinvesting the discretionary <unk> backing the strategic areas I think that if we take a look up to your first half financial results the financial impact.
From new initiatives on their coal commerce continue to.
To be nehring, which leads to very strong profit growth.
So should we should we think are you will be incrementally more aggressive in those initiatives in the second part of such that the fashion show trend in the first half cannot be extrapolating to the second half I'm also can you talk about youre all parties across the four initiatives.
Our local consumption international.
Logistic and then you reach out thank you.
Sure I personally I want to highlight again too I mean, that's there is that if you look <unk> revenue growth and profit growth. Those are very strong by out way ahead of our Oh, almost all of our closest peers.
So we do have this.
Luxor, if you recall to be less because strong core and they're good management managing the business.
And so to talk about second half.
We you know in those areas like things like local consumers service or things like globalization and also the RPM Oh, So let's just take a we've done a continuing that at the same time, even look at the competitive landscape right. So we've seen.
Competitors are happy Im very aggressive a investing in a you know the agenda, we talk a commerce business also in the local service businesses. So we it's not only reactive to competitor competition, but also you know for our own to extend the a user base.
Also to.
You know deep haul these user base a week on a it's a good time for us to two and yet you reinvest.
And.
Coffee trend et cetera, although we don't guide on the profitability, but I mentioned that we you know do care about efficiency of the business and also the big topic wells.
So I think Oh. This is a very important measure a amar senior management, a you know if the business grows.
Yeah, I think the prioritize they shouldn't have a investment we miss out on this on our P.P.P. the investment areas I would say that these areas equally important the you know not only the Claude and Ah, Yes, but also at the local customer service and.
You know like the logistics.
Retail and the globalization.
Okay next question.
Thank you and next question is from their line of Gregory Zhao of Barclays. Please go ahead.
Hi, My coming up I was strong quarter.
Thanks for taking my question I feel confident to continue forever you highlighted during the prepared remark kinda during investor day, So Bob I actually have seen that you do to argue economy strategy, how do you see teacher or the economy into two groups fit to consumer and to be space segment.
Given the difference between the two peacemaker nature, but just wanted to understand more about trip.
Execution on the how do you could call Tonight I between the two segments.
Globally, how we see some room has successfully example, with my grandmother like Microsoft and how fuel strategy I'd be friend from Oh disappears and also very quick follow up on every single story.
So we'll see some if you do for your company I'm also to increase.
Hi, good people refer you to read the couple of 11 I promotion this year.
How about kind of kind of living vacation to you I know competitors. Thank you.
Okay. I think the first one is very good questions I think a when we Oh, we will you said that too we are having to flooding wheels to see stratagen to be strategies I think good. These two Australia is a rather than two different type of businesses, which requires.
Different skill sets and even d. and they have the team. So that's why we said Ali Baba and digital economy, which <unk>, Oh, which hub.
Have a.
Diversity of the skill sets all people and the and even the way of working so from a consumer business as we always said that we encourage all young people to take more responsibility to talk to innovate the part of features which fit for the needs of the young.
<unk>. So we always do these popped up a took to this bottom up on the innovations Ah, but for the enterprise services and actually a lot of the POS 10 years offers in T Mall, we've already build a <unk> and the plus services model or to smoke big brands and retailers and all we wrote.
Just over two more categories or even into a into a close.
Call services to corporate clients and a wheel we've already built a very.
So good team in terms of the off.
Also this is and also to integrate multiple services from all the bump up to one corporate client. So we will continue to do so and the we believed.
To have two flooding, we use to see and to be but with a welcome.
With a good connection and there was a with a good chemistry is the <unk> is a core value of volleyball by the coal competitive advantage of all the Barbara.
In terms of the I'll, let just oh the budget the company's performance all uprising, placing struthers in November 11th I don't know so far I don't here, Oh, I don't I don't if your Eddie I mean a.
Big pricing trade policy changes from the just partners actually we are working very closely with early logistics partners and the we prepare for long time to make sure we have the right capacity and the right. So there is available for.
For the upcoming or shopping events.
Thank you very much.
Okay. Thank you and next question is from the nine of Tina lots Credit Suisse. Please go ahead.
Hi, Thank you thinking management, taking my question. Congratulations again on the results I have a one quick question on the live streaming as the format of life live streaming gets you increasing increasingly popular can you give an update on the Jimmy contribution tried that stuff format in first half that here.
And also I want to understand sudden <unk> for this that format, especially when it like streaming and native versus those from third party sites.
Like so he all Cashel Ah thank you.
Sure live streaming if you look at the T. any size. This is a already what we caught this new swimming laying that generates over hundred billion T.N. mean per annum. So if you look at our.
You know a the merchants who have you using the service or 50% of them or using like streams that this is very popular and value added service to these merchants and in terms of monetization. We haven't really started you know it there very early stage.
Test. So there are multiple ways, we can monetize the a service.
And it will give you update when we started the for won't monetization.
Okay. Thank you.
<unk>.
Thank you. Your next question is something I know generally you have you'd be at <unk>.
Hi, Thank you for your time I have two quick ones one is.
At the Investor Day, we talk from multiple new.
Up new drivers, whether that's live streaming to second hand, a platform just thinking into next year.
If we look at each opportunities. In addition to the feed based defeats till the primary one we're looking to monetize or some of these other opportunities also a possible.
Into next year. Thank you.
Sure.
Gross driver.
And as I mentioned happy that you you heard that so we have so many new business and services that are already generated quite big Sciences business and they are up 10 piece for us to monetize these businesses such as you know I don't fish and because.
Second and Oh platform in China, and also like our lives a streaming platform also like top all factory.
If you look into next year, yes, we do have a attunitys, where it I should say it's possible that we start to monetize because these are you know society be businesses that we can start thinking about that monetization on D. A recommendation fees I think the way we look at this and stuff.
Like we have in always doing where we tend to rather undermine has a then over monetize a we already have a you know passing the extended the live on the tests on monetizing wasn't admission fees the weather when a spend it we'll we'll see.
Besides neither on overall, we already have shown 40% your your revenue growth right. So for the past two quarters in the our guidance shows like Thirtyish, which is a well ahead of a.
A lot of a pro appears so we can I have a more balanced approach monetization to look after consumer experience merchants ROI I slides are ready to close.
Thank you.
Thank you [laughter] I next question.
It's from your line of Youssef Squali of Suntrust. Please go ahead.
Excellent. Thank you I've two questions first can you provide us with an update on the food delivery traction in lower tier cities, maybe number of cities and competitive intensity, there [laughter] and second the kind of a broader question for either Joe or Daniel.
[laughter], which in some conflicting data on the Chinese economy recently NBS for July and September suggests a slow down in the economy in general and even online. This morning that there was a new private survey that showed actually manufacturing expanded [laughter].
I think in October much faster than expected. So [laughter] just what did you make of it. It just generally how much of it predicts that predictor is this of the demand football bus services. When you know, particularly from US looking at this.
From the outside thank you so much.
Let me also the first close for the especially in the local service a foot delivery business actually we are we we are expecting all were oh, what coverage under the low two cities seem to resolve the local suppliers a that even though in the past why your we've already a separate expense that's too many are low two cities, but I think.
That's not enough, we'll continue to do so to strengthen our supply which true. We believe very important you are seeing the local service business.
We have huge advantage in the country in the consumer side, and we can leverage a lot or even as we as we said in the digital economy seems comes off the cost so up to the consumers are either.
A quick systems, but thought single from supply side, and Oh, we have oh.
We have done a lot and so far we see it's very good I mean opportunities.
Oh, good trend, if we have the right supplies.
Piccolo rigid, but Oh, we will continue to do so under hub <unk> have a more strong local supply.
Oh.
On the other question about sort of whether the a total macroeconomic data is a good predictor of Alibabas performance well I think you have seen that Oh, we have just multiple quarters, where all the bottoms business Oh performs a the whole economy.
And even outperforms our total retail sales. So currently we're looking at total retail so those were growing at around 8%.
And Ah Ah, Yes, e-commerce or based on the a and B S data is growing in the high teens is the latest study that that's available but Ali Baba drugs growth is we're outgrowing the entire retail sector as well as the ecommerce sector.
I think there's Ah Ah a secular trend, obviously, you called versus taking share away from the traditional retail economy.
So Oh Ali Baba is very much driving that secular trend, but vis-a-vis peers were also outgrowing the peers a in e-commerce because now.
Daniel was referred to the <unk>. Besides a we are getting synergies from a a few areas number one technology or being able to match or a variety of product supply different formats and also different types from standardized.
Products too long, so products or technology will match, the right products the right consumers.
That is giving us a leg up vis-a-vis competitors and the other areas synergy is that now we have a close to 700 million annual active consumers in our China retail marketplace.
That we're able to do the cross selling.
Of additional services like local services and entertainment.
To our base of close to 700 million active consumers in the China retail marketplace. So these synergies are now starting to come through and Ah Ah. That's also giving us whether that is overall peers.
Okay. Thank you both.
Thank you My last question comes from benign of fish Mumbai of Goldman Sachs. Please go ahead.
Thank you for taking my question, maybe on the points you made about improving user experience. So that will result in higher engagement in cost too much that <unk> spend soccer can I was just Austin, where you are on user experience in terms of how you are you finding jobs.
And where do you want to take it and second does not mean and I know the joked about the contradiction Jimmy contradiction here, where does this what does this mean for the ability for you to control to bring down Youre Youre stem.
In particular in the second huh.
And there was a specific would you use the there was aggressively reinvesting just wanted to ask was Goodwood aggressively would use and I'm, sorry, and be very picky like it.
Uh Huh, that's 90 or so in terms is a user experience we have many measures actually the on the ones you know for your easy understanding that we see user expansion first of all these word of mouth I you know besides <unk>.
So where miles and more importantly, if you say retention and now so you since Sandy and also uses time I spent our platform and also across Oh, you know a platform a time spending by users. So there are many ways and be either matches.
You might be interested is that the conversion right. It's the how many just that uses convert into buyers and then the buyers convert into the repeat that buyers. So and then the loyal customers, where we have 88 VIP members of our platform.
Who actually are spending level is very high so it isn't where we are very happy to see and.
In terms of our spending and.
Why we use of class I think okay. This is no question very interesting if I I saw that others. If I. We say we were very disciplined in spending right. Some people may worried about you know you might loosen you know you might give more room to the competitors that because they're staying very.
You know grass, Italy and your.
Yes, I see on PC plane that if we're talking about aggressive spending than other good people worried about you know how that's going to impact your profit margins et cetera.
So actually this is a game that we play every day since the decision when you do you know making.
Every day. So this is where first of all the way you look at our strong profit growth. That's Capesize you know the bullets and for oil to two to five. So we have we do have a very strong pocket and cash flow and Ah Tms and secondly.
Well in the past several quarters, you've seen the efficiency.
You know on other platforms way look at the marketing spending as a percentage of revenue way look kind of as she anyway, let's have all of these sending a as a total revenue. It's you know we have very good control on these spending center, we measure our eyes, a at very I know a a different levels.
So I think today, we still see the potential in so many areas and we do believe we have we are the ones that have to best you know a in the best position to expand our service across all of these areas in commerce.
And to help Murchinson consumer so I think each so we're in a good position to spend aggressively I think we.
You know we have set that's several times like a in the past here. When we you know extend our when we last you know <unk>.
Business, we talk about as I said spending really nothing to our beaten citizens wants to talk about classes Sandy. The key thing is that we spent aggressively but the return should be insured.
That's are thinking on that.
I think well.
Did you means is simply that.
We couldn't afford to be aggressive what we want to be and there's there's Ah Ah you know market conditions may change from from quarter to quarter and Ah Ah, but so we have the luxury so if you look at our quarterly.
Earnings before interest taxes, Amortizations that you could top measure.
This quarter with 45 billion of you could talk and we're taking about 15% of that number.
To aggressively invest into the core Congress areas.
Like local services international New retail logistics.
So we could be very aggressive.
But still just spend 15% of our EBITDA.
Those core areas I think I think we simply means we've got the luxury to do that right well in some companies spend like 60% or revenue right in the marketing.
Okay. Thank you everyone, though it was a loss a question and you have any questions feel free to reach out to the Ali Baba or team. Thank you.
I can't say disenchantment that definitely they conference for today and thank you for participating.
Well disconnect.