Q4 2020 Earnings Call
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David in D.A. E. R. <unk> D. Brown D. R O W and now from a.
Hey, Ali E R Hey.
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Yeah.
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Okay.
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Finally as body April.
On the popularity.
Of our grocery business remains strong.
We believe the consumer habit buying fresh food and groceries online we will continue after the pandemic.
An online and offline.
And we'll drive the new retail model to the next stage of development.
We have been investing for years to build the new retail tax knowledge infrastructure, which will help us further strengthen our market leadership in this sector.
As a leading cross border equal platform in China.
More global has become an ever more important destination for Chinese consumers to buy imported products as they could not travel abroad during the pandemics.
In markets outside of China.
Our international retail marketplaces, so trusts lazada and aliexpress attracted over 180 million annual active consumers as of March 2020.
Regardless order volume growth by.
Grow more than 100% year on year during the fiscal year and completed the March quarter with a strong finish despite impact of the cover 90 a pandemic.
During February and March 2020.
Our cross border marketplace Aliexpress GMB growth.
Was negatively impacted mainly by supply mailing by supply chain and the logistic disruptions caused by Colby 19 economics.
We are seeing signs of recovery in certain major markets starting in April.
There are there are still uncertainties ahead.
Revenue from our local consumer services business decreased by 8% year on year in the past quarter due to the impact of course 19.
In April.
The growth of our full delivery GMT turned positive as locked down measures is.
Restaurant began opening and the people began returning to work in China.
Ali Baba cloud continues its rapid growth in the past fiscal year with revenue reaching.
40, good in R&D.
An increase of 62% year on year.
During pandemics, our public cloud business.
Roll rapidly driven by increased consumption of video content as well as well adoption of remote working and learning.
Our cloud computing infrastructure and big data business have also play a key role enabling business too quickly RECIUM operation and production.
We believe the pandemic will further accelerate digital transformation of enterprises.
All industries, including public sectors will choose to move their technology infrastructure infrastructure to the cloud.
Think of our digital collaboration platform for enterprises plate and key role during the Pandemics.
Millions more enterprises and the users in China are now using talk to stick connect.
And what remotely.
Think of also made significant penetration in adaptation sector as schools adopt the platform for the our teachers and students.
In March 2020, Tinkle conduct an average of over one meeting active classroom sections.
On east to date.
Think of number of daily average active consumers during working day grow significantly to 155 million in March.
As offices and the schools re open in China I.
I think cost number of active.
Users.
Came down from the peak level.
While still maintaining at more than 100 million you.
In the past quarter.
Our digital media and entertainment business deliver healthy growth in paying subscribers and user time spent.
As users consumption of video content increased significantly during the Pandemics.
You will continue its focus on production and distribution of original an exclusive content, while ensuring cost efficiencies and return on investment.
During the past quarter, we leveraged our platform technology and other resources across the IPO, our ecosystem to support populations incurred by Colby 19, pandemic within China and around the world.
We also implemented a comprehensive set of financial and business support measures to help.
Alleviate the near term challenges faced by our business customers and partners.
As of March 31st Twentytwenty.
The Barber together with financial have contributed approximately 3.4 parent RMB in value in the form of donations subsidies and tech support.
To name a few examples.
We weigh feast reduced commissions and offer logistics suffers the subsidies to our merchants.
We work with and financial and other partners to advance working capital funds.
For our merchants to provide liquidity and two facility one year loans with professional.
Preferential interest rates.
We used the 1 billion RMB special fun.
We established in January to procure medical and related supplies for parts of China affected by Pandemics.
Our logistics subsidiary Tanya offered free delivery of medical supplies.
Destinations around the world through his extensive global logistics network.
Our self operated fresh fresh food and grocery chain Fisher CFO.
Committed to more than 200 remaining open for business even during.
Period, when lockdown measures.
The effect.
Free ship will also work with his supply chain to keep our commitment to not raising prices as well as maintaining adequate stock on the shows.
We made available AI technology to over 550 hospitals in China to help improving the speed and efficiency of their Colby 19 died users during CTG landscapes.
The Alibaba Foundation through combined efforts with Jackpot Foundation, and the Jo Ann Claratyne Foundation.
Donated over 200 million units of personal protective equipment testing kits and the vendor ventilators to over longer 50 countries and regions.
In April 2020.
We further announced the Twentyth century.
Spring Thunder.
Initiative, which aims to help export oriented and east explore opportunities in the China domestic market through our China retail marketplaces.
And expand into new markets through our international wholesale and retail market places such as Alibaba Dot Com and our express.
To develop digitalized manufacturing clusters.
To accelerate to accelerate the digital transformation of China's agricultural sector, and alleviate financial financing challenge faced by as an east by working with and financial and as partners.
The battle against the Colby 19 condemning is not over.
Although China has made good progress in fighting and controlling the spread of the.
Corona virus.
With most business, we opening and the people returning to normal life.
The threat of the pandemic is still looming in rest of the world and the timing and the pace of recovery is still uncertain.
At the same time.
Tensions between the us and China have added another layer of uncertainty to the post Kogan 19 world.
Despite the uncertainties in the macroeconomic and geopolitical environment.
There is one thing we cancel them.
The World is moving towards digital first and the digital everything.
In the past two decades audio above our has developed a comprehensive infrastructure and the capabilities built on digital technology for business financial services logistics cloud computing and data to prepare for this new era.
We believe our infrastructure and capabilities will play an important role, enabling all industries to embrace digital transformation.
And the customers to embrace digital lifestyle.
In addition, we aim to empower smbs around the world, including those in America to access the China Chinese and other global consumer markets.
And create new jobs.
This is a hard work that ARPA must undertake to fulfill our ambition to Mickey easy to dismiss anywhere.
And it is also the fundamental assurance.
For our sustainable growth in the future.
Now I'll turn it over to Megi, who will walk you through the details of our financial results.
Thank you Matt.
Thank you everyone Tanya.
And at like.
Prepared remark by addressing coking 19th Impac, our financial and recent trends.
Back in February given the potential uncertainties of coffee 19, Amec, we guided a market that our overall revenue growth rate would be negatively impacted for the March quarter and thats. Some of the businesses such as China retail marketplaces, and local consumer services Nice show next.
Revenue growth.
Im pleased to report, we delivered Africa expected March quarter without.
The covenanted effective measures to limit the spread of Iris two lockdown, social dispensing digest and travel restrictions.
With the virus spread under control in China. These restrictions starting to use in early March and this net recovery our supply chain and let's just take delivery capacity.
This entire enabled a quick recovery for our China retail marketplaces.
Improving fundamentals for local consumer service businesses.
For our 10 nanometer marketplaces.
Chemo online physical goods.
Kelly this is our pay TV.
10% in the March quarter.
Although only 10% growth what do you see relative demand as FMCG and the consumer electronics categories as home that consumers Cook at home and upgraded home antisense Tracy.
These two categories combined grew 25% our team our platform.
On the other hint.
Discretionary product categories, such as apparel and accessories home furnishing and autopart experienced negative growth.
Starting in April chemo online physical goods.
PLD so strong gross a strong recovery and has continued to further improve in may.
No call consumer services recorded 8% decline in revenue this quarter.
Reflecting mass closure of restaurants and local merchants.
However, social distancing match has also led to increased demand for grocery and other daily necessities.
Starting April GMI, both and should deliver businesses.
Positive as lockdown matches east.
Restaurants began reopening and people began returning to work in China.
Sorry International Commerce business.
Which represents around 7% on total revenue in physical Twentytwenty.
The timing and pace of recovery is still uncertain.
As demand in countries outside China, maybe further impacted I koby Nike.
So, let's just take look at the March quarter financial highlights.
Our total revenue was 114 billion R&D grew by 22% year over year. The increase was mainly driven by growth in China Commerce retail business.
Actually new retail businesses, English, partially category and cloud computing.
We continue to be successful at expanding product offering our platform that cater to the needs of different consumer segment.
The decrease of non-GAAP cash free cash flow was due to a one off I Express payment service restructuring. So this had we had a full disclosure in our earnings release.
This is mainly due to overseas revelation requirement change and that I expect began the process and Irish structure so that.
No longer host the consumer funds before I get released to the merchants.
That.
We take that impact out the our non-GAAP free cash flow would have been over 2 billion RMB.
[noise], let's take a look at the revenue in detail.
Commercially hilgert, 21%.
As Mary mentioned, our revenue growth, 3% the growth customer National revenue was primarily due to the increase in revenue from Britain recommendation fees and help our life.
These new revenue streams.
Partially offset by decrease in volume volume of paid clicks and average unit price per click.
These are.
Pay Clay, Canada, PPC I'm talking about it's fair to search business people Pete.
So this is the.
Impacted because.
Coking 19th.
Commission revenue decreased 2%, primarily due to its access to come in 19 impact.
These impacts including.
Installation of some orders as a result of logistics disruption February weakness in apparel categories.
Our wafer of annual service fees for the first half Twentytwenty as part of our support to merchant customers.
International retail revenue grew 8%.
To 5.4 billion R&D the increases primarily due to the closest lazada and Chen deal and partially off offset at exclusion of revenue from Ali Express, Russia, which will no longer consolidated since October 2019, So we had a JV in Russia right now.
Tiny our revenue reached if I see only R&D growing at 28% year on year.
This was primarily due to the increasing the volume of orders for failing from our fast growing cross border and international Congress retail businesses.
And.
Our local consumer service experience the negative growth this quarter I just talked about.
So for Ali cloud.
It's still growing strongly and 58%.
And.
Let's take a look at the March quarter cost trends.
Cost of revenue excluding SBC.
Were 62% of revenue the increase was primarily due to revenue mix shift towards their access businesses, the new retail businesses such as our new.
New retail and also consolidation Carla.
And the partially offset by decrease in delivering cost so far local consumer services.
Let's turn to segment profitability.
Our market based core commerce, adjusted EBITDA reached 34 billion decreased 2%.
Core Congress adjusted EBITDA grew 2% to 28 billion. This is because losses in our four strategic commerce initiatives, where narrowed compared to prior year.
Driven by ongoing improvement of China logistics network higher demand for fresh Paul.
And the lower variable costs required for our local consumer service business.
I would like to national about they are in innovation initiatives.
We.
Look at their adjusted EBITDA loss was 3.1 billion RMB pushes the up from 1.9 billion from a year ago. They increases primarily due to our aggressive last name didn't talk to provide remote work collaboration capabilities to enterprises and the schools free of charge during the Koby night.
As a result daily active user hunting talk achieved a fourfold increase to over 100 nearly the peak.
See you is about 165 million.
So much quicker August initial matches.
The share of results of equity and less tea in the quarter reached 3.5 billion.
The year over year increase in shared with south of equity messy.
Was mainly due to our share of profit <unk> see national in December quarter, as we take it its profit in one quarter lag.
Partially offset by a decrease in our share of results as Sunil.
March quarter GAAP to non-GAAP net income.
The GAAP net income attribute to shareholder was 3.2 billion the year over year decrease was primarily due to net loss investment income, mainly reflecting decreases in the market prices of our equity investments in publicly traded companies compared to net gain recorded in the.
Same quarter of 2019.
Non-GAAP net income actually been was just to shareholders increased by 12% to 25 getting RMB.
Now, let's look at a physical twentytwenty full year results.
GMB as Daniel mentioned, the Alibaba stitched economy achieved an important milestone of one trillion U.S. dollar CMV carcass, you probably remember that this is the talking we.
Committed.
To do five six years ago.
User growth and new active consumers in China reached 780 million, including 726 million, our China retail marketplace ish in other words well out of every two Chinese are buying our platform.
780 million of any I guess consumer and China accounts for around 85% and 40% of the Chinese population in developed and the less developed.
Areas.
Our ability to attract users at a rapid pace reflects not only the diversity of product selection, but also the platform has become an everyday destination for entertainment and discovery of new trends.
We continue to achieve strong revenue growth across all businesses, including core commerce.
Cloud computing and other business. So total revenue grew 35% to 510 billion R&D.
Talk about the profitability.
In the last 12 months.
We grew adjusted EBITDA by 28%.
The 137 billion RMB and generated 131 billion RMB in non-GAAP free cash flow. This is significant firepower for a long term growth.
Okay, let's turn to our business segments.
All of the revenue we talked about for each sector show strong.
And then when you look at the they're adjusted EBITDA.
Hi fit for the core a still growing strongly.
And the investments and areas that these businesses, who end up in the investment stage are progressing very well and lost gets narrowed.
Okay.
So I would like to.
Talk about our all look at before that.
[music].
I want to address that recent failed passed by the U.S. Senate caused the holding foreign companies accountable Act.
The proposed the legislation would essentially prohibit a foreign issuer from being listed a U.S. stock exchange.
If the U.S. public company Acone oversight board this is a pickup.
Is unable to inspect all the work day part of the issuer audits for three consecutive years due to.
Circa reasons.
Were closely monitor the development of this bill.
And I think it's important for investors to understand I must practice and issues raised the entered its proposed legislation.
First there is an existing framework of the pickup will conduct.
As the pickup rule and for its conduct and inspection of audit companies with Chinese operations. In this regard we understand that there there has been ongoing dialogue Amanda Vic for accounting firms China's securities regulator CSRC.
The FCC and pick up.
With respect.
To the types of the information that are permitted to the extent.
Issuers with with Chinese operations, while maintaining compliance with Chinese laws.
Number two.
Only about a financial statements are prepared in accordance with U.S. GAAP.
And since our inception, 90, 99, we have being audited by Pwc Hong Kong.
Pwc Hong Kong is the local affiliate of the worldwide Pwc firms and it's all the things that are our overseen by the Pwc National office in the United States.
The integrity of Alibaba financial statements speaks for itself.
We have in that as Cc fighter since 2014 and hold ourselves to the high standards of trying to support the transparency.
Each year, we have received.
And our US unqualified audit opinion are a financial statements from Pwc.
Third.
Costs is one of our core values.
And transparency and integrity are essential component, a feeling trust with all of our stakeholders.
Oh this year, we have consistently aimed to grow the business for a long term.
Maintain come time, with all applicable laws and deliver value for customers employees and investors.
Investors, who bought our stock in 2014 IPO have tripled during lessened over the past five in half years.
Given the up.
We will never to comply with any less listen nation, whose aim is to attack and bringing transparency to investors, who buys securities on U.S. stock exchanges.
Looking ahead.
Despite a challenging quarter due to a pandemic.
We achieved our guidance of over 500 billion in revenue and delivered healthy sustainable profit growth in physical your twentytwenty.
The reason, we have been able to deliver these results is that way so let's see years ago by investing in technology.
Innovation.
And in businesses that required for site and long term patients.
Today, the only package to economy remains strong and growing.
Looking ahead, we will continue the same strategy of delivering robust revenue growth and sustainable profit growth.
Oh, no it is difficult to predict the uncertainty of global economic and the Jill political developments.
Based on our current view of Chinese domestic consumption and enterprise Digitization, we expect to generate over 650 billion RMB in total revenue in physical your 2021.
We believe a commitment to invest and deepen our value proposition to customers, thereby ensuring robust revenue and profit growth.
That concludes our prepared remarks, let's open it for acuity. Thank you. Thank you might be.
Hi.
So for today's call you are welcome to ask questions in Chinese language.
Third parties for Slater will provide consecutive interpretation.
For the two in a session.
And our values will address your question as you know language you asked.
Please note that the translation use for convenience purposes only.
Okay. So discrepancies our management's statements that worries are language.
[music].
So operator, I like to open up for questions.
Thank you ladies and gentleman will now begin the question and answer session. Operator, if you wish you I'll pick up.
Please press star, one or sell it somehow by turning to be analysis.
Well.
Once again to get more people the opportunity to up question. Please keep yourself to no more than one question at the time once again, if you wish you all the question. Please press star one on your telephone.
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Yes. Good question comes from the lined up Binnie Wong from HSBC. Please ask your question.
Hey, Ken Umeki, Rob isn't just wanted to let.
It sounds you know you're not usual and Linda good judgment dive deeper into we should the strategy.
Gee you Kinda talk about your he just how many biologists as youre well Neal suji it up on that well known you may know each agile digital your decision to address it even though he said total or how should the usual.
You can't do it comes out to hit your use of what's Oh. It you should note I thought our and not just to just to deepen penetration.
Penetration I only had turned down or does it have a press release now woman done in a new customer loyalty I suppose you on counseling Davinci shuttle knowledge on how do you guys are weighing challengers assumed the unions woman's ideas on day hits on the just yet.
Thank you Daniel.
And Rob My question is regarding your strategy in lower tier cities I note that last week, you issued a news release and Patrick is for Targa, providing new support for merchants.
As well as other other new features and 70% of the uptake for that new patch release has in fact being from the lower tier city. So deeply speak to us about your strategy going forward for the larger cities.
Otherwise well well I certainly wouldn't here is Oh change can you help our dozens or you don't woman so for the.
Hi, just a woman seems like GE Si the young gentle one does do they see the AC you put onto this will garner seems like he has most of the 100 and see how its own thing called on thoughts medieval Antonio Kenya Woman's and good. According so since all the things on that make the decision to London, Don Julio payment due to the secret.
She says that I see blindness.
Thank you and I will take that question.
Given the the size in the scale of tobacco.
As a retail platform and works out today 700 million.
Factors that we've penetrated all segments of the market from the high end down to the low and the increase in the user base over the past year 70 million, 70% of that came from the lower tier cities.
So it seems a woman so you see as legalizing. He joins the you know a woman she will get lucky component of our whole woman, Jim, but it's a homeowner to cope with LENSAR Youll woman doesn't I'm going to value for money does this year, you can see our homes little one meal and towards the ball often for the three on the bodies.
On the being taught by foods this years ago cigar sequence evangelistic Toby's machine, obviously you don't.
Also the woman see what I'll tell you can count on it will me at least one of machine the call what could Java and then go into its easier to go deep onto the Yahoo, and Google with almost equal you couldn't Argentina, you could you go to the.
One question talking to people. So you will see cuts will lead to you go sodium.
Thank you so what we're doing in the lower tier cities is deploying a more diverse broad range of different services.
Including on on Taobao with more value for money offerings as well as live streaming and other kinds of engagement.
That are targeted for those users, especially those who are looking for good value for money and as you've noted we have a new.
Special Price addition of a taobao, which is targeted for those are uses and lower tier cities with a focus on giving them value for money offerings.
Consequently, a condo, especially with the Boston, Los Alamos, Ohio team with a single within damage. Andy you mentioned that will consume courses on the easy to say that you didn't buy you to $80 on legal rights are using the Egan since closing on the send us as they go above.
Got it by this system the sounds each other anything does it will become the Ohio.
Another into my team will forgot so you will more than two body cheap we see the gene pool that they can go take a bottom associates once upon a light the team was I'm going to be bahama finish off with let's assume the book on the velocity contingency that you could you quantify Cody.
At the same time, we see significant potential for further growing our user base.
Current figure.
For annual active consumers 780 million.
Represents only 45 penetration, 45% penetration on the population and lower tier cities and in the rural areas in China. So there's still is lots of room to grow.
In those regions and we intend to do so together with hourly pay in driving a digitalization strategy in those areas that will convert people into consumers.
Thank you.
Thank you own next question comes from your line of a yellow from Bank of America. Please go ahead.
Hi, good morning today, and you know this year.
Thank you wouldn't see sequentially to MOCON tick up by core to report.
We view the usage trends through the Michelle Google on tons. In this are sound job I'm sure. You. All can you just see young suchinda user can you help push initiating then you go we're going to Michelle Ash folio, they usually E commerce things upland high.
You could get needed.
Yes.
Thank you my question is regarding the long term impact of live streaming.
On the industry and in particular celebrity hosting TRL live streaming. The question is if merchants need to pay these.
Celebrities care wells will not impact on the profitability of platforms going forward.
Hi, This is Ed as you see this is a how the wouldn't see our children's I will come down low single figures. The both hoisting suites on so we all of these machine the she also phones.
And I think Oh, let's take a yet I don't know through that arent, although he mutations or your constitute our to go to letting you know two opens us owning so singled icon opened last season, which also bonuses, obviously to take or what does it doesn't mean that seasonal supplier you guys either do socially antibody and he was busy I'll touch on English also engine.
Thank you and that's a really good question.
What we're seeing really is the emergence of live streaming as a new kind of sales methodology or new kind of sales channel with the emergence of these are key or wells and celebrity Influencers.
Online the role that the really playing in the context of retail is sales the serving the salespeople and they make money by way of a sales Commission.
So it sounds onto like currency, though we're really sit on the phone situational wholesale clients and good to see the Cinco Sonia Johnson, our submission and go down even until the spin you really think the nigger.
It's losing that down to you go through the show So talk to you on the show So I thought I didn't see on that you could you go your way.
Well I suppose and then go please take a closer to the gene are wasn't as the interesting. There's also run off almost on the other dogs are simply lithology to want somebody you got borrowing was 100, obviously the top possibly even if we're going to somebody formula. So you go country, that's in automotive quantum of the tightening.
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On the good news Charlotte gene to consider new presuming. So she knew that you would need.
Hey, good Charleston, Alibaba woman thought they would support so we'll take our.
Overall consisted encore, let's all the eagle fees on some of that used to cookies.
Hey woman. So you go to Cushing to pick a marketplace.
The only other engagement.
We'll take the who's on the single housing push also phones will not go past, we bought I will come to you got to lead the using michelle's the impact on bottle constant 70, the shelf is a unique.
Moving to Thomson boundaries on top quartile tickets on SEDAR, John This is yet [noise].
In the long term how this trend will play out I think really comes down to.
Whether the intrinsic commercial value.
In terms of having a online influencers, who care wells do live streaming be fully captured in an efficient and effective way.
If you have a one off sales event with the celebrity Influencer you got a user to make a one off purchase that's fine but the question is can you then keep the user in the long term and continue to market.
To them and get the full value out of that relationship.
So I think it's important.
Paying money to these online influencers or celebrities.
That you can vary in part Thats about supplanting existing channel costs and saving costs, there, but more importantly, it's about getting the new consumer into your ecosystem. So they can become a long term consumer and this is critical to Alibaba because.
We are a diversified.
Ecosystem with multiple channels and formats for engaging consumers. So that's precisely what we're looking at doing.
With these kinds of live streaming approaches its just one part of an overall integrated approach through which we hope to develop those long term relationships and create long term value.
Okay.
Next question.
Thank you next question comes from the line of years more buying from Goldman Sachs. Please go ahead.
Thanks, Thank you for taking my question.
I have one question with regards to guidance you provided for next year. What are the drivers of that growth assumption agreed to say provided and in particular what are the underlying macro assumptions you made.
More generally the platform makes that you're likely to one Pos at Threepi makes that you're likely to see.
Thats underpinning that guidance. Thank you I'll go back to the two afterwards.
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Okay.
He is this is Maggie Lenny.
A question. So we all know that were facing listen the uncertainty right. So many of which were not able to predict or control, so whether they're going to be a second wave where alone will that vexing home how much impact.
The and geopolitical Nishu brain, we you know.
It's hard for us to factor in so the guidance, we give a basically reflect assumption that we believed to be reasonable today.
So Dan you talked about you know the recovery speed of each other businesses.
And putting the particularly for like I'm kinda retail a local service.
And international business et cetera, So based on what we've seen today.
And you know we see.
Two quarter to date, a transaction volume and also user activity. It's actually has already experienced a similar a gross debt at a similar rates to the December quarter level.
So that's a.
They see a assumption that we used and you mentioned about a one he's a p. So you can see from our revenue breakdown a sort of twentytwenty physically yes, a one key business as a percentage of total revenue so already went up.
You around 16% since then and we believe that percentage is going to continue to go up and not dramatically.
The important thing is that people are thinking about you know a your revenue contained.
Take a portion of when he when he normally represents you know a low margin, but looking at our profit growth I think.
This is another point I want to make is that we are a group that has.
Such a strong growth for the core and also has a multiple engines.
Not only he oh well chemo.
Kinda retail marketplace, but also called new retail local services logistics right. So strong revenue growth brands and yes, the powder far too in that in go strategically important area and these investment areas they are doing better and better.
Which reflect.
Our office growth.
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Next question please.
Thank you next question comes from the line of Alex Yao from JP Morgan. Please go ahead.
Hi, This is a company towers, Alex Nikkei bonds had to patterns I mean, your investment or each it to the congressional rule you when youre seeing a threed sensing surely okon color that you change the direction heads who are you, saying so you wish on when you said something quite Youre managing that she should do can go Vincent.
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Thank you I noted in the early remarks your comments about.
Advertising revenue in the first quarter, performing well driven by good performance of recommendation feeds and in our contacts I'd like to ask about your plans for monetization of recommendations.
I I imagine that in your answer you will talk about the need to balance the interests of merchants against the desire for monetization. So so given that perhaps I could.
Go ahead of just ask the second part of the question.
Namely is there any technical or technological method that could be adopted on the one hand, so as to fully protect the merchant centrus or even better serve the merchants interest while at the same time also providing more opportunity for monetization and if so is that something that could happen this year.
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Thank you long I'll start with the latter part of your question and the answer is yes. There is technology that can do precisely that and the technology is a artificial intelligence.
Huh.
Which can be applied and we are already working on applying it.
In a way that can ensure a good user experience in terms of balancing advertise content versus a free content.
For users and also leveraging that technology for merchants to drive better return on their investment.
So we're working in this direction and I think we're already making good progress.
So in general we are moving forward.
Cautiously and working on growing revenues from recommendation feeds.
And as our hope that weekend.
Find ever better ways to do precisely what you mentioned in your question, namely finding the best possible balanced.
Leveraging on technology between user experience and creating value.
For merchants.
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Thank you I'd just like to out a couple of points on top of Daniels already a very clear answer and the keyword I'd like to out in as.
Multi engine approach.
So if you look out.
Our revenue.
Over the three year period revenue from CMR and commissions accounted for.
70% or compared against 40% I. What this means is that our strategic investments are starting to produce.
No.
New channels revenue new sources of revenue.
So you can see the sooner.
Figures over the three year period for CMR, as well, 90% and Thats down now by 20% to about 70%.
So you have all of these deferred revenue revenue areas that can be tapped into including recommendations that we've talked about but also live streaming also shanyu and many other new sources of revenue.
So thirdly, I mean conclusion going forward, yes, we will continue to as we said on Investor day.
To take a prudent approach and moving forward.
With monetization.
[noise]. Thank you I'll next question comes from the line.
Thomas Chong from Jefferies. Please go ahead.
Hi, Good evening spends management ball, taking my questions. My question is more about these spending power of the bias oppose wireless I can management comment about the overall spending power house consumers. These days and outlets that can you comment about.
A trend in E S P and order frequency that we would expect as people speeding up the migration to all night. Thank you.
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Okay. Let me answer this question.
First of all I think Oh problem, we are a.
That's a huge consumer problem, we have different tiers of consumers around us so what we see that consumers.
They are inc. or the engage with us and fund what they want on in different categories into different pricing range.
Well, we do seized on a shift of the product categories.
In in this quarter because of the economic for example, we see.
Very strong growth of food and groceries business and that because people when people said home they have to cook at home or they don't they're unable to go to the rest wrong. So they need more food and more groceries, which are on daily necessities.
That's why we see very strong growth on our.
Our FMCG categories and four categories our.
Our FMCG categories grow.
I could take I think example, like thing in the in the.
From the new fiscal year, our FMCG categories.
In keeping more grow.
Nearly like 40, I remember 40% of around 40%.
Which is a very strong indicator that people spend more our platform in these categories well.
Because of the.
Because of the.
[laughter] Tonami people spend less on like apparel are like fashion, because people, Oh, where face masks and the they don't even need these I mean make ups.
So.
So I think I think the spending is still there by the focus are quite different and but in terms of the general humming spending power I would say a different China is a famous I saving a rate countries and we do see people.
I remain in there.
Consumption.
For a very strong consumption power two to.
To continue there to maintain there.
Hi, Bob So we do so far we haven't seen any big I mean change in terms of the consumption power but.
As I said before I think or the the category the.
The tethadur product categories. The at least five we do see some difference.
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Operator next question.
Thank you. All next question comes from the line that Jason Epstein from Oklahoma. Please go ahead.
Thank you I just want to go a little bit deeper into that last point.
You said that.
Online physical goods GMB grew 10% and then you did write down that you saw 25% in these categories that benefited a were were.
More covered related offset by areas, where they didn't spend money.
What do you think of that kind of more reflective of other consumer health is it that 10% number or really that that kind of 25% and consumers have the ability right now to to spend more they're just not because they don't need the items.
Consistent to what you talked about not needing make up if you're wearing a math for example.
And maybe talk about how that relates to your outlook for the next quarter. Thank you.
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Okay. Let me answer this question as well as we said before.
Our our trying to reduce our team will outgrow like 10% operating in the March quarter, Ann Inc. T mall, or we have our FMCG and.
Our consumer electronics, the combined growth rate in March quarter for these categories. The on T. more about like a was about 25%.
If we if you want to get a big picture of the of the future development, but I think in my in my remarks, I give you a very clear Ami.
Latest Ami.
Indicator, which is like in our starting from the new year on the quarter to date.
Overall speaking, our our founder retail marketplace growth rate is similar to those on the December quarter.
I think that that's not the basic the big picture of where we are today.
But we do a whole people realize understand that the.
There is still the uncertainties about the containing the our pandemic. So we are we.
We're closely monitoring the situation.
Are we strongly believe that Oh, the concerns in power in China do very strong Oh, we will take all advantage in the digital platform.
Two to two.
A continuing our leading position.
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Yes, let me one more point, which is like if you look on the part of fiscal year.
Our Oh, we generally one for the U.S. dollar GMB on the in our.
People buy consistent and but if you look at our <unk>, our China retail marketplaces.
Jimmy we generated last fiscal year's about like 6.5 trillion RMB.
And we are.
[music].
If we look at the.
If we look on what's happening in the March quarter, I think Oh, we.
We should have achieved a higher TNT I mean, if without this pandemic, obviously and but if.
We are very confident that in the.
In the new year I think.
We will.
Achieve another likely not at all like a one tenant at least one foot in R&D GMB, Inc. Thank you all are trying to retail marketplace, which is I think a are still very strong number compared to the size of our business.
He in China.
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Question.
Thank you next question comes from your line of Gregory Zhao from Barclays. Please go ahead.
Hi, Dan There, Joe Mackie, Robert <unk> General with if Youre, a course, you've hit on charging a year.
Oh, what everybody for calling something food or Google Yeah, we'll do what kind of or you could you tell me here are you confident going from Q4, we run view helpful. Color commentary would you take a seasonal it's usually COMETRIQ and their dealer show, who don't see if we can feed on balance among kids. What else are you show who kick off of your cost of living balance sheet trend is it sounds.
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[noise]. Thank you.
Congratulations on the strong performance my question relates to cloud services.
We know that internationally.
Players like Microsoft and Google.
Who have already achieved significant scale in terms of the size and in the revenues continue to be able to maintain a.
Rapid growth in their revenues an uneven acceleration.
Looking at China. However.
In the cloud space Ali Baba and its competitors seem to be.
Seeing a different trend where things are somewhat slower. So I'm wondering if you could compare for us we use the China market versus the international market for cloud what are the differences.
Thanks.
Picture and what are the short term bottlenecks.
And how would it be possible potentially to make a big leap forward in terms of accelerating revenue and profit growth in cloud.
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Thank you will first I'd like to say that in the past year Alibaba cloud intelligence is very important milestone.
Namely, reaching revenue of 40 billion and even in the March quarter.
Achieving 58% growth. So we don't see a slowdown it all Conversely, we think the growth is good.
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We see this growth coming from several different areas. One is the the demand across all sectors of the economies to get onto the cloud and if you look at Chinese our t. spending in the future.
We can expect to see more and more spending going forward as organizations get themselves on on the cloud.
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The second thing I would point to.
Is.
But the the cloud is not just the way of providing infrastructure infrastructure on the cloud to lower our t. related operating cost. It's also an opportunity for companies to leverage on big data and cloud enabled computing capacity to achieve better efficiencies and drive value for the business.
And different kinds of algorithms.
And analytics will be developed in the cloud for a different sectors for different verticals different product solutions to meet those needs and unleash new value for them. So it's not just about saving costs on IP infrastructure, it's about driving volume flow.
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Going to other sustainability that being the hunting cushings hunting that you got to this New York buttons.
In Ali.
The the value proposition.
So we offered as cloud plus intelligent so we're not just about providing cloud services, it's a combination of cloud.
Plus intelligence now in different countries cloud services are defined differently.
It's true in China, and internationally as well there are different definitions.
But to us if it's just about shifting traffic onto the cloud to save costs, that's kind of a low value added offering and that's not really went Alibaba is about we're looking at focusing on higher value added our cloud enabled offerings, but cannot crew truly create value for clients into perspective.
Well, it's still a surcharge is we've got as it were daughters ITSM or the doing so it's a high what a cheap it went onto it ought to be a high school do the softness and high how about that ison high was onsite make all the highway downtown Ison high something on since our to go away downtown the covered us and all causes a softness and.
I think a full who attends all I can monetize our audio official game console, though I've also has a whole bunch like ones yet either you know what I doesn't.
And finally on your question as to the differences that we see in the Chinese cloud market versus the quad market overseas I would say that in the U.S. and another more developed markets. The SaaS and the whole ecosystem developers are more mature already whereas in China that developer ecosystem.
I'm sorry is just starting.
To get going and Alibaba very much looks forward to partnering.
With developers to jointly create a very robust ecosystem in China.
Okay.
Next question.
Thank you next question comes from your line of Alicia Yap from Citigroup. Please go ahead.
Hi, I'm good evening management, Thanks for taking my questions. Congrats on the strong results. All my questions. It's on so if you could give us some call learns that on the subsidy mattea you help provide much trends.
Do you think that it's actually more effective to the commission rebate on latrines actually prefer more free traffic and given recommend up seats actually becoming quite effective for much trends I'm. So is that mean over the next few quarters Oh, we don't have to provide more preferential commission rate.
Over time or is that it's a separate thing and the CMO and commission growth directions, I'll still be up it that much. Thank you.
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Alicia Let me first I'll answer your question I think.
First of all the we we.
Hi, we're trying to help our Americans, especially as Denise during this phenomenon, but we have to first of all we have to.
A very fair and transparent policies to all the Merck has our platform. So that's why we decided to use the subsidy to to waive the.
With the annual fees and also give us some.
Reduced commissions in some of our business, but Joe This is applied to all the merchant our platform and in terms of the free traffic. This is very interesting question I was they went when we decided to give these support to the merchants we have to consider the user experience our platform because Chris.
We are a marketplace.
What are we on marketplace. We are powerful model. So we have to consider the interest of both merchants and consumers. So if we give free traffic to certain arming merchants I think there I mean operating with their.
Conversion rate on their click through rate of them off of the product may or may not be good enough or to the customers. So that's why we don't along too.
Do this one size efforts. So we have to ensure the good thing user experience our platform as a thing time, we want to shoot we want to solidify our merchants are too.
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Yeah, no need to supplement the little bit a Alicia suffered a subsidy and preferential commission that these are two separate everything that you were talking about like waving a a merchants and you'll see an chemo platform. That's a that's it.
Supports doing koby 19 rights to help them to go through this difficult time and this prefer answer commission right right. It's a ongoing effort that we have this practice.
Oh, yes, and I'm talking about the either subsidy or or a professional rate I think our operational philosophy is that were not a believer just burning.
Money to grow that DMV.
We believe that Oh, you know whatever lessening when they should be to supporting the sustainable growth rather than just burger and a slow away that knowledge. So if you look at our possibility you at this year, we're talking about somewhere over 840 billion RMB and we have.
Like 50 billion U.S. dollar cash on our account. So they are money to see less that you know we are assessing all helping noxious efficient effective and sustainable way. Thanks.
Operator, we're blessed question.
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No.
Well find a question comes from the line of Mark Mahaney from RBC. Please go ahead.
Thank you very much if you were to talk about the biggest structural changes you think that will occur to your business or to the digital economy because of the cobot 19 crisis. What would you say they are you highlighted the increased shopping for a groceries online but it.
Putting that other things just step back what do you think are gonna be the biggest structural changes permanent changes in a way that consumers around the world interact digitally because of this crisis. Thank you very much.
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Okay, I think are on top of the.
New category penetration like being the food and cost raised I think going.
The other important change is the allocation on upon honey fishing.
In the customers, who have who are not I mean, a very I mean experienced the internet user all online shoppers a focal benign teeing off resembled to what we see that during the Panasonic many many.
Older people.
They moved to online and by everybody needs and so it's not only about a category penetration is also bought a user penetration. So we do see this change the lifestyle of many many people.
On the second thing is not about.
Consumption is about a change the way of working and a change the way of added patients. So that's why in my remarks, I sound like our thing talk experienced a very very robust growth during the quarter up because of our they become a very.
Very important platform of where people are four for working our people, who they cannot and to improve the working efficiencies and for students our schools and think of become a very efficient powerful for online for on classroom. So I think as this is.
This is all about single the lifestyle change of the way up working tenure king of wheel agitation. So this is a very very fundamental.
These are very fundamental change I will say this will est. However, I mean, even after the pandemic.
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Okay.
Thanks, everyone for joining the call today, yes, maybe for the questions. The please feel free to protect the only about biopsy.
He laid much.
Thank you.
[noise]. Thank you. Thank you, ladies and gentlemen that does conclude our conference for today. Thank you for participating in the oldest.
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