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pww.comAlibaba Group Holding Limited, Q3 2020 Earnings Call, Feb 13, 2020 - SEHK:9988

SEHK:9988

Robert Lin [Investor Relations] 💬

Robert Lin, the Head of Investor Relations for Alibaba Group, made several announcements and comments during the earnings call. Here is a detailed list of his statements:

Opening Remarks

  • Welcomed everyone to the Alibaba Group's December Quarter 2019 Results Conference Call.
  • Provided instructions for the call, mentioning that a replay would be available on the website later.
  • Covered the safe harbor, noting that the discussion would contain forward-looking statements and outlined the risks and uncertainties associated with these statements.
  • Mentioned that the call was being webcast from the IR section of the corporate website.
  • Indicated that certain financial measures used in the call, such as adjusted EBITDA and non-GAAP net income, are non-GAAP based and provided guidance on where to find GAAP results and reconciliations.
  • Stated that growth rates mentioned referred to year-over-year growth unless otherwise noted.
  • Announced that the Q&A session would be conducted in both Chinese and English, with consecutive interpretation provided by a third-party translator.

Transitions and Introductions

  • Passed the call over to Daniel Zhang, Executive Chairman and CEO, for further remarks.

Q&A Session

  • Provided interpretation for questions and answers in Chinese, translating them into English for the benefit of the audience.
  • Clarified responses to analyst questions, such as explaining the impact of the coronavirus on different categories of products and the company's approach to managing costs.

Closing Remarks

  • Thanked everyone for joining the call and invited participants to contact the IR team for any additional questions.

Yong Zhang [Former CEO, Executive Chairman and Chairman & Chief Executive Officer of Cloud Intelligence Group] 💬

Yong Zhang, referred to as Daniel during the call, made several comments during the Alibaba Group Holding Limited Q3 2020 Earnings Call. Here is a detailed summary of his statements:

Opening Remarks

  • Celebration of Milestones:

    • Successful holding of the 11.11 Global Shopping Festival.
    • Successful listing on the Hong Kong Stock Exchange.
    • Appointment of Dr. Wang Jian as a member of the Chinese Academy of Engineering.

  • Impact of Novel Coronavirus:

    • The outbreak presents significant challenges and potential opportunities.
    • It will affect the development of Alibaba's business across the board.

Performance Overview

  • China Retail Marketplaces:

    • Annual active consumers reached 711 million, with a net increase of 18 million.
    • Over 60% of new annual active consumers came from less-developed areas.
    • MAU reached 824 million, up 39 million from the previous quarter.
    • Unit engagement and buying frequency showed strong growth.
    • Tmall physical goods GMV grew 24% year-over-year.

  • 11.11 Global Shopping Festival:

    • Set a new GMV record of RMB 268.4 billion.
    • 15 brands surpassed RMB 1 billion in total sales.
    • 215 premium brands launched new products in new categories.
    • 120,000 merchants acquired over 10,000 new customers.

  • Globalization Strategy:

    • Lazada and AliExpress continued to grow rapidly.
    • Lazada's quarterly orders increased 97% year-over-year.
    • AliExpress DAU grew by 56% in December.
    • Tmall Global paid GMV grew by 45% year-on-year.

  • Cainiao Network:

    • Processed a record-breaking 1.29 billion packages during 11.11.
    • Improvement in end-to-end order delivery time by 10%.
    • Number of packages collected by Cainiao Post increased by 88% year-over-year.

  • Alibaba Cloud:

    • Revenue grew 62% year-over-year.
    • Core systems of e-commerce businesses migrated to the public cloud.
    • Successfully powered over 544,000 orders per second during 11.11 without disruption.

Coronavirus Situation

  • Responsibilities Towards Community:

    • Efforts to protect employee health through flexible work policies and remote collaboration.
    • Procurement of medical supplies and delivery to affected regions.
    • Donations of over 40 million units of medical supplies worth RMB 468 million.
    • Collaboration with global partners to deliver medical supplies.
    • Ensuring supply of food and consumables for residents in affected regions.

  • Relief Measures for SMEs:

    • Announced comprehensive relief measures under six categories, including reduction of business operation costs, financial support, and logistical assistance.

  • Potential Impact on Business:

    • Delay in employees returning to work post-Spring Festival.
    • Negative impact on commerce business for the first two weeks after the holiday.
    • Increase in average basket size for New Retail businesses, but limited delivery capacity.
    • Decline in restaurant visits and food delivery orders.
    • Significant levels of cancellations for Fliggy's travel bookings.
    • Explosive growth in DingTalk's DAU and number of corporate users.

Closing Remarks

  • Opportunities Amid Adversity:

    • Similar to the growth experienced after SARS in 2003.

    • Consumers and enterprises are adopting digital means for daily living and working needs.

    • Confidence in the ongoing digitization of China's economy and society.

    • Ready to seize opportunities for long-term growth of Alibaba's digital economy.

Wei Wu [Executive Director] 💬

Wei Wu, the Executive Director, provided a detailed financial overview during the Q3 2020 Earnings Call for Alibaba Group Holding Limited. Below is a summary of the key points Wei Wu addressed:

  1. Hong Kong Listing:

    • Alibaba successfully listed on the Hong Kong Stock Exchange on November 26.
    • Offered 575 million new ordinary shares with proceeds of about HKD 100 billion (approximately USD 13 billion).
    • Shares were multiple times oversubscribed.
    • Hong Kong is considered strategically important for Alibaba.

  2. Financial Highlights:

    • Achieved strong results for the core commerce segment, reflecting a strategic focus on user acquisition and engagement.
    • Mobile MAUs increased by 39 million, reaching 824 million.
    • New active consumers on China retail marketplaces increased by approximately 18 million to 711 million.
    • Over 60% of new annual active consumers came from less developed areas.
    • Total revenue grew 38% to RMB 161 billion.
    • Excluding the effects of consolidating acquired businesses, mainly Kaola, total revenue would still have grown at 33%.
    • Growth was mainly driven by robust growth in China commerce retail business and Alibaba Cloud.
    • Operation expenses were well-controlled while businesses continued to grow.

  3. Core Commerce Segment:

    • Revenue grew 38% to RMB 141 billion.
    • Customer management revenue grew by 23%, primarily due to an increase in the average unit price per click and an increase in the volume of paid clicks from improving click-through rates.
    • Commission revenue grew by 16%, primarily due to 24% growth in Tmall online physical goods GMV.
    • China retail "others" revenue grew very strongly at 128%, driven by direct sales business including Tmall Supermarket and Freshippo, and the first full quarter of consolidation of Kaola.
    • International retail business revenue grew 27% to RMB 7.4 billion, driven by growth in revenue from Lazada and partially offset by slower revenue growth from AliExpress due to the deconsolidation of the Russian business.
    • Cainiao revenue reached RMB 7.5 billion, growing at 67%.
    • Local consumer service revenue grew 47% to RMB 7.6 billion, driven by robust order growth and an increase in average order value.

  4. Profitability:

    • Market-based core commerce adjusted EBITA reached RMB 66 billion, growing at 22%.
    • Core commerce adjusted EBITA grew strongly by 26% after incorporating the combined losses in strategic areas.
    • Cloud computing adjusted EBITA was a loss of RMB 356 million, with the loss margin narrowing slightly.
    • Digital media and entertainment segment adjusted EBITA loss was RMB 3.3 billion, significantly reduced from RMB 6 billion in the same quarter last year.
    • Innovation initiatives adjusted EBITA was a loss of RMB 1.9 billion.

  5. Cash Flow and Capital Expenditures:

    • Cash, cash equivalents, and short-term investments were RMB 352 billion (approximately USD 50 billion) as of December 31.
    • Free cash flow was RMB 78 billion, which increased by 52%, mainly due to robust profitability growth and a decrease in capital expenditure.

  6. Other Financial Matters:

    • Share of profit of other equity initiatives reached RMB 2 billion, including a one-time gain from Suning.
    • Recorded share of profits of RMB 215 million from Ant Financial for the period of September 24 to September 30.
    • GAAP net income during the quarter was RMB 50 billion, up 62%.

  7. Impact of Coronavirus Outbreak:

    • While it's too early to quantify the financial impact of the coronavirus on the business, Wei Wu provided some qualitative observations.
    • The epidemic has negatively impacted the overall China economy, especially the retail and service sectors.
    • Alibaba is not immune to the imbalance of supply and demand caused by the delayed opening of offices, factories, and stores after the Lunar New Year holiday.
    • However, the situation presents an opportunity to provide value and support to customers to help them recover production and supply capabilities.
    • Major businesses have been negatively impacted in February due to the coronavirus outbreak and the resulting business disruption.
    • Waiving fees and providing interest-free or lower-interest loans to support customers.
    • It is difficult to accurately estimate the full financial impact for the March quarter, but overall revenue growth rate will likely be negatively impacted.
    • Some businesses that rely on physical means of production on the supply side, such as China retail marketplace and local consumer services, would even show negative revenue growth for the quarter.

Wei Wu concluded by expressing optimism about consumption growth in China and confidence in the long-term growth prospects of Alibaba.

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