Alibaba Group Holding Limited

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's December quarter 2019 results conference call. At this time, all participants are in the listen-only mode. After management's prepared remarks, there will be a question-and-answer session. And I'd like to turn the call over to Mr. Roblin, Head of Investor Relations of Alibaba Group. Please go ahead.

Good day, everyone, and welcome to Alibaba Group's December quarter 2019 results conference call. With us today are Daniel Zhang, Executive Chairman and CEO, Joe Tsai, Executive Vice Chairman, Maggie Wu, Chief Financial Officer. This call is also being webcast from our IR section of the corporate website. A replay of the call will be available on the website later today. Now, let me quickly cover the safe harbor. Today's discussion will contain forward-looking statements. These forward-looking statements involve inherent risk and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report on Form 20F and other documents filed with the U.S. SEC or announce on the website of the Hong Kong Stock Exchange. Any forward-looking statements that we make on this call are based on assumptions as of today, and we do not undertake any obligation to update these statements, except as required under applicable law. Please note that certain financial measures that we use on this call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, marketplace-based core commerce adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, or ADS, and free cash flow are expressed on a non-GAAP basis. Our GAAP results and reconciliation of GAAP to non-GAAP measures can be found in our earnings press release. Unless otherwise stated, growth rate of all of the stated metrics mentioned during this call refers to year-over-year growth versus the same quarter last year. In addition, I want to highlight Let everyone know that today's Q&A session will be conducted in both Chinese and English. A third-party translator will provide consecutive interpretation for the Q&A session, and our management will address your question in the language you asked. Please know that the translation is for convenience purpose only. In the case of any discrepancy, our management statement in the original language will prevail. With that, I'm going to pass to Daniel. Thank you, Rob.

Hello, everyone. Thank you for joining our earnings call today. We delivered an outstanding quarter for a strong finish to the 2019 calendar year and celebrated three major milestones especially important to Alibaba. First, we successfully held our 11th Double 11 Global Shopping Festival. Second, we successfully listed on the Hong Kong Stock Exchange. Thirdly, Dr. Wang Jian, Chairman of the Alibaba Technology Steering Committee, was the first ever representative from the private sector to be appointed as a member of the Chinese Academy of Engineering. However, like all the other companies in China, We are confronted with a black swan event soon after the start of 2020, the novel coronavirus. The outbreak is having significant impact on China's economy and may potentially affect the global economy. It will present near-term challenges to the development of Alibaba's business across the board, but at the same time, we will see opportunities created by the Forces of Change. Before further elaborating, I will share an overview of our performance for the December quarter. According to the China Ministry of Commerce, total retail sales across China increased by 8% year-over-year in 2019 for a total of 41 trillion RMB. Consumption contributed 58% of China's economic growth and accounted for 3.5 percentage points of China GDP growth. Online retail sales of physical goods for the year was 8.5 trillion RMB, up 19.5% year-over-year. From these figures, it is clear that consumption has become the major driver of economic growth in China and online retail is the engine driving consumption growth. Over the past quarter, our China retail marketplaces continue to maintain rapid growth in both GMV and user base. As of December 31st, annual active consumers reached 711 million, representing a net increase of 18 million over the previous quarter. over 60% of new AAC came from less developed areas. China retail marketplaces MAU reached 824 million, up 39 million from the previous quarter. We noticed stronger user engagement and buying frequency as measured by DAU growing faster than MAU. This reflects healthy user stiffness on Taobao. Tmall Physical Goods GNV grow 24% year-over-year, further consolidating our leadership position as the top consumer engagement and a distribution platform for branding China. Our 11th Double 11 Global Shopping Festival set a new GNV record of 268.4 billion RMB. This is equivalent to 2.3 times the combined online sales of Black Friday and Cyber Monday in the U.S. It reflects the strength of Alibaba's digital economy and of Chinese consumers' robust consumption power. More and more merchants are leveraging Double 11 to acquire new customers, launch new products, and develop new categories. During this year's November 11, 15 brands surpassed 1 billion RMB in their total sales. 215 premium brands launched their new products and new categories. And 120,000 merchants each acquired over 10,000 new customers. Our globalization strategy enjoyed solid progress this quarter. Lazada and AliExpress continued to grow rapidly as a result of effective strategies in user acquisition and merchant onboarding. Lazada's quarterly orders increased 97% year-over-year and AliExpress DAU grew by 56% for the month of December. Tmall Global Pay GNV grew by 45% year-on-year and continue to consolidate its leading position in China's cross-border import market. And with the ongoing optimization of bounded warehouse import logistics solutions, Tmall Global's end-to-end order delivery time has further improved by 2.78 days, which is a 10% reduction in delivery time compared to the same period last year. China network continued to go from strength to strength. During this November 11, China processed a record-breaking 1.29 billion number of packages. Of those, 690 million packages were delivered within one week, an improvement of 30% year-over-year. As a result of ongoing platform optimization, and collective efforts with our logistics partners. We also saw a preference for using China Post, our last mile service stations in residential areas and campuses. The number of packages collected via China Post increased by 88% year over year. In November 2019, we invested 23.3 billion RMB to raise our equity stake in Tainiao from 51% to 63%. This investment is a demonstration of Alibaba's commitment to the development of a smart logistic platform as one of the core pieces of infrastructure for digital commerce. Alibaba Cloud continued its rapid rise with 62% year-over-year revenue growth. We celebrated two meaningful milestones this quarter. The first milestone is Alibaba Cloud revenue surpassed 10 billion RMB in a single quarter for the first time. The second milestone was a successful migration of our e-commerce business core systems onto the public cloud. During Double 11, our public cloud infrastructure and technology helped us to power the creation of over 544,000 orders per second at peak, process 970 petabytes of data without any disruption, and defend against 6 billion cyber attacks all within the 24-hour period. we believe the migration of Alibaba's core e-commerce system to the public cloud is a worship event. Not only will we, ourselves, enjoy greater operating efficiency, but we believe it will also encourage others to adopt our public cloud infrastructure. Now I would like to speak to the coronavirus situation on three areas. First, the responsibilities and the duties that we assumed towards the community immediately upon the outbreak. Second, our relief measures to support F&Es. Third, the potential challenges and opportunities that we see for Alibaba's business in connection with the outbreak. Let me start with our actions related to our community. We took every effort to protect the health and safety of our employees through flexible work policy and remote office collaboration using our proprietary technology. At the same time, we leveraged Alibaba's powerful forces of commerce and technology to deliver suppliers to the affected regions. This is our responsibility to our community. Soon after the outbreak, we also began to procure medical supplies from around the world. To date, over 40 million units of medical supplies worth 468 million RMB are on their way or have been donated to Wuhan and other affected cities. China team up with our global industry partners to launch a fast-track logistic channel that facilitates delivery of over 26 million units of medical supplies into Wuhan and other cities to date. We also worked to ensure supply of food and other consumables for the residents in affected regions. Our self-operated grocery chain, Shishiko, committed to a policy of remaining open for business, no raising prices and remaining stocked, particularly in the 18 stores across Wuhan. Shishiko became a lifeline for many local residents. Additionally, Frisico and Erlema team up with restaurant chains to provide free meals and necessities to the hospital staff in Wuhan and emergency response teams. Alibaba also contributed the power of our advanced technologies to combat the outbreak. Damo Academy provides free AI voice chatbot service to government and epidemic prevention agencies to efficiently keep a daily health record of those who might have close contact with affected patients. Our enterprise communication and collaboration app, Inpoc, introduced a digital health check-in feature to help companies maintain up-to-date health monitoring of their employees. there have been more than 150 million daily health check-ins recorded in Dintalk. Now about our relief measures in support of SMEs. Together with M-Financial, we announced a comprehensive set of relief measures that fall under six categories. One, reduction of business operation costs on our platforms. 2. Financial support by waiving or lowering interest rates 3. Subsidies for delivery personnel and raising level of logistic efficiency 4. Provision of flexible job opportunities to guarantee income 5. Additional tools for businesses to accelerate digitalization 6. remote working management for enterprises. We will support our merchants to overcome this challenging time and are taking proactive measures to fulfill our mission to make it easy to do business anywhere. Lastly, the potential impact on our business. We are closely monitoring the challenge as well as identifying opportunities for Alibaba's business as the situation evolves. For our e-commerce business, the delay in employees returning to work following the Spring Festival holiday is preventing merchants and the logistic companies from resuming operations. For the first two weeks after the Chinese New Year holiday, we have observed negative impact on our commerce business as merchant operations have not returned to normal and a significant number of packages were not able to be delivered on time. In our new retail business, Shui Shi Po and Tao Xian Da's average basket size increased significantly as a result of consumer migration to online purchasing of fresh goods, groceries, and a broader selection of daily necessities. However, Limitations in delivery capacity is preventing order volume from fully recovering. For the local consumer services, restaurant visits and the food delivery orders declined noticeably year over year because many restaurants have not received normal operations. Other categories like grocery shopping have increased sharply. Our travel booking service, FLEGI, received material levels of cancellations for air tickets, hotel reservations, and the tour packages. In accordance with government regulations, FLEGI provided unconditional and penalty-free cancellation for our customers. BINPOC has experienced explosive growth in DAU and a number of corporate users. It is providing business with remote working features to maintain their operation and accelerate their digitalization. In addition, the input also saw increasing popularity over virtual classrooms that help schools and students resume their studies via live streaming classes. We are closely monitoring the impact of the outgoing outreach outbreak on our business and will take necessary measures to ensure our business operations. Our mission is to make it easy to do business anywhere, and we are being tested. True to our mission, we will stand together with all of our merchants to overcome the current challenges and facilitate our users and our communities to fight against the virus. 17 years ago, the e-commerce business experienced tremendous growth after SARS. We believe that adversity will be followed by change in behavior among consumers and enterprises and bringing ensuing opportunities. We have observed more and more consumers getting comfortable with taking care of their daily living needs and working requirements through digital means. We are confident in the ongoing digitalization of China's economy and society and are ready to seize the opportunity to build the foundation for the long-term growth of Alibaba's digital economy. Now, I will turn the call over to Maggie, who will walk you through the details of our financial results.