Alibaba Group Holding Limited

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's March quarter 2021 and full fiscal year 2021 results conference call. At this time, all participants are on meet and all remote. After management's prepared remarks, there will be a question and answer session. Now I'd like to turn the call over to Rob Lin, Head of Investor Relations at Alibaba Group. Please go ahead.

Good day and good evening, everyone, and welcome to Alibaba Group's March quarter 2021 and full fiscal year 2021 results conference call. With us today are Daniel Zhang, our Chairman and CEO, Joe Tsai, Executive Vice Chairman, Maggie Wu, Chief Financial Officer. This call is also being webcast from the IR section of our corporate website. A replay of the call will be available on our website later today. Let me cover the safe harbor. Today's discussion may contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussion of these risks and uncertainties, Please refer to our latest annual report on Form 20-F and other documents filed with the U.S. SEC or announce on the website of Hong Kong Stock Exchange. Any forward-looking statements that we make on this call are based on our assumption 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 as 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 non-GAAP to GAAP measures can be found in our earnings per release. Unless otherwise stated, growth rate of all the stated metrics mentioned during this call refers to year-over-year growth versus the same quarter or same period last year. In addition, during the call today, management will give their prepared remarks in English. A third-party translator will provide simultaneous translation in Chinese on another conference line. Please refer to our press release for details. During the Q&A session, we will take questions in both English and Chinese, and a third-party translator will provide consecutive translation. All translations are for convenience purpose only. In the case of any discrepancy, management statement in the original language will prevail. With that, I will turn the call now to Daniel.

Thank you, Rob. Hello, everyone. Thank you for joining our earnings call today. We deliver another solid quarter, making the strong finish to this eventful fiscal year. China started this past year with the national battle against the COVID-19 outbreak and ended the year as the first country in the world to effectively control the pandemic and return to normal life. Based on IMF estimates, China was the only major economy that achieved positive real GDP growth in 2020. According to the National Bureau of Statistics, China recorded retail sales of 42 trillion RMB during the 12 months ended March 31, 2021. and the GDP growth in the quarter ended March 2021, reached 18.3% year-over-year. Against the backdrop of this microeconomic recovery and accelerated digitalization in China, Alibaba Group achieved healthy growth across all businesses. During the past fiscal year, we made significant progress in our three key strategies. namely domestic consumption, globalization, and cloud computing. Such progress demonstrated the tremendous power of Alibaba's digital commerce infrastructure, as well as our long-term commitment to invest for the future and to create value for our consumers, merchants, and partners through innovations. For our consumer-facing businesses, Alibaba ecosystem recorded $8.1 trillion RMB in GMV or 1.2 trillion US dollar during the fiscal year, a net increase of over 1 trillion RMB year-over-year. Annual active consumers for our ecosystem reached a historical milestone of over 1 billion, with a net increase of 170 million year-over-year. Our annual active consumers outside of China increased by 60 million to over 240 million as of March 2021, which reflects the progress of our globalization strategy. Benefiting from the increasing demand for digitalization across industries, Alibaba Cloud's revenue exceeded 60 billion RMB for past fiscal year, representing a year-over-year growth of 50%. as it continues to strengthen its market leadership in China and Asia Pacific. During the past fiscal year, we have gone through all kinds of challenges, including the COVID-19 pandemic, fierce competitions, as well as the anti-monopoly investigation and the penalty decision by Chinese regulators. We believe the best way to overcome these challenges is to look forward and to and invest for the long term to create value for our customers through technology and innovation and to solve major problems in society. Therefore, we plan to invest all of our incremental profits in this coming year into core strategic areas such as technology innovation, support programs for merchants to lower their operating costs, user acquisition and experience enhancement, merchandising and supply chain capabilities, infrastructure development, and new business initiatives. Considering that our incremental profits are expected to be significant, our investments will be highly targeted and disciplined. They will be designed to enlarge our total addressable market, differentiate consumer and merchant value proposition from our competitors and generate greater consumer engagement and purchase frequency. We will establish key metrics to measure the effectiveness of these investments, which we believe will generate significant results in the long term. Our annual active consumers in China reached 891 million by the end of March. We hope to grow this customer base in China by over 100 million in the coming fiscal year to reach over 1 billion. Annual active consumers for our China retail marketplaces were 811 million by the end of March, representing a net increase of 85 million year-over-year. These consumers spent an average of 9,200 yuan annually per person on our platforms. We believe this is the largest and best quality consumer base in China. We will continue to serve the demands of consumers get diversified lifestyle based on their segmented preferences. As the largest digital consumption marketplace in China, Taobao app will continue to strengthen its comprehensive supply of branded products, valuable money products, agricultural products, imported products, and differentiated long-tail products to meet the diversified demands of our consumers. In under-penetrated categories such as groceries, real estate, home furnishings, and pharmaceuticals, we will redefine the consumer journey and a digitalized experience for the sector to enhance its online and new retail penetration. We will also work on improving the overall consumer experience and engagement in Taobao App by offering diversified consumer journeys based on different user segmentation and intent. At the same time, we are improving the tools and enabling capability for merchants to enhance their customer engagement and reviewing our platform policies to lower their operating costs. As part of our China retail marketplaces, Taobao Deals has grown rapidly over the past year, reaching over 150 million annual active consumers. As an indication of the effectiveness of our APP users, Monthly active users of Taobao Deals reached 130 million in March, a net increase of 27 million from December. Taobao Deals offers the best value-for-money products for price-conscious consumers. It features simple product design and direct-to-consumer supply from farms and manufacturers. The rapid growth of Taobao deals contributed positively to our China retail marketplaces. During the past fiscal year, average spending of consumers who purchased on Taobao deals increased more than the average spending of China retail marketplaces' consumers. We will further increase our investment in Taobao deals in the new fiscal year to serve more price-conscious consumers in less developed areas. Next, I would like to talk about new retail, which includes the community marketplace model that has attracted a lot of attention lately. Alibaba introduced our new retail strategies in 2016, and we have executed our strategy based on multiple business models to serve the various demands of consumers. For groceries, fresh-produced and FMCG products, we transformed offline retailers such as SunArt through digitizing their operations and created new retail formats such as FreeShippo that integrate online-offline experience. The combination of these new retail formats satisfy consumer demands not only in-store but also in nearby communities by offering comprehensive delivery options from one hour, half a day, same day, and the next day. As part of our latest exploration in new retail, we started the community marketplace business in select regions in China. Our community marketplace is supported by the supply chain capabilities of Frisheepo, Sunart, and other partners. In addition to one hour, half day, same day, and the next day delivery options mentioned above, we now offer community consumers with the option of order today and pick up tomorrow. We believe new retail is a multi-format consumer infrastructure of which the community marketplace model is one of the essential ways to serve price-conscious consumers. This model can help us acquire new customers in low-tier cities and rural areas and further increase our users' consumption frequency and stickiness. We believe the key to unlocking the full value of the community marketplace model is not only about the standalone P&L of the business, but also about the overall efficiency and servicing capability of the entire commerce platform where the business sits. And we believe the latter can generate far greater value than the former. Alibaba has the most sophisticated and efficient commerce infrastructure in China with the most comprehensive product and service offerings to serve consumers of diversified segmentation and demands. Accordingly, we believe we will be able to create and capture the highest consumer lifetime value through investment into the community marketplace business. We will grow this business leveraging Alibaba Ecosystems' four core capabilities, including merchandising and supply chain capabilities, logistics and fulfillment infrastructure, consumer engagement capabilities, and distribution channel development and management capabilities. While we are still in the early stage of business expansion, our goal for the new fiscal year is to expand our geographic coverage nationwide and define a healthy and sustainable community marketplace business model. Tynion Network. has delivered solid revenue growth during the fiscal year. Revenue from external customers outside of Alibaba Group grow 68% year-over-year and contribute to over 70% of Tanya's network's total revenues. Tanya also reached an important milestone of generating positive operating cash flow during the year. We believe Tanya's continuous growth will be driven by three important engines. Number one, first mile business based on Tanya Post and Tanya Guo Guo. Second, fulfillment service from factory to consumers. And third, cross-border supply chain services for importing and exporting merchants. Building on top of the significant improvement in operating efficiency in the last few quarters, Erlema invested in user acquisition and the logistic capacity during the Chinese New Year period, where many residents were encouraged by the local government to stay in the same city they work and avoid long distance travel due to the pandemic. As a result, Erlema's annual active consumer grow strongly at close to 20% year-over-year during the fiscal year when user experience improved. Looking forward, we will continue to invest in ELEMA consumers' mindshare as the entry point for local service through converting more consumers in Alibaba ecosystem into ELEMA user, as well as cross-selling between food delivery and other other on-demand services to increase order frequency. In our international commerce retail business, Lazada and AliExpress each achieved more than 100 million of annual active consumers by March 2021. Lazada delivered another quarter within triple-digit order growth year-over-year, Aliexpress continued to achieve rapid growth by significantly improving the logistics experience for its consumers, leveraging tiny networks, global smart network, smart logistic infrastructure. For example, France and Spain, two of the key markets that Aliexpress invested in logistic infrastructure improvement, recorded triple-digit GMV growth year-over-year during the quarter. In the future, we will continue to invest in key cross-border logistics hubs in Europe, develop local logistics networks in target markets, and strengthen infrastructure support for our cross-border and local e-commerce businesses. In fiscal year 2021, our cloud computing revenue rose 50% year-over-year to over 60 billion RMB. I'm very excited about the massive potential of our cloud computing business, as the post-pandemic world is facing a massive opportunity for industrial digitalization. Cloud infrastructure will eventually replace IT infrastructure, empowering enterprises to achieve digital operation. As China's industrial sector undergoing its digital transformation, manufacturers are moving forward smart manufacturing and direct-to-consumer initiatives, while other traditional industries such as retail, energy, finance, and transportation have all noticed the tremendous value and new opportunities that big data and intelligent applications could create. Alibaba Cloud will capture the historical opportunity by number one investing in core and past products such as database, storage, elastic computing, and big data platforms to establish our core product competencies benchmarking against the global cloud leaders. And number two, further expanding the integration of intelligence with cloud infrastructure to provide our customers with more diversified industry intelligence solutions together with our partners. Lastly, we announced in April 2021 that we received the administrative penalty decision issued by the China State Administration of Market Regulation. We have stated that we accept the penalty with sincerity and will ensure our compliance with determination. As a result of the anti-monopoly fine of 18.2 billion RMB leveled by the SAMR, we recorded an operating loss this quarter for the first time since our history as a public company. The penalty decision motivated us to reflect on the relationship between a platform economy and a society, as well as our social responsibilities and commitments. We believe the self-reflection and adjustment we've made will help us better serve our community of consumers, merchants, and partners. and the position as well in the future. Thank you all. Now I will turn it over to Maggie, who will walk you through the details of our financial results.