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spk09: 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.
spk01: 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.
spk05: 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.
spk10: Thank you, Daniel. Hello, everyone. Let me start with financial highlights for the fiscal year 2021 and for the March quarter. So our total revenue was $717 billion, an increase of 41% year-over-year. Excluding the consolidation of SunArt, our revenue would have grown 32% year-over-year to $674 billion. This is a well-exceeded revenue guidance we gave at the beginning of the year, which was $650 billion. For March quarter, our total revenue was $187 billion, up 64% year-over-year. excluding sound, the growth would have been 40%, still very strong. The growth was driven by the robust revenue growth of China commerce retail business, as well as continued growth of cloud computing businesses. Total adjusted EBITDA was 170 billion, an increase of 24% year-over-year. And for the March quarter, it was 23 billion RMB, with an increase of 14% year-over-year, primarily driven by healthy profit growth of our market-based core commerce business, partially offset by increased investment in new businesses and key strategic areas. Total adjusted EBITDA increased 25% year-over-year to $197 billion for the year and increased 18% year-over-year for the March quarter. So net income was $143 billion for the fiscal year, which includes the one-time fine levied and increases in SPC expenses. The non-GAAP net income for the year was $172 billion, 30% yearly growth. March quarter, we showed net loss of $7.7 billion, primarily due to the anti-monopoly fine of 18.2 billion RMB. Excluding this impact and certain other items, non-GAAP net income was 26 billion RMB, an increase of 18% year-over-year. We continue to maintain a solid cash position of $72 billion with strong cash flow generation capability. Our free cash flow grew strongly 32% to 173 billion RMB or around 26 million US dollars. Now let's look at the fiscal 21 revenue in more detail. Our revenue continues to be more diversified on the back of strong organic growth. The revenue of our China retail marketplaces continues to grow strongly as reflected by our customer management revenue growth of 24%. Our Alibaba cloud and technical businesses were the two fastest growing businesses and important drivers of our organic revenue growth. Both have also achieved important financial milestones, with the cloud computing business proving its capability to be profitable in December quarter and continue to showing increasing profit in March quarter, Tynion generating positive cash flow. These two growth businesses exemplify our track record of committing to investing businesses over the long term that we believe can create tremendous value for our ecosystem. It is important to note that we have continued to invest and grow new seed businesses such as How About Deal, Taobao Grocery Festival Market, which is the community marketplace business, and new features on the core platform, such as Taobao Live and short-form video. These initiatives address new consumption demands and behaviors that will continue to expand our addressable markets in China and create many cross-selling opportunities in our ecosystem. We believe these businesses have the potential to be the long-term revenue growth drivers that continue to catalyze our multi-growth engine in the future. Let's look at our overall cost trends. Excluding SBC as percentage of revenue, cost of revenue ratio increased in March quarter and fiscal year due to higher proportion of direct sales business. This increase was primarily attributable to higher proportion of our direct sales business from the consolidation of SunArt as well as the growth of Tmall Supermarket. These direct sales businesses will continue to strengthen our new retail initiatives, especially in development of our product sourcing capability. Sales and marketing ratio also increased in March quarter and fiscal year given increase in marketing and promotion spending to drive user growth and engagement. I would like to remind everyone that we added 84 million annual active consumers on our China retail marketplace in fiscal 2021, especially in lower tier cities, with Taobao deals ending the year with 150 million annual active consumers. Q&A expense ratio was significantly higher at 30% for the quarter primarily due to expensing of the one-off anti-monopoly fine. Excluding this item, G&A ratio would have decreased by 1 percentage point to 4%. Revenue and Just State EBITDA. This slide provides you with the overall summary of our segment revenue and possibility for the March quarter and fiscal year. For the next part of the discussion, I will first provide you with an overall financial recap by segments for the fiscal year, and then followed by a quick discussion of the important segments. Let's look at the segment revenue and profitability for fiscal year 2021. Starting this quarter, for the purpose of presenting a market-based core commerce assessment epitaph, we expanded the list of the new initiative businesses that we break out in order to present the progress of our strategic investments as well as the profitability of our market-based core commerce business. This is on a like-for-like basis. The new initiative businesses, which now include our new retail business, local consumer service, Ladada, Taobao Deal, and Chai Niu. represents strategic areas where we are executing to capture incremental opportunities. As previously mentioned, we are very excited about the growth perspectives of these fast-growing businesses that will not only increase our addressable market but also require long-term investment commitment. We believe these new businesses will be the drivers of our multi-engine revenue growth in the future. So, under this new presentation for fiscal 2021, our market-based core commerce adjusted EBITDA was $229 billion, growing 17% year-on-year. Combined losses of strategic investment areas was $34.6 billion, reflecting investment in new retail, local consumer service, Lazada, as well as addition losses reflecting our aggressive investment in top of deal. Core commerce adjusted EBITDA reached 194 billion. The cloud computing and DME continue to narrow losses during this fiscal year. Our innovation initiatives recorded adjusted EBITDA loss of 10 billion RMB, up 1.8 billion as we continue to be investing in technological research and innovation. our adjusted EBITDA for fiscal year grew 24%, reflecting the strength of our core commerce business that was partly offset by the investment we made in the new initiative areas. Segment reporting, I wouldn't go into detail for each one of them, just some highlights. So for the core commerce, EMR grew 40%. year-over-year to $64 billion. These are all for the discussion for the quarter. This growth actually is driven by solid growth of our China retail marketplaces. Overall, online business GMV grew 33 percent, reflecting the rapid recovery of growth in apparel, accessory, and home furnishing category, et cetera. SMCG also exhibited solid growth during this quarter. From merchant spending perspective, we saw strong growth in higher spending per merchant and an increasing number of paying merchants on our China retail marketplace. In March quarter, China retail orders revenue grew 134% to $60 billion due to consolidation of SunArt. In March quarter, Marketplace-based EBITDA reached $44 billion, up 28%. Yeah, you're reflecting solid CMR growth, partially offset by the increase in the marketing, promotional spending for user acquisition and increasing engagement on China retail marketplace. Let's take a look at the cloud computing business. AliCloud revenue grew 37% year-over-year to $17 billion during the quarter. This lower revenue growth during the quarter was due to a change in our relationship with a top cloud customer in the Internet industry. This customer has a sizable presence outside of China that used our overseas cloud services. They have decided to terminate their relationship with us with respect to their international business due to non-product-related requirements. We expect the impact of reduction in revenue from this customer to affect our year-on-year growth rate when compared to prior years. Excluding this customer impact, Alibaba Cloud top 10 non-affiliated customers together accounted for no more than 8% of Alibaba Cloud's total revenue. So you get a sense on this concentration of the revenue is really not high. Going forward, we believe that our cloud computing revenue will be further diversified across customers and industries. Alibaba Cloud was profitable for the quarter and generated an adjusted EBITDA of 308 million RMB. Our cloud business has delivered profits over the last two quarters which demonstrates that we can run this business on a profitable basis. We believe it is still more important to drive market share leadership given the rapid growth of the industry. We will continue to invest in innovation and innovative technology, expanding customer servicing capabilities, and enabling a robust developer ecosystem for the cloud business in the future. Our DME business for the quarter growth to $8 billion in revenue, 12% year-on-year growth. This is a sector that's impacted by the pandemic as well. Income statement selected financial metrics. So when you look at the interest and investment income, it was $111 million RMB in March quarter. This year-over-year, is primarily due to the decrease in net loss arising from the fair value changes of our investments. Our share of results of equity method investees was 6 billion RMB during March quarter. Our free cash flow was an outflow of 658 million this quarter. It was also a similar pattern in last year. The cash flow outflow during this quarter was mainly these are increased strategic investment as well as an increase in marketing and promotional spending for your acquisition and retention. And at the same time, there was merchant's deposit funds that as a practice that we discussed in the earnings release that we just take it out from the free cash flow calculation. Okay, so let's take a look at the non-get net income attributable to shareholders was $5.5 billion for the quarter. This was mostly due to expensing of $18.2 billion fine, partially offset by the reduced net loss arising from the fair value changes of our investments. Now, outlook and guidance. So total revenue excluding SAR consolidation was 674 billion for fiscal 2021, which, as I mentioned, surpassed our annual revenue guidance. This was driven by robust performance of our core business as well as continued growth of cloud. Going forward, we expect to generate over 930 billion RMB in revenue in fiscal 2022. Considering the total market potential as well as our strong profit and cash flow generation capability, this gives us the internal resources to focus on long-term value creation. In fiscal 2022, we plan to invest all of our incremental profits and additional capital into supporting our merchants and developing new businesses. and the key strategic areas that will help us increase consumer wallet share and penetrate into new addressable markets. That completed our prepared remarks. Let's open up for Q&A. Thank you.
spk01: Hi, everyone. So for today's call, we welcome to ask questions in Chinese or English. A third-party translator will provide consecutive interpretation for the Q&A session. Our management will address your question in the language you ask. Please know that the translation is for convenience purpose only. In the case of any discrepancy, the management statement in the origin language will prevail. Operator, now we can connect to the speaker and SI conference lines and start the Q&A section when ready. Thank you.
spk09: Thank you. As a reminder, to ask a question, you need to press par 1 on your telephone. To withdraw your question, please press the pound or hash key. Please stand by while we compile the Q&A roster. To give more people the opportunity to ask questions, please keep yourself to no more than one question at a time. Once again, it is par 1 to ask a question. First question comes from the line of Alex Yao of JP Morgan. Your line is open. Please go ahead.
spk06: 管理层,晚上好。 我想问一下投资方面的问题。 第一个是想澄清一下, Maggie和Daniel, 你们说的把incremental profit reinvest, 那是不是一个zero profit growth的这样的一个展望? Secondly, we have talked about many areas of investment. Where is the main direction of investment this year? Lastly, Daniel, you also said that we will look carefully at these investments internally, and there will be some internal definitions of KPI. How do we look at and measure the return on these investments? Thank you.
spk03: And good evening, management. I have some questions on the investment side. First of all, I'd like to know if you could please clarify the remarks made, I believe, by both Maggie and Daniel in your presentations as regarding the intention to completely reinvest all incremental profit in the coming year. Does that mean that we're talking about an outlook with zero profit growth in the coming financial year? Secondly, you listed a lot of different areas into which that investment will be channeled. I'm wondering if you could tell us which of those will be the top priorities. And thirdly, Daniel in his remarks spoke of how these investments will be managed in a prudent fashion with internally defined KPIs to monitor investment effectiveness. I'm wondering if you could please tell us more about how that will work and on those KPIs, how performance has been year-to-date. Thank you.
spk10: Hey, Alice, 你好。 我先回答一下就是关于我们 What does it mean to describe the intensity of investment? What is the main area of investment? In our performance announcement, in the guidance, I also said that we plan to invest all the profit increase. Investors will definitely ask this question. I often ask, do you want profit or growth? Are you going to invest all of this to make a profit? I believe that the two things, profit and growth, are not contradictory to us. In the past few years, you may have seen that there are very few companies in the market that invest a lot of money in the field of potential growth and future investment. there is still such a good profit growth. Now, regarding our investment plan, people will say, are you talking about a profit equalization? Or are you saying that the profit is going to drop? I think we look at it this way. First of all, the market potential is still very large, whether it is in the core business or in other areas. Even in the core business, there are still a lot of value offers that can be made. If we say today that we will guarantee profit growth or reputation or no decline, I think for real long-term investors, they will think Alibaba is very stupid. You see so many competitors, so many companies are making such a big loss, a huge investment into the market. And the so-called popular fields we are talking about now, the value we can create and the resources we already have, we have no reason not to invest in them. So when we look at it, we don't guarantee that we will grow or that the level will not drop. But what we can guarantee is that when we invest, it is highly targeted. Yes, hi Alex and good evening. Let me start by answering.
spk03: as to what we intend to or what we meant with this announcement of our investment of incremental profits and what the priorities will be in terms of making this investment. So as we stated in our earnings guidance, we plan to invest all incremental profit in the coming year into growing our business further and investing for the future. Does that mean then that in the in the coming year there will be no prospect of profitability, of profit growth, or will maximum profit growth be restricted to what it was this year. Well, let's look at what we can achieve with this investment first. In the market, as you know, there are very, very few companies that can do what we've done in terms of investing. a lot of money into future business growth and to strategic initiatives while still enjoying very robust profit growth. So I think it's fair to say that there's huge potential for us to further grow, be it in our core market or in other areas. There's still lots of scope and lots of room for us to do new things and grow the business. And I think any long-term investor would say that promising to maintain a certain level of profit or prioritizing a higher level of profit would be a stupid thing to do because in the market today there are so many competitors who are investing large amounts to gain a foothold in the market, to grow the market. And we're in a great position to create value and capitalize on our existing resources to drive future growth. going forward. So that is the intention. We're going to be investing in a highly targeted and highly disciplined way in order to lay a foundation for even better growth going forward. And at the end of the day, users will vote with their feet. So we see these investments ultimately as playing out in terms of growing the business and more deeply engaging users.
spk10: And then,
spk03: By way of follow-up, in terms of the specific areas we intend to be investing in, as we've talked about, certainly core commerce, new retail, as Daniel mentioned in his remarks, the community marketplace business, Tabao Deals, but also our international business, local services, and logistics.
spk10: And then another way of breaking down the investments, not by business, but in terms of the results that we seek,
spk03: Certainly, these would include growth in the user base, enhanced engagement, as well as the provision of more value to merchants.
spk05: Okay, let me add one more thing. Regarding the whole investment, I think the three major strategies around us, whether it's regional, global, or high-tech, we actually all Yes, I'd just like to add to that briefly. When it comes to making these investments, we do have three major strategic priorities. As I mentioned in my script, these are domestic consumption,
spk03: globalization and the cloud or high advanced technology part of the business. And we intend to be investing in all three of those because we see large incremental opportunities.
spk05: 在这个内需领域,其实首先我们尽管现在已经到达了这个中国已经到达了AAC,到达了8.9亿,在中国这个广义的消费市场里边,阿里巴巴的这个生态里边, 8.9 billion in various business platforms. This is our latest figure for this quarter. But in fact, according to the purchase rate, how to turn 8.9 billion users into not just AAC, but monthly purchase users, MAC, even daily purchase users, I think there is a huge potential in the middle. In different categories, in different categories of consumption, I think this is, as I said, China's largest and most consumable consumer. Consumers of different levels of consumption are on our platform. How do we increase such a frequency? So from this perspective, the increase in purchase frequency is a very important perspective for us.
spk03: Starting with the first of those three strategic priorities, namely domestic demand, domestic consumption, our AAC number has now reached 890 million in China. This is the latest total figure across the ecosystem, all of the different platforms, an aggregate AAC figure of 890 million. However, there's still a lot of scope to grow the frequency of purchase and engagement of these 890 million AACs to convert them into MACs, monthly active consumers, or even DACs, daily active consumers. So huge scope for development there. We have today within this user base the broadest, largest, multi-tiered consumer base in China. So as I said in my remarks, a major priority for us in further developing that user base is to continue to drive higher levels of purchase frequency across all classes of consumers.
spk05: At the same time, in China's domestic market, we already have 8.9 billion annual purchase users. But in fact, in large, low-level cities and rural areas, there is still a huge amount of population. As we mentioned last year, China Retail Marketplace has 8.5 million users, 70% of which are from low-level areas. We believe that this space is still very large. We will continue to increase the number of new users. So, as I said, we hope that in the coming fiscal year, And then although we already have 890 million AACs, still there is quite some scope for further growth in that figure.
spk03: with respect to users in lower tier cities and in rural areas. In fact, in my script just now, I reported the growth achieved in the past year in our user base, and 70% of those new users came from rural areas. So we will continue, as I said, to strive to grow the user base, adding new users, and have set as a target surpassing 1 billion ADCs in the new financial year.
spk05: Yes, in addition to the growth of consumers and the frequency of consumption, we also have various measures for the long-term development of the business, including reducing the burden of the business and reducing the cost of the business. Some have already been announced.
spk03: Apart from growing the number of consumers and their frequency of consumption, another important initiative for us is helping merchants by reducing their burden, reducing their costs, as well as facilitating and conducive environment for their long-term development and success. In this respect, we have many measures. Some have already been announced. Some have yet to be announced, but they all aim at helping merchants.
spk05: Finally, also in the same area of domestic demand and domestic consumption,
spk03: Another place we'll be investing is in the continued construction and improvement of our infrastructure, our logistics, our supply chain and merchandising capabilities. This is also an important area where we can discover and satisfy user demand and create long-term value for users. And for the company, in the interest of time, I will not expand any further. I will merely end by saying that we will put in place detailed KPIs to monitor all of these investments and ensure that they're conducted in a disciplined fashion.
spk05: Yes, and this is all about the domestic field. The second field is the globalized field. We are now very happy to see that our AEC has already accounted for $2.4 billion overseas. So the above was always with respect to the domestic consumption piece of our strategy. Turning now to globalization.
spk03: As was mentioned in my speech earlier, we're very pleased that we now have 240 million international AACs, and we hope to double that figure going forward. So growing the international user base is also very important to us. 这个在整个的技术领域,我们 在特别在云计算,这个是一个时代的机会,所以我们还是在核心技术上,特别是云计算的技术,大数据的技术上,还是会增加投入。
spk05: These investments include not only the cloud, but also high-tech investment in the next generation of consumer experience, logistics, and these aspects. We will make this investment on the record. We believe that such investment in technology will make our internal demand grow, make our globalization progress, and make our cloud growth.
spk03: Finally, I'd like to talk briefly about technology. We see the cloud as an epoch-defining opportunity and will continue to invest in cloud technology, but also in big data and other kinds of technology. as well, including technology to enable the next generation consumption experience to better support logistic services and in other areas to ensure that technology is supporting the realization of our domestic consumption strategy, our globalization strategy, as well as our cloud and high-tech technologies. We want to enable all of these strategic areas to benefit from further improvement in our technology capabilities.
spk01: Okay. Next question, please.
spk09: Thank you. Yes, our next question is from the line of Thomas Chong of Jefferies. Your line is open. Please go ahead.
spk00: Hi. Good evening. Thanks, management, for taking my questions. the trend in terms of the CMR. Given that we have seen the CMR growth rate is very solid, can you comment about the FY22 outlook? In particular, how we should think about the tick rate trend for this year? And my second question is about the competitive landscape. Given that we have a wide product selection and very strong technology, How would we leverage our core capabilities in different areas, like lower tier cities penetration, as well as our strategic initiative in local service and NASA? Thank you.
spk03: Good evening, Mr. Guan. Thank you for accepting my question. My first question is to understand the future of customer management revenue, CMR, in the next year. We also see that the number of CMRs is still very solid. In the year 2022, how is it going, especially in terms of take rate? What is the trend? The second question is about the trend pattern. Because in the case of Ali, the supply of this product is very wide, and the variety is very rich. We are also in technology. Yeah. Hi, Thomas. In terms of CMR growth, you've seen that we recorded 24% year-on-year growth for the quarter.
spk10: And if you look at the past few quarters, it's been growing strongly considering this, you know, large base. I believe the CMR growth is going to be, have, continue to have high potential. If you look at these, this revenue, actually the term is merchant's budget, right? You pay for the services and the, we provided. Currently, our take is somewhere around 4%. This is mainly where merchants paying for the sales and marketing branding services were provided. So even in this sole area, we still have a lot of potential. And there are also other areas that we could provide merchant service So take rate has been growing over the past years. I think this year, as we talked about, we're going to provide more support to the merchants. In our last call, we talked about the details on how we support merchants, these including waiving certain charges, fees, and also invest in the and infrastructures to support merchants. So we're not aggressively monetizing the value we created for the merchants, actually. The one thing worth to mention is that CMR currently accounts for approximately 43% of our total revenue. If you look at three years ago, five years ago, it used to be like 70%, 80%. So it has been growing very fast, but as the percentage of revenue coming down, I think that trend will continue. That is because of our multi-engine strategy. We have so many new businesses and revenue contributed from these new that become more and more important and significant to our total revenue.
spk03: Thank you for your question. Regarding the growth of customer management revenue, we just reported that this quarter the growth rate is 24%. If you look at the past quarter, there has been a relatively strong growth, especially considering that the original rate is higher. I think in the future, there will still be Take rate 4% This is equivalent to the cost of providing services such as sales, marketing, brand creation, etc. There is also room for further improvement in this regard. Of course, there are other areas where we can also provide services to our customers. In recent years, our take rate has been increasing. This year, we have announced that we will increase our support for our customers. In the last phone call, we have already mentioned some of the measures. For example, we will cut some of the customer's fees. We will also invest in our platform infrastructure and some support measures. Therefore, it can be seen that we are not actively manifesting these values that we have created for the business. Let's take a look at our customer management income, CMR, which now accounts for 43% of the total income. If we look at the previous few years, this number has been up to about 70-80%. So, on the one hand, our CMR is growing faster, but at the same time, its total revenue percentage is decreasing. I think this trend will continue to go on. The reason is that we are promoting a multi-engine growth strategy. New business is constantly growing. They are also increasing their total revenue by 100%. I'm sorry, I'm trying to correct the number I just mentioned.
spk10: The number I just mentioned,
spk03: Let me answer the second question in terms of the technology, how to apply technology into the competition.
spk05: Actually, we always believe that technology is so critical in the competition, and we are proud of our technology development and integration with the real operation and even in the fierce competition. So let me just give you a few examples. In the method consumption area, actually one of the key things is how to acquire and retain the customers on our China retail market basis. But the key thing is how to use technology to match the most comprehensive product offerings we have on our platforms with the right customers and generate the real consumption. So the matching capabilities is all driven by AI and driven by technologies. So I think that's our big advantage to make sure we have a most effective conversion I mean, over years, our conversion rate continued to grow, and which not only to grow our GME, but also to meeting the diversified demands of our customers. The second example I want to give you is that once we acquire new customers, it's all about how to maximize the lifetime value of these customers via cross-category setting opportunities. And so in this regard, we have these, we build a very comprehensive user profile and the product features profile to make sure we can maximize, we can understand our customers very well and provide all the needs during their lifetime cycle. Let me stop here for translation.
spk03: Okay, let me answer the second question you just mentioned, which is how we can use technology to increase our competitiveness. So, Ali has always believed that technology is the key. We are also very proud to have such a powerful technology development capability, and to be able to continuously develop technology to integrate the new technology into our actual operation. In terms of domestic consumer demand, a big problem is how to constantly acquire new customers, how to keep these consumers in the Chinese retail market. In this respect, we will use our technology advantage to make a good match and catch the consumer's demand. Our product supply is very rich, and our user base is also very large. We rely on this kind of fully automated AI-driven matching technology to continuously increase and optimize our conversion rate every year. In this way, we can improve our trading and GMV, and at the same time, we can satisfy more different customers with more diverse needs. This is the first point. Secondly, after acquiring new consumers, another key consideration is how to ensure that each customer's life cycle value
spk05: Well, but technology application is not limited to the consumer management side. Actually, it covers all the areas. Just a few more examples. For example, on the logistics side, technology actually plays a very important role for Canyao to build a smart data-driven logistics network and operating system. and to serve our merchants both in China and the international market. And on the cloud side, I think technology is a key. As I said in my script, we continue to invest in technology to build our competitive advantage in the art and past products. But our benchmark is not only in China. Actually, we benchmark the global leaders in all their core cloud products and to make sure we are at the top tier of the world. Thank you. 那么技术方面的优势不仅局限于消费者运营这一方面,
spk03: It is also very important in other fields. For example, in the logistics field, technology is very important for vegetables. It is through leading technology that we can create a smart, data-driven logistics network and system, as well as its operating network, so that it can provide the best service to domestic and international merchants. In the same way, in terms of cloud technology, we have always been talking about it as a key factor. As I mentioned in my book presentation, we have been constantly investing in cloud technology, including IaaS and PaaS products. In terms of these products, we are not only targeting Okay, next question. Thank you. Next question is from the line of Jerry Yu of UBS. Your line is open. Please go ahead.
spk07: Okay, thank you. Thank you, management. Yeah, my question is really on the business model. If we look at the recent past years, we've seen an increase in the 1T revenue mix, right, as Alibaba consolidates SunArt and as we grow Hemao or Creshipo. So today we talk about investing in community marketplace. And from the presentation, it looks like, you know, the providers of groceries and FMCG into this business includes also SunArt and I believe Thelma as well. So as we invest in these high-frequency categories, how does this change the long-term business model? How do we envision the ecosystem looking long-term? And maybe more specifically, do we have a target 1P, 3P mix in mind? Thank you.
spk03: Thank you very much, Manager Ceng. My question is to further understand the change in your business model. In recent years, we have known that the direct business, the so-called EP business, is constantly increasing in terms of income, especially with the expansion of the business of high-performance retail, Hema. Today, you also talked about the community e-commerce business, new investment. I think in this community e-commerce business, it is certainly inseparable from this high-end retail and Hema to provide these daily necessities, fresh and fast products, etc. If you want to know the future, it will continue to evolve. In short, we don't have any specific goal for 1P-3P mix. We strongly believe that this mix is an organic result
spk05: outcome of operation. And we don't manage the 1P3P mix intentionally. Over the years, we built our two flying wheels in our consumption business. One is to build our, continues to build the capability to manage the customers smartly and efficiently. And in this regard, we said how to create a demand. So the demand side we continue to invest to improve our user interface with creativity and with technologies. And we strongly believe that it's very important for us to enhance our engagement with our customers, not only to have more customers on our platform, but also to help them spend more time with us. And we strongly believe that A very diversified supply from the merchants, from different sources, is very, very important. And the selection is very, very important to enhance the user's thickness. So I think that's the area we continue to invest and to build capability on the customer management and demand creation. And on the other hand, over years, we tried to build a very strong, I mean, merchandising capabilities and supply chain management capabilities, which we believe actually over years, no matter how changed the user interface will be, the efficient supply is a must to do a successful commerce business, including e-commerce business. So that's why we invest a lot to build our supply side capabilities. and we believe that the advantage of this capability will not change, even with user interface upgrading and change. So these are two flying wheels to Alibaba. I'm so proud that maybe we are one of the few companies in the world which has excellent consumer management capabilities, but at the same time, has this merchandising and supply chain management capabilities in one company and in one team. I think that these two flying wheels are the critical successful factor for our long-term growth.
spk03: 总而言之,我们对于未来EP和3P各站的比例没有特定的目标。 我们也不会 ah, ah, ah, to manage and operate our customers in a highly efficient way. So how to create this demand? On the one hand, it is to rely on our technology to understand our users and dig up our insights. It is also very important to constantly improve their participation. Because it's not just about How many consumers are there? It also depends on the market and participation they put on the platform. In addition, the second point is that we are in the supply side of the product and the business side. is very diverse and rich. We believe that this is also very important for improving user connectivity. So we are constantly investing in these aspects to increase our ability to manage customers and create demand. Over the years, we have also been constantly strengthening our products and supply chain. So we continue to expand our investment to strengthen the development of the group in the supply chain. Alibaba should be very proud that we have such two drones. It should be said that we are the only company in the world that has such a company. It has a very strong ability to manage and operate consumers. It also has a very good business and supply chain ability. It is a company's honor, and a team is grabbing these two wheels. In the future, we think these two wheels are also key to the long-term growth of the company.
spk02: Next question.
spk09: Thank you. Next question is from the line of Hanchu Kim of Macquarie. Please go ahead.
spk08: Great. Thank you for your time today. I wanted to ask about Taobao Deals. I think it's been one of the fastest growing apps in last year. And are you guys empowering it to kind of grow to 700, 800 million over a few years? You just kind of see it as, you know, something that can stabilize. Hello?
spk01: I'm sorry to interrupt. Can you repeat your question, maybe get closer to the mic?
spk08: Sure. It's recording tab ideals. I'm wondering if we are empowering it to try to grow to 700, 800, 500 million users over the years.
spk01: Sorry, your mic feels very noisy.
spk08: Hopefully this is a little bit better. Yes. Sorry, just to repeat, for Taobao Deals, just wondering if this is a business you're empowering to try to get to kind of 700, 800 million kind of user base in a few years' time. And if that's the case, how do we see this interacting with, I guess, Taobao and Tmall in the sense of as Taobao Deal grows, do we see any kind of cannibalistic behavior? to our own services. And, you know, part of this is also I don't feel like I'm seeing your competitors in that similar space being particularly impacted as Taobao deal grows. So I'm also kind of thinking how this impacts perhaps the competitive landscape as well. Thank you.
spk03: to the scale of 700 million or 800 million users. If this is the case, how will the relationship between Taobao Special Edition and Taobao Tianmao be? Will the development of Taobao Special Edition affect some of the business of Taobao Tianmao? In addition, it seems that we have not seen the development of Taobao Special Edition 对于进队有什么特别大的影响? 那么不知道未来这个竞争格局将会怎样? Well, the value proposition of Taobao Deal is very clear.
spk05: It's for price-conscious consumers. We provide on Taobao Deal's platform the value for money products for these price-sensitive customers. And in terms of supply side, actually we focus on consumers manufacturers and farmers and their direct offer and end-to-end to the customer which care more about a price. So I think the value proposition and the simple consumer journey, shopping journey, I think is key for Taobao Deals. And we are very happy to see the progress we made during the last year. And as I said, our MAU in March reached 130 million. And for the entire year, our annual active consumer reached 150 million. So I think that's a good start. And because China is so big and with so many population with different consumption power and with different segmentation and preferences, so we try to As part of Alibaba China retail marketplaces, we try to provide multiple destinations to the customers with different purposes. So I think Taobao Deals is a good supplement to other applications, other businesses we have in China retail marketplaces. And in terms of the incremental value we create from Taobao Deals, I just give a good example in my script to you, which is the average spending of our customers on Taobao deals, the increased rate of the spending for the customer on Taobao deals is bigger for the average spending on China retail marketplaces, which indicate that if we have people, if we give people multiple choices, the overall, the total spending within Alibaba ecosystem will be bigger. So that's a very good indicator. And so that's why we will continue to invest in Taobao Deals. And as to whether this have any impact on other players, I think I think it's very important that we, on Taobao deal, our goal and value proposition is very clear and straightforward and even simple. So we are confident the impact is coming. And because for these customers, they just need a simple choice and a price sensitive and a price advantage. That's it. So we will strengthen this value proposition on Taobao deals. While on Taobao mobile app, our flagship I think we provide more comprehensive offerings to different segment customers. And they will enjoy more selections and more funds. So the value proposition are quite different. And we are, as I said, our goal is to build a metrics, an application metrics to serve the customers with different needs. Thank you.
spk03: Thank you. I think the value of Taobao's special edition is very clear. It is a product that can provide these cost-effective products to consumers who are more sensitive to price. In terms of supply, one of its focus points is that factories and farms can supply. to these price-sensitive consumers. So its value proposition should be said to be very simple and clear. It is to give such consumers who are looking for high-cost consumers a very simple shopping experience. This is Taobao's special edition. We are very happy to see that in the past year, Taobao's special edition, its MAU has reached China is a big country with a wide area of land. There are so many different types of consumer purchasing power. Uh, uh, uh, uh, uh, uh, uh, uh, What kind of value can such a Taobao special edition bring to us? In fact, I also mentioned it in the speech just now. In other words, the average purchase amount of users on Taobao special edition is higher than that of the entire Chinese retail market at the same time. What does this mean? It means that if we can give people more choices, then the overall consumption level in our entire ecosystem will be improved. Therefore, we will continue to invest in Taobao special edition. You also asked if this will have an impact on others. I think the Taobao special edition has a very clear and clear goal. We are also very confident that the so-called impact will come soon. Taobao and Tianmao as our flagship platform, its products are more diverse and diverse. Thank you everyone for joining today's call. We have all the materials that will be provided in our IO website.
spk01: We look forward to, you know, communicating with you in the coming months. Please contact me and the IR team at Alibaba. Thank you.
spk09: Thank you. This concludes today's conference call. Thank you for participating.
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