Alibaba Group Holding Limited

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's December quarter 2021 results conference call. At this time, all participants are on listen-only mode. And after management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Rob Lynn, Head of Investor Relations of Alibaba Group. Please go ahead.

Good day, everyone, and welcome to Alibaba Group's December quarter 2021 results conference call. With us on the line today are Daniel Zhang, Chairman and CEO, Joe Tsai, Executive Vice Chairman, Maggie Wu, Chief Financial Officer, Toby Xu, Deputy 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. Now, let me quickly go through 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 discussions of the risks and uncertainties, Please refer to our latest annual report on Form 20-F and other documents filed with the U.S. SEC or announced 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, 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 reconciliations of GAAP to non-GAAP measures can be found in our earnings per share lease. Unless otherwise stated, growth rate of all the stated metrics mentioned during the call refers to year-over-year growth versus the same quarter last year. In addition, during today's call, management will give prepared remarks in English. A third-party translator will provide simultaneous Chinese translation 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 purposes only. In the case of any discrepancy, management's statement in the original language will prevail. With that, I will now turn the call to Daniel.

Thank you, Rob. Hello, everyone. Thank you for joining our earnings call today. This quarter, Alibaba Group's business continued to make steady progress. We remain focused on building long-term capabilities centered around customer value creation despite the resurgence of COVID, China's market economy slowdown, and increasing competition. In the fourth quarter of 2021, China's GDP grew 4%, while total retail sales rose 3% year over year. Both decelerated from the previous quarter due to the confluence of COVID, price increase of raw materials, and other factors. At the same time, the overall trend of digitalization across both consumption and the industrial sectors became increasingly apparent and accelerated. Large internet companies in China have entered commerce through various ways, and digital consumption formats and user experiences have become increasingly diversified. Against this backdrop, we believe our most important proposition and biggest opportunity for healthy and sustainable long-term growth are, number one, the ability to continually create new consumption demand and offer innovative consumer experiences, and number two, support the industrialization of our customers. As of quarter end, our annual active consumers reached 1.28 billion globally, representing quarterly net ads of 43 million. In China, our AAC grew from $953 million to $979 million during the quarter, while AACs outside of China grow from $285 million to $301 million. We are fully on track to deliver the target of 1 billion China AACs by the end of this fiscal year. And Taobao Deals has been the major contributor to our new user acquisition. With one billion high-quality AACs, we believe we have substantially captured all consumers with purchasing power in China. We focus on shift from new user acquisition to user retention and output growth. Despite the impact from slowing retail sales and intensifying competition on our China commerce business, the next year retention rate of new AACs acquired in calendar year 2020 was 86% in 2021. This AAC retention rate held steady against our historical pattern, indicating healthy user stiffness on our platforms. Our overall ARPU, or the average annual spend per AAC, decreased by a low single-digit percentage year-over-year in 2021 due to increased contribution of new users from less developed areas. But I want to highlight that our pool of our AACs with over 10,000 RMB annual spend on our platform continued to increase year over year. Looking ahead, we aim to further strengthen user engagement and time spent through a greater variety of consumption use case offerings. We want to enhance our influence on the consumer decision-making journey and tailor it to reflect unique considerations of each product category. We will shift our focus from spending the total number of AACs in China to driving deeper AAC penetration across product categories. This will ultimately help us capture a more significant consumer water share. Over the past year, we invested heavily in Taobao Deals and Tao Caicai. We do not view these two businesses as standalone units, but integral parts of our China commerce business matrix. The unique value contribution of these two new businesses gradually became clear following several quarters of development. Taobao Deal has been a powerhouse in new user acquisition for China Commerce, attracting 280 million AACs within a quarterly net add of 39 million. Paid orders during the quarter grow over 100% year-over-year. Taobao Deals and the Taobao APP have highly complementary user base, with a higher proportion of price-sensitive consumers on Taobao Deals. there are many ways for us to realize the commercial value of these users. One example is improving supply chain efficiency by connecting manufacturers directly with consumers. As for Tao Cai Cai, it has been a successful use case extension into the grocery and fresh produce category for price sensitive consumers. More than 50% of Tao Cai Cai's AACs were first-time fresh-produced buyers on our platforms. Now that Taobao Deal and Tao Tai Tai have established market presence, we will shift our focus towards quality growth. Through optimizing efficiency, we expect to gradually narrow the operating losses in these two businesses in the next few quarters. In local consumer business, In local consumer services, the combined AACs of our to-home and to-designation business have reached $372 million, reflecting a quarterly net add of $70 million. Total order volume grew 22% year-over-year. On the to-home side, we made meaningful progress in improving unit economics for Ulema through a city strategy with more disciplined user acquisition spending and improved delivery cost. On the two destination side, AMAP reached a recall high of over 200 million DAUs during the National Day holiday in China, while transacting users continued to grow during the quarter. We believe the picture of AMAP transforming from a map navigation tool to a lifestyle services platform centering around destination is becoming more and more clear. For our international commerce business, AACs reached $301 million by December, with a quarterly net add of $16 million. Overall order growth continued to maintain healthy momentum at 25% year-over-year, with Lazada and Trendio growing 52% and 49%, respectively. Aliexpress was negatively impacted by change in European Union's VAT exemptions. We believe the future of development of international commerce markets will be based on the combined combination of local supply and cross-border supply. Our long-term focus is a balance of both. to fully leverage China's advantage in cross-border supply while organizing local supply effectively. Meanwhile, logistics network development is a priority in our globalization strategy, as logistics is a fundamental infrastructure supporting a high-quality consumer experience based on integrated product supply from cross-border and locally. Tainiao has been developing local logistics network in Southeast Asia and Europe, leveraging the commerce use cases presented by Lazada, Aliexpress, and Trendio. We will continue to invest in Tanyo's global logistics network as a cornerstone of our globalization strategy. Additionally, global coverage and capacity in cloud is another essential piece supporting our globalization strategy. This quarter, AliCloud continues to invest in expanding its international infrastructure. We added two data centers in Asia Pacific, one in Korea and one in Thailand. AliCloud now provides cloud computing services in 25 regions globally. Our cloud revenue grew 20% year-over-year this quarter. We saw very strong growth in demand from financial services and the telecom sectors, which partially offset slowing demand from some customers in internet sector. China's cloud market will be a trillion RMB opportunity by 2025, and industrial digitalization today is still in a very early stage. Alibaba Cloud is committed to serving the real economy for the long term, and the digitalization of all industries. Recently, we helped the International Olympic Committee migrate 100% of their core systems onto Alibaba Cloud during the Beijing Winter Olympics. This is the first time in the history of Olympic Games that cloud computing has replaced traditional IT infrastructure to support the planning and operations of the Games. In the past, Each Olympic host city would have to build extensive IT infrastructure and dismantle it after the end of the Games. By replacing the physical infrastructure with cloud-based services, hardware costs will be significantly reduced, while application development and deployment will be much more efficient. We see similar opportunities and advantages for digitalization in many industries in the future. such as new energy vehicles, financial services, and health care. These industries have high potential with massive demand for cloud computing and digital intelligence. We will leverage Alibaba Cloud's proprietary technology and products to deliver tailored industry solutions. As China continues to advance toward its carbon peak and neutrality goals, We foresee increasing demand for more reliable and sustainable technology infrastructure as digital transformation deepens across industries. We aim to leverage Alibaba Cloud's product and technology innovations to help our customers find a greater energy efficiency. For example, our data centers equipped by liquid cooling technology achieve industry-leading energy efficiency level with a PoE of as low as 1.09. Moreover, our facilities can deliver high performance with lower power consumption, leveraging our proprietary product and technologies. During our investor day this past December, we announced Alibaba's carbon neutrality pledge. By 2030, we committed to achieving scope one, two, and three carbon neutrality for Alibaba Cloud, scope one and two carbon neutrality in the operation of Alibaba Group, and reducing scope three carbon intensity by half. Additionally, we introduced a concept of scope three plus to facilitate 1.5 gigatons of decarburization across Alibaba's ecosystem participants by 2035. Since Q4 last year, China's regulators have issued multiple important statements about the digital economy. They emphasize the need to strengthen China's digital economy, improve its quality, and grow its scale. They also promote healthy and sustainable development of the platform economy based on robust platform governance. These principles are highly consistent with Alibaba's own business philosophy and commitment to social responsibility. Looking ahead, we remain focused on healthy and sustainable development by serving our customers, especially SMEs, supporting the digital transformation of industries, serving the real economy, and supporting our community. Thank you, everyone, for your time. Now I will turn it to Toby, who will walk you through the details of financial results.