Alibaba Group Holding Limited

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's June quarter 2022 results conference call. At this time, all participants are on listen-only mode. After management's prepared remarks, there will be a Q&A 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 June quarter 2022 results conference call. With us are Daniel Zhang, Chairman and CEO, Joe Tsai, Executive Vice Chairman, Toby Xu, Chief Financial Officer. This call is also being webcasted from our IF section of our corporate website. A replay of the call will be available on our website later today. Now, let me quickly 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 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 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 take undertake any obligations 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 on our earnings press release. Unless otherwise stated, growth rate of all the metrics stated during this call refers to year-over-year growth versus same quarter last year. In addition, during today's call, management will give their prepared remarks in English. A third party translator will provide simultaneous Chinese translation and 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 translations. All translations are for convenience purpose only. In the case of any discrepancy, management statements in the origin language will prevail. With that, I will now turn the call to Daniel.

Thanks, Rob. Hello, everyone. Thank you for joining our earnings call today. we have delivered stable results after overcoming challenges in an extraordinary quarter. According to data released by the National Bureau of Statistics, China's GDP grew by 0.4% in the last quarter, lowest since the outbreak of the pandemic. Retail sales decreased year-over-year in April and May due to the resurgence of COVID-19 in Shanghai and other major cities. and has slowly recovered in June. Despite the soft economic conditions, we managed to deliver stable revenues and narrow losses in our several strategic businesses by improving operating efficiency. In response to these external macro uncertainties, our guiding principles have been, as I wrote in my annual letter to shareholders, Be confident, be flexible, and be ourselves. We are confident about the future of the digital economy. We are confident that digitalization has a universal trend across industry and the market, and this will constitute an increasing percentage of the total economy. Be flexible means actively adapting to the external challenges and finding our own path through the social economic development cycles. Be ourselves means focusing on our three core strategies, namely consumption, cloud, and globalization, and delivering high quality growth with ESG as a foundation for reaching our vision of becoming a good company that lasts 102 years. More specifically, We are executing our three core strategies and delivering high quality growth in the highly uncertain environment today in the following ways. On consumption, we are leveraging our strengths, which is our digital commerce infrastructure built on comprehensive fulfillment capabilities to serve diverse consumer segments and focus on consumption categories with higher certainty of demand. we already achieved the target of 1 billion annual active consumers in China during the last fiscal year. Going forward, we will focus on growing our wallet share in different consumer segments instead of pursuing further absolute increase in our user base in China. On cloud, we will focus on enhancing our competitive advantage, which is our proprietary technologies and serving the sectors and customers that represent the future in social and industrial development. On globalization, we will focus on the markets with favorable economic development prospects in the next five to 10 years, investing in localized capabilities and building infrastructure in logistics and cloud. During the past quarter, Taobao and Tmall's GMV experienced a mid-single-digit percentage decline on a year-over-year basis. We saw signs of recovery since June as logistics and the supply chain situation gradually improved after COVID restrictions eased. Over the past few months, daily active users and consumption-related page views of our Taobao app remained relatively stable despite the market volatility. Consumers with the highest spending power demonstrated strong loyalty to our platforms. In the 12 months ended June 30, 2022, more than 123 million annual active consumers each spent over 10,000 RMB on Taobao and Tmall, representing a retention rate of approximately 98% compared to the prior 12-month period, which was on par with the data as of the end of March. 8 VIP members, our most important premium users, continued to grow at a healthy rate to 25 million by quarter end, with average with annual average spending of over 57,000 RMB per member. Starting in July, we are seeing gradual recovery of business performance compared to June, especially in the relatively more impacted category in the past few months, such as fashion and electronics. As we continue to grow our location-based digital commerce infrastructure in recent years, our diversified business models are showing complementary benefits. For example, while certain discretionary categories on Taobao Tmall were negatively impacted by the pandemic, our Freshepo and Ulema business captured growth opportunities in food and groceries. fulfilling family needs for daily necessities. In the past quarter, Fisher Post GMV grew over 30% year-over-year, and the Ulamas GMV of non-restaurant deliveries increased by over 50% year-over-year. We are aware that the overall growth of Taobao and Tmall's GMV was below China's retail sales growth in the past quarter. as we experience increasing fierce competition among various formats of e-commerce. From Alibaba perspective, I want to be clear about our competitive strategy. On the consumer side, we will continue to strengthen Taobao Apps consumer mindshare as the main shopping destination with diversified experience of digital commerce formats. In a highly uncertain market environment, we will focus on serving the consumer groups with higher spending power, while providing a matrix of consumer offerings with diversified value proposition for different user segments, such as Taobao Deals, Tao Cai Cai, Ido Fish, and Free Shippo, et cetera. On the merchant side, we will continue to enhance our tools and services to strengthen our marketplace position as the main platform for sustainable business operations. In addition, we will also take advantage of our quality of operations in China commerce. Our current scale is much bigger than our peers. And more importantly, our advantage in profitability is even larger. Therefore, we will make the best use of our capital reserves by increasing in building consumer mindshare, user experience, and core capability in key areas such as logistics and after-sales services, and execute on these as our long-term strategy. During the COVID resurgence in major cities such as Shanghai and Beijing in April and May, the digitalized network integrating intra-city commerce and fulfillment has become a new infrastructure in modern urban life. During the quarter, Olimus restaurant delivery volume were negatively impacted by COVID restrictions. However, Olimus GMV during the quarter was less impacted as order volume for non-restaurant deliveries such as food, grocery, and medicine increases rapidly. which also contributed much higher basket size than restaurant deliveries. As COVID impact eased, ULMA's operation has been recovering and its GMV resumed positive growth year-over-year in June. At the same time, while Fisherpool and Sunart experienced negative impacts in offline sales during the pandemic this quarter, They play an important role in providing essential supply support for local communities, leveraging their digital sales and intra-city fulfillment capabilities. The percentage of online sales for Frisheepo and Sunart during the quarter reached 68% and 36% respectively. ULMA's unique economics turned positive this quarter. mainly due to increased average order value as well as its ongoing focus in optimizing user acquisition spending and reducing delivery cost per order. Looking forward, Ullama will continue to focus on its city strategies and strengthen its customer mindset from restaurant delivery to everything delivery while improving its operating efficiency. We are confident about narrow early mass operating losses during the fiscal year. AMAP, another important business in our local consumer service segment, continue to grow towards a destination around service discover and transaction platform. In June, the number of average daily active users of AMAP reached a new high of over 120 million. driven by East COVID impacts and ongoing enrichments of local contents and services on the platform. Our international commerce retail businesses in Southeast Asia and Europe experienced a decline due to change in European Union's VAT rules, depreciation of local currencies, Russian-Ukraine conflict, and normalizing offline activities after COVID restrictions lifted in the regions. In spite of these challenges, we still see great opportunities in the international market under the general trend of digitalization. Today, we have already established certain foothold in the international market. On a combined basis, our international commerce retail business have an annualized GMV of over $50 billion. Going forward, we will continue to focus on growing both the cross-border model and the local commerce model and building logistics as a core capability. Despite the near-term sales fluctuations, we will continue to focus on building the cross-border logistics network from China to Europe and the local logistics network in Southeast Asia. We believe the establishment of these infrastructure will bring long-term value. Our cloud revenue delivered 10% growth year-over-year during the quarter. The slowdown in revenue growth was the result of multiple factors, including slowing microeconomic activities, declining in revenue from the top internet customer. softening demand from China Internet customers and a delay in parts of our hybrid cloud projects due to the impact of the COVID resilience. Looking forward amidst of uncertainties in economic outlook and the Internet industry deceleration, our cloud business will continue to focus on the following areas. Number one, building proprietary technology capabilities in key areas, such as computing, big data, and artificial intelligence. Number two, capturing the growth opportunity in industrial internet by identifying the sunrise industries and customers. And number three, strengthening our cloud data security capabilities and defending our bottom line. we have been seeing some progresses in these strategies. Contribution of cloud revenue from non-internet industries was 53% in this quarter, up more than 5 percentage points compared to the same quarter last year. During the same period, more and more enterprise customers are adopting Dintoc to work or study as COVID restrictions increased across the country. TeamTalk will continue to strengthen its position as a digital workplace collaboration platform by further improving the capabilities and increasing user penetration of its core office products, such as document collaboration and virtual conferencing. In addition, TeamTalk will enhance its local application development platform to encourage the development and usage of more diversified digital business applications on Dintox. As part of our ESG strategy, we are committed to corporate governance excellence and diversity at the board level. Earlier today, we announced two new independent directors appointments. Ms. Irene Li and Mr. Albert Ng are both respected business leaders with invaluable global insights as well as China experience. I believe their participation will add great value to our board. In addition, Mr. Dong Jianhua, one of our independent directors, will not seek re-election after his current term expiring in September. I would like to express our most sincere gratitude to Mr. Tong for his invaluable contribution to Alibaba over the years. Finally, I would like to talk about our thoughts on the path forward in the current micro environment. The external uncertainties, including but not limited to international geopolitical dynamics. COVID resurgence, and China's macroeconomic policies and social trends are beyond what we as a company can influence. The only things we can do at this moment is to focus on improving ourselves. For example, as I mentioned earlier, we have made meaningful progress during the quarter in narrowing operating losses for several business units, such as Taobao Deal, Tao Caicai, FreeShippo, Elema, Lazada, and Youku through operating efficiency enhancement and cost optimization. We are still in the process of improving the quality of operation across the organization. We are confident this is a result that we can deliver with certainty through our own efforts in a highly uncertain environment. Despite the challenges we are facing, Our overall financial position remains healthy with strong free cash flow and net cash reserves, which is our biggest advantage. During uncertain times, we believe the best investment is to invest in ourselves, to build our core capabilities, and to continue self-improvement. We will continue to focus on serving our high-quality customers building high-quality infrastructure for digital commerce and driving high-quality technology innovations. We believe these will lay the foundation for our healthy and sustainable development over the long term. Thank you, everyone, for your time. I now will turn the mic over to Toby, who will walk you through the details of our financial statements.