Alibaba Group Holding Limited

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's December 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 Lin, Head of Investor Relations of Alibaba Group. Please go ahead.

Thank you. Good day, everyone, and welcome to Alibaba Group's December quarter 2022 results conference call. With us today are Daniel Zhang, Chairman and CEO, Joe Tsai, Executive Vice Chairman, Toby Hsu, CFO. This call is also being webcasted 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 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 20F 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 reconciliation of GAAP to non-GAAP measure can be found in our earnings press release. Unless otherwise stated, growth rate of all the metrics mentioned on this call refer to year-over-year growth versus the same quarter last year. With that, I will now turn to Daniel.

Thanks, Rob. Hello, everyone. Thank you for joining our earnings call today. This past quarter, our business and operations experienced significant challenges due to the rapid change in the COVID situation during December. Despite these challenges, we delivered double-digit year-on-year growth in our adjusted EBITDA and the free cash flow through effective business management, cost optimization, and operating efficiency. With the lifting of COVID-related measures at the end of peak wave, everything is now quickly getting back on track. In general, consumer confidence and business confidence are rising. Logistics has resumed normal operations, with the entire supply and manufacturing chains becoming active. Digital transformation across different industries and sectors has accelerated significantly. Against this backdrop, our various businesses are showing positive trends. Recently, the IMF raised the estimated GDP growth for China to 5.2% this year. Given the expectation for economic recovery following the lifting of COVID-related measures and China's reopening. I have chosen progress as a key word internally to set the tone for Alibaba's development this year. We need to respond quickly to the change in the macro environment and the major cycles. The theme of progress represents the need to adapt to the trends in the macro environment and for Alibaba's own development. In China's post-COVID economic development, although different businesses across our complex ecosystem face their own unique circumstances, we remain confident in our three main strategic pillars of consumption, cloud computing, and globalization. Now I will share how our business performed this past quarter in a difficult COVID environment. together with some color on the situation in January and February, and how we plan to capture opportunities across our businesses. During December quarter, the China consumer market was highly impacted by COVID cases. Taobao and Tmall GMV dropped mid single-digit year-on-year, and the consumption demand was quickly suppressed. In terms of category, apparel and other discretionary goods were weak, while healthcare and wellness-related grew strongly. This is consistent with the data trend released by the National Bureau of Statistics of China. From January to early February of this year, overall sales of online physical goods remained weak, and our China commerce continued to be highly impacted due to COVID cases as well as people traveling home or to other places during the spring festival holidays. But as the influence of COVID cases at the spring festival travel subsided in February, especially recovery in categories such as apparel and sports and outdoors, as work and life returned to normal, All of our merchants have also expressed their strong desire to get to business. We expect this recovery will continue. In our operations, we are strengthening the user experience and customer value proposition on Taobao and Tmall to reinforce our market leadership with the following measures. First, enhance user stickiness and time spent. Taobao and Tmall are home to China's most comprehensive population of online shoppers and is the most efficient consumer transaction platform. We are building on our competitive advantage by continuing to introduce a wide variety of consumption-related contents in the form of short-form video, live streaming, and other formats to strengthen consumer stickiness, product discovery, influence, and the user engagement. Second, enhance value for money proposition. Price is always a key factor in consumer purchasing decisions. We will continue to improve competitive pricing of products through the design of marketplace mechanisms, promotional marketing features, and the retail model innovations, such as Powerball deals direct from factory goods and farm-to-table offerings. Third, neighborhood digital retail. We will capture consumers' time-sensitive needs for highly-frequency everyday necessities through our neighborhood digital retail business, such as Tao Xian Da and Tao Cai Cai that fulfill orders from local supply chains using local deliveries. In local consumer services, Erlang's restaurant order volume growth rate picked up towards the end of this quarter due to increased home-based consumption from COVID cases. Notably, non-restaurant order volume growth rate was far higher than what it was for restaurants. The business saw an increase in revenue due to higher average order value. Ongoing improvements in operating efficiency resulted in lower expense ratios in marketing and logistics. Erlema continued to demonstrate positive unit economics, and it will continue to improve. During COVID, Erlema adjusted operating strategies, safeguarded its delivery capabilities, and supported supply recovery. During peak COVID cases, AMAP's user scale and scale of services used were greatly affected. As cases eased, usage of AMAP quickly recovered. Run heading and hotel room booking volume grew very rapidly. AMAP has become a new platform providing various destination-based consumer services. FLEEGIS domestic and outbound travel activity also quickly grow during the spring festival holidays. As a result of our ongoing development of the supply chain and the service capability over the past two years, recovery of FLEEGIS domestic airplane ticket and hotel booking was significantly faster than the overall domestic travel performance reported by the China National Tourism Administration. and a noticeable day better in comparison to 2019 before the COVID outbreak. In international commerce, our various businesses made steady progress. TrendDeal continued to deliver strong growth as overall order volume grew over 50% year-on-year, with local consumer services growing even faster. When Turkey was suddenly hit by earthquakes in early February, we actively organized and delivered support for emergency relief. So far, all our employees in Turkey are safe. Trendio's business operations remain stable, and they have mobilized resources to aid disaster relief. As for Lazada, as the business continues to optimize for order volume growth. They also reduced loss per order by more than 30% year-on-year. We remain firmly committed to continuing to invest in Lazada's region of Southeast Asia. Through close collaboration with Tainiao, AliExpress greatly optimized time-bound order deliveries on key routes. As logistics services quality continues to improve, and the impact of VAT and the foreign exchange rate in Spain and France continue to ease, AliExpress order volume is starting to show positive growth. Our globalization strategy will continue to be firmly focused on Southeast Asia and Europe through a mix of localized retail and cross-border commerce. We will continue to make sustainable long-term investments and build businesses that can withstand economic cycles. China is celebrating its 10th anniversary this year. It has built a robust, comprehensive business covering China and cross-border international logistics, large-mile logistics technology, and more. It is also continuing to make progress in green logistics and emergency response logistics. In China, Chineo continues to expand its doorstep delivery services for our Taobao and Tmall customers. During the most recent November 11, more than 18 million orders from Taobao and Tmall were delivered to customers' doorsteps daily at its peak, which includes those delivered directly to doorsteps through or through Chineo post locations in residential communities. Anyo has also built its own international logistics network over the past few years. As of this past quarter, it had more than 15 international sorting centers in operation. Our cloud business overall revenue growth rate this quarter was 3% year-on-year. The growth rate for public cloud was double-digit year-on-year, which was partially offset by a decline in hybrid cloud revenue from project delays due to COVID. In terms of revenue by industry, financial services, education, and automobiles are among the growth drivers. We also announced an important organizational change towards the end of last year. I took on the role of Acting President of Alibaba Cloud in addition to my current role as Chairman and CEO of Alibaba Group. This decision was based on a few considerations. First, cloud computing is one of Alibaba's core strategies for the future. Innovation and other technologies will have an impact not just on Alibaba Cloud, but the entire Alibaba Group. Alibaba Cloud is also the foundation through which Alibaba serves the real economy and will continue to drive physical digital integration. Third, we believe this is a critical period for technological breakthrough and development in the nexus of cloud computing and AI. As one of the leading cloud computing service providers globally, We strongly believe in the vast potential of industrial digitalization and the role of cloud computing as infrastructure to the digital economy. Going forward, we will focus on a few areas to reinforce and strengthen our market leadership position as we look at opportunities ahead. First, enhance the stability and the security of our cloud computing services. while continuing to optimize performance and manage costs through technology advancement. Second, continue to build a dynamic developers and industry ecosystem for cloud computing. Third, collaborate with partners to provide intelligence-based industry solutions to our customers in different industries and sectors. continue to push forward a holistic cloud-based service product that integrates our intelligent online workplace collaboration platform and application development platform. Lastly, in this exciting era of disruptive breakthroughs initiative by generative AI, computer power is essential. On one hand, we will continue building our own large-scale pre-training model. We are also ready to capture the market opportunities to provide the computing power for the various generative AI models and its applications. This year marks Alibaba Group's 24th year, and in Chinese traditional culture, this means we have gone through two complete calendar cycles. We captured two historical opportunities of e-commerce in China for the consumer Internet and start to cloud computing in China for the industrial Internet. We will continue to capture the vast opportunities ahead through the impact of technology on commerce and other facets of our society and environment. Although there are many uncertainties in the journey ahead that are very difficult to evaluate, we remain highly confident in the future of Alibaba and China's development. Thank you, everyone. Let me pass the microphone to Toby, who will share our financial results.