Alibaba Group Announces June Quarter 2020 Results

20-Aug-2020 Intellasia | BusinessWire | 5:37 PM Print This Post

HANGZHOU, China--(BUSINESS WIRE)--Alibaba Group Holding Limited (NYSE: BABA and HKEX: 9988, “Alibaba” or “Alibaba Group”) today announced its financial results for the quarter ended June 30, 2020.


Alibaba delivered excellent results this past quarter. We were well positioned to capture growth from the ongoing digital transformation, which has been accelerated by the pandemic, in both consumption and enterprise operations,” said Daniel Zhang, Chairman and Chief Executive Officer of Alibaba Group. “We mobilized our entire digital infrastructure to support the economic recovery of businesses across a wide range of sectors, while broadening and diversifying our consumer base by addressing their changing preferences in a post-COVID-19 environment. Despite these unusual times, we remain focused on the long term, on fulfilling our mission, and on creating true value for our consumers and business customers.”

We delivered a very strong start to our new fiscal year, with revenue growing 34% year-over-year and adjusted EBITDA growing 30% year-over-year,” said Maggie Wu, Chief Financial Officer of Alibaba Group. “Our domestic core commerce business has fully recovered to pre-COVID-19 levels across the board, while cloud computing revenue grew 59% year-over-year. Our strong profit growth and cash flow enable us to continue to strengthen our core business and invest for long term growth.”

BUSINESS HIGHLIGHTS

In the quarter ended June 30, 2020:

  • Revenue was RMB153,751 million (US$21,762 million), an increase of 34% year-over-year.
  • Annual active consumers on our China retail marketplaces reached 742 million, an increase of 16 million from the 12-month period ended March 31, 2020.
  • Mobile MAUs on our China retail marketplaces reached 874 million in June 2020, an increase of 28 million over March 2020.
  • Income from operations was RMB34,705 million (US$4,912 million), an increase of 42% year-over-year. Adjusted EBITDA, a non-GAAP measurement, increased 30% year-over-year to RMB51,039 million (US$7,224 million). Adjusted EBITA, a non-GAAP measurement, increased 31% year-over-year to RMB45,372 million (US$6,422 million).
  • Net income attributable to ordinary shareholders was RMB47,591 million (US$6,736 million), and net income was RMB46,437 million (US$6,573 million). Non-GAAP net income was RMB39,474 million (US$5,587 million), an increase of 28% year-over-year.
  • Diluted earnings per ADS was RMB17.36 (US$2.46) and non-GAAP diluted earnings per ADS was RMB14.82 (US$2.10), an increase of 18% year-over-year. Diluted earnings per share was RMB2.17 (US$0.31 or HK$2.38) and non-GAAP diluted earnings per share was RMB1.85 (US$0.26 or HK$2.03), an increase of 18% year-over-year.
  • Net cash provided by operating activities was RMB50,099 million (US$7,091 million) and non-GAAP free cash flow was RMB36,570 million (US$5,176 million).

Reconciliations of GAAP measures to non-GAAP measures presented above are included at the end of this results announcement.

BUSINESS AND STRATEGIC UPDATES

Core Commerce

China Retail Marketplaces – broad product selection and engaging user experience drive consumer growth and higher purchase frequency

Consumers – the largest consumer platform in China continues rapid growth while increasing penetration in less developed areas

In June 2020, our China retail marketplaces had 874 million mobile MAUs, representing a quarterly net increase of 28 million. Annual active consumers on our China retail marketplaces was 742 million for the twelve months ended June 30, 2020, representing a quarterly net increase of 16 million. We continue to acquire new users and consumers from less developed areas, reflecting our ongoing success in broadening product offerings to meet diverse demands. For example, Taobao Deals (特价版), which enables merchants and manufacturers to sell directly to value conscious consumers, has been growing rapidly since we launched a new version in March 2020. In June 2020, Taobao Deals had approximately 40 million MAUs.

Product Supply – fast growing platform delivers the most comprehensive product offering

Tmall online physical goods GMV, excluding unpaid orders, grew 27% year-over-year during the June 2020 quarter, with all major categories growing at similar or faster rates compared to the December 2019 quarter, before the onset of the COVID-19 pandemic. This solid growth was primarily driven by higher purchase frequency and increased new consumer acquisitions, reflecting the success of our consumer segmentation and category expansion strategies. Fast-moving consumer goods (“FMCG”), home furnishings and consumer electronics categories were the fastest growing categories during the quarter.

Tmall Global is the premier platform that helps overseas brands and merchants reach Chinese consumers directly, build brand awareness and gain unparalleled consumer insights. During the quarter, Tmall Global GMV, excluding unpaid orders, grew over 40% year-over-year, reflecting strong consumer demand for high quality, branded products from overseas, as well as increasing online purchases due to the impact of the COVID-19 pandemic on international travel.

Engagement – multiple engaging and interactive formats drive higher consumer spending

In the June 2020 quarter, our China retail marketplaces exhibited solid GMV growth. This growth was driven by increased consumption through effective marketing campaigns and our ongoing success in increasing spend per consumer through interactive formats and features. Annual spending per consumer continues to exhibit strong growth reflecting higher engagement among our consumers.

We achieved another record 6.18 Mid-Year Shopping Festival in scale and reach. We offered interactive promotions and tailor-made deals for different categories that were popular among consumers. As part of the festival, our China retail marketplaces, together with local governments and merchant partners, distributed billions of RMB in consumer coupons and subsidies to stimulate domestic consumption and revitalize businesses across China.

Taobao Live’s ecosystem continues to strengthen with broader adoption by brands, retailers and merchants across all product categories. Taobao Live’s KOLs (key opinion leaders) continue to generate robust GMV growth on the platform. At the same time, brands, retailers and merchants are also increasingly hosting live streaming sessions by themselves to connect directly with consumers. During the June 2020 quarter, Taobao Live GMV continued to grow over 100% year-over-year. In addition, live streaming sessions hosted by merchants accounted for approximately 60% of Taobao Live GMV (excluding unpaid orders).

New Retail – increasing value through new business models enabled by the digital transformation of brick-and-mortar retailing

Our New Retail operations continue to accelerate digitalization of our offline retail partners and enable them to offer a seamless omni-channel experience for consumers. Businesses within our New Retail grocery vertical are benefitting from Chinese consumers’ increasing adoption of online shopping for groceries and daily necessities.

Creating the New – Our self-operated grocery retail chain Freshippo (known as “Hema” in Chinese) continues to expand its footprint, achieve robust same-store sales growth, optimize its store operations and improve customer experience. For the June 2020 quarter, online penetration of Freshippo’s GMV continued to be above 60%. As of June 30, 2020, we self-operated 214 Freshippo stores in China, primarily located in tier 1 and tier 2 cities.

Transforming the Old – Tmall Supermarket continues to deepen its collaboration with Sun Art through our omni-channel solutions for retail grocery partners. Since its launch in September 2019, our half-day delivery service that use Sun Art’s store-based inventories has seen tremendous growth as consumers enjoy greater product selection and faster delivery. Our half-day delivery service helped Sun Art capture new online consumers living within a 20 kilometer radius from its stores. In the June 2020 quarter, Alibaba enabled approximately 15% of Sun Art’s total revenue.

Local Consumer Services – increased investment in market penetration with focus on operational efficiency

Ele.me food delivery GMV growth turned positive in April and improved during the quarter as lockdown measures for the pandemic in China were lifted. Unit economics per order for the on-demand delivery business was positive during the quarter, reflecting improved delivery network efficiency as well as enhanced marketing efficiency that leverages our consumer insights technology.

We are attracting many high-quality restaurant chains and local service merchants throughout China with our digital technology and the value added services of the Alibaba digital economy. As a result, merchant acquisition continued to accelerate, with the number of registered merchants of Ele.me as of June 30, 2020 growing 30% year-over-year. We also continue to acquire new users for our local consumer services business by leveraging the Alibaba digital economy. For the June 2020 quarter, approximately 45% of new customers ordering food delivery came from the Alipay app.

Cainiao Network – progress in last-mile solutions as well as international and cross-border fulfillment

Cainiao Network continues to improve the efficiency of its partners and China’s logistics industry overall through its data technology and infrastructure investments. In urban areas, Cainiao Post (neighborhood and campus stations and residential self- pick-up stations) continues to see robust adoption by third party logistics players to optimize their last-mile delivery. In June 2020, Cainiao Post recorded over 100% year-over-year growth in average daily package volume.

The COVID-19 pandemic has caused significant disruptions to the import and export of goods by foreign businesses and organizations with operations in China. During the quarter, Cainiao Network enabled organizations and businesses to utilize its robust import and export fulfillment solutions that leverage its dedicated worldwide warehouse network and Smart Customs Clearance System. For example, in April 2020, the United Nations World Food Programme selected Cainiao Network to provide commercial hub, customs declaration and cross-border transportation services as part of its global response to the COVID-19 pandemic.

International – strong growth in Southeast Asia

Lazada, our Southeast Asian e-commerce platform, continues to deliver strong growth momentum. For the June 2020 quarter, Lazada achieved over 100% quarterly order growth, reflecting strong consumer demand in general merchandise, FMCG and electronics categories. The robust growth reflects an accelerating shift to online consumption in this region. During the quarter, Lazada also saw solid merchant growth and greater increases in product supplies. Brands and merchants are also leveraging interactive engagement formats such as live-streaming and mini-games on Lazada to connect with online consumers.

Cloud Computing

Alibaba Cloud leads the Asia Pacific cloud computing market by developing technology and business solutions that enable the digital transformation of businesses across industries. According to IDC (July 2020), Alibaba Cloud was the largest public cloud service provider in China, as measured by market share for IaaS (Infrastructure as a Service) as well as PaaS (Platform as a Service) for the quarter ended March 31, 2020.

We continue to expand and upgrade our PaaS offerings, such as data analytics and database management. According to the Transaction Processing Performance Council, AnalyticDB, our ultra-large-scale database, has been ranked the world’s fastest real-time data warehouse solution for the second straight year. AnalyticDB allows businesses to perform real-time petabyte-level data analysis and has been widely adopted by businesses in different industries, including e-commerce, finance, logistics, public transportation and entertainment.

In the June 2020 quarter, cloud computing revenue grew 59% year-over-year to RMB12,345 million (US$1,747 million), primarily driven by increased revenue contribution from both our public cloud and hybrid cloud businesses, reflecting higher average revenue per customer.

Digital Media and Entertainment

Youku continues to focus on increasing paying subscribers and delivering a superior user experience by offering more original and exclusive content. Youku’s daily average subscriber base increased by over 60% year-over-year during the quarter. The increase was primarily driven by Youku’s more effective targeting of new subscribers and increased contribution from the 88VIP membership program on our China retail marketplaces. Additionally, as we continue to focus on return on investments and cost efficiencies for the Youku business, loss year-over-year further narrowed during the quarter.

Cash Flow from Operating Activities and Free Cash Flow

In the June 2020 quarter, net cash provided by operating activities was RMB50,099 million (US$7,091 million), an increase of 45% compared to RMB34,612 million in the same quarter of 2019. Free cash flow, a non-GAAP measurement of liquidity, increased by 39% to RMB36,570 million (US$5,176 million), from RMB26,361 million in the same quarter of 2019, mainly due to our robust profit growth. A reconciliation of net cash provided by operating activities to free cash flow is included at the end of this results announcement.

KEY OPERATIONAL METRICS*

 

 

June 30,

 

March 31,

 

June 30,

 

Net adds

 

2019

 

2020

 

2020

 

YoY

 

QoQ

 

 

 

 

 

 

 

 

 

 

 

China Commerce Retail:

 

 

 

 

 

 

 

 

 

 

Annual active consumers(1) (in millions)

 

674

 

726

 

742

 

68

 

16

Mobile monthly active users (MAUs)(2) (in millions)

 

755

 

846

 

874

 

119

 

28

______________________

*

For definitions of terms used but not defined in this results announcement, please refer to our annual report on Form 20-F for the fiscal year ended March 31, 2020.

(1)

For the twelve months ended on the respective dates.

(2)

For the month ended on the respective dates.

JUNE QUARTER SUMMARY FINANCIAL RESULTS

 

Three months ended June 30,

 

 

 

2019

 

2020

 

 

 

RMB

 

RMB

 

US$(1)

 

YoY %
Change

 

(in millions, except percentages and per share amounts)

 

 

 

 

 

Revenue

114,924

 

153,751

 

21,762

34

%

 

 

 

 

 

Income from operations

24,375

 

34,705

 

4,912

42

%

Operating margin

21

%

23

%

 

 

Adjusted EBITDA(2)

39,238

 

51,039

 

7,224

30

%

Adjusted EBITDA margin(2)

34

%

33

%

 

 

Adjusted EBITA(2)

34,556

 

45,372

 

6,422

31

%

Adjusted EBITA margin(2)

30

%

30

%

 

 

 

 

 

 

 

Net income

19,122

 

46,437

 

6,573

143

%(3)

Net income attributable to ordinary shareholders

21,252

 

47,591

 

6,736

124

%(3)

Non-GAAP net income(2)

30,949

 

39,474

 

5,587

28

%

 

 

 

 

 

Diluted earnings per share(4)

1.01

 

2.17

 

0.31

115

%(3)

Diluted earnings per ADS(4)

8.06

 

17.36

 

2.46

115

%(3)

Non-GAAP Diluted earnings per share(2) (4)

1.57

 

1.85

 

0.26

18

%

Non-GAAP Diluted earnings per ADS(2) (4)

12.55

 

14.82

 

2.10

18

%

______________________

(1)

This results announcement contains translations of certain Renminbi (“RMB”) amounts into U.S. dollars (“US$”) and Hong Kong dollars (“HK$”) for the convenience of the reader. Unless otherwise stated, all translations of RMB into US$ were made at RMB7.0651 to US$1.00, the exchange rate on June 30, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board, and all translations of RMB into HK$ were made at RMB0.91344 to HK$1.00, the middle rate on June 30, 2020 as published by the People’s Bank of China. The percentages stated in this announcement are calculated based on the RMB amounts and there may be minor differences due to rounding.

(2)

See the sections entitled “Information about Segments,” “Non-GAAP Financial Measures” and “Reconciliations of Non-GAAP Measures to the Nearest Comparable GAAP Measures” for more information about the non-GAAP measures referred to within this results announcement.

(3)

The year-over-year increase was mainly due to a net gain arising from increases in the market prices of our equity investments in publicly-traded companies in the quarter ended June 30, 2020, compared to a net loss arising from the decrease in the market prices of these equity investments in the same quarter of 2019.

(4)

Each ADS represents eight ordinary shares, which reflects the share subdivision and ADS ratio change that became effective on July 30, 2019.

JUNE QUARTER INFORMATION BY SEGMENTS

The table below sets forth selected financial information of our operating segments for the periods indicated:

 

Three months ended June 30, 2020

 

 

Core
commerce

 

Cloud
computing

Digital media
and
entertainment(1)

Innovation
initiatives
and others(1)

 

 

Unallocated(2)

 

 

Consolidated

 

RMB

RMB

RMB

RMB

RMB

RMB

US$

 

(in millions, except percentages)

Revenue

133,318

 

12,345

 

6,994

 

1,094

 

 

153,751

 

21,762

 

 

 

 

 

 

 

 

 

Income (Loss) from operations

45,192

 

(1,774

)

(2,018

)

(3,565

)

(3,130

)

34,705

 

4,912

 

Add: Share-based compensation expense

3,425

 

1,425

 

452

 

837

 

1,576

 

7,715

 

1,092

 

Add: Amortization of intangible assets

2,620

 

7

 

245

 

23

 

57

 

2,952

 

418

 

 

 

 

 

 

 

 

 

Adjusted EBITA

51,237

(3)

(342

)

(1,321

)

(2,705

)

(1,497

)

45,372

 

6,422

 

Adjusted EBITA margin

38

%

(3

)%

(19

)%

(247

)%

30

%

 

 

Three months ended June 30, 2019

 

 

Core
commerce

 

 

Cloud
computing

 

Digital media
and
entertainment(1)

 

Innovation
initiatives
and others(1)

 

 

 

Unallocated(2)

 

 

 

Consolidated

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

(in millions, except percentages)

Revenue

99,544

 

7,787

 

6,426

 

1,167

 

 

114,924

 

 

 

 

 

 

 

 

 

Income (Loss) from operations

35,049

 

(1,509

)

(3,282

)

(2,877

)

(3,006

)

24,375

 

 

Add: Share-based compensation expense

3,310

 

1,147

 

621

 

990

 

1,047

 

7,115

 

 

Add: Amortization of intangible assets

2,666

 

4

 

330

 

20

 

46

 

3,066

 

 

 

 

 

 

 

 

 

Adjusted EBITA

41,025

(3)

(358

)

(2,331

)

(1,867

)

(1,913

)

34,556

 

 

Adjusted EBITA margin

41

%

(5

)%

(36

)%

(160

)%

 

30

%

______________________

(1)

Starting this quarter, we reclassified the results of our self-developed online games business, which was previously reported under the innovation initiatives and others segment, to the digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures have also been reclassified to conform to current year’s presentation.

(2)

Unallocated expenses primarily relate to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.

(3)

Marketplace-based core commerce adjusted EBITA increased 19% year-over-year to RMB55,476 million (US$7,852 million). A reconciliation of adjusted EBITA for core commerce to marketplace-based core commerce adjusted EBITA is included at the end of this results announcement.

JUNE QUARTER OPERATIONAL AND FINANCIAL RESULTS

Revenue

Revenue for the quarter ended June 30, 2020 was RMB153,751 million (US$21,762 million), an increase of 34% compared to RMB114,924 million in the same quarter of 2019. The increase was mainly driven by the robust revenue growth of our China commerce retail and cloud computing businesses.

The following table sets forth a breakdown of our revenue by segment for the periods indicated:

 

Three months ended June 30,

 

 

 

2019

 

2020

 

 

 

RMB

 

% of
Revenue

 

RMB

 

US$

 

% of
Revenue

 

YoY %
Change

 

(in millions, except percentages)

Core commerce:

 

 

 

 

 

 

China commerce retail

 

 

 

 

 

 

- Customer management

41,954

37

%

51,434

7,280

33

%

23

%

- Commission

16,902

15

%

19,781

2,800

13

%

17

%

- Others(1)

16,745

14

%

30,106

4,261

20

%

80

%

 

75,601

66

%

101,321

14,341

66

%

34

%

China commerce wholesale

2,992

3

%

3,484

493

2

%

16

%

International commerce retail

5,567

5

%

7,012

992

5

%

26

%

International commerce wholesale

2,245

2

%

3,204

454

2

%

43

%

Cainiao logistics services

5,005

4

%

7,713

1,092

5

%

54

%

Local consumer services

6,180

5

%

7,101

1,005

5

%

15

%

Others

1,954

2

%

3,483

493

2

%

78

%

Total core commerce

99,544

87

%

133,318

18,870

87

%

34

%

 

 

 

 

 

 

 

Cloud computing

7,787

7

%

12,345

1,747

8

%

59

%

Digital media and entertainment(2)

6,426

5

%

6,994

990

4

%

9

%

Innovation initiatives and others(2)

1,167

1

%

1,094

155

1

%

(6

)%

Total

114,924

100

%

153,751

21,762

100

%

34

%

______________________

(1)

“Others” revenue under China commerce retail is primarily generated by our New Retail and direct sales businesses, comprising mainly Tmall Supermarket, Freshippo, direct import and Intime.

(2)

Starting this quarter, we reclassified revenue from our self-developed online games business, which was previously reported under the innovation initiatives and others segment, as revenue from digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures have also been reclassified to conform to current year’s presentation.

Core commerce

  • China commerce retail business

    Revenue from our China commerce retail business in the quarter ended June 30, 2020 was RMB101,321 million (US$14,341 million), an increase of 34% compared to RMB75,601 million in the same quarter of 2019. Revenue from our China retail marketplaces recorded a strong recovery compared to March 2020 quarter. Combined customer management and commission revenues grew 21% year-over-year, reflecting an increase of 23% in customer management revenue and an increase of 17% in commission revenue. The growth of customer management revenue was primarily due to increased revenue contribution from new monetization formats, including recommendation feeds, as well as the increase in volume of paid clicks in search monetization.

    The growth of commission revenue was primarily due to strong 27% year-over-year growth of Tmall online physical goods GMV, excluding unpaid orders. Commission revenue did not grow in proportion to the growth of Tmall online physical goods GMV (excluding unpaid orders), mainly because of faster growth in FMCG and consumer electronics categories that have lower blended commission rates, and also because of our initiatives to support our merchant customers, including our waiver of annual services fees for the first half of 2020.

    “Others” revenue under China commerce retail business was RMB30,106 million (US$4,261 million), achieving year-on-year growth of 80% compared to RMB16,745 million in the same quarter of 2019. The increase was primarily driven by contributions from our direct sales businesses, including Tmall Supermarket and Freshippo, as well as our consolidation of Kaola starting in September 2019.

    We expect that the proportion of revenue of our direct sales businesses will continue to increase as we further implement our New Retail strategy.
  • China commerce wholesale business

    Revenue from our China commerce wholesale business in the quarter ended June 30, 2020 was RMB3,484 million (US$493 million), an increase of 16% compared to RMB2,992 million in the same quarter of 2019. The increase was primarily due to an increase in average revenue from paying members on 1688.com, as well as an increase in revenue from Lingshoutong (零售通), our platform that connects FMCG brands and their distributors directly with small retailers.
  • International commerce retail business

    Revenue from our international commerce retail business in the quarter ended June 30, 2020 was RMB7,012 million (US$992 million), an increase of 26% compared to RMB5,567 million in the same quarter of 2019.

Contacts

Investor Relations Contact:
Rob Lin
[email protected]

Media Contacts:
Brion Tingler
[email protected]

Cathy Yan
[email protected]


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