Alibaba Group Holding Limited (BABA) 4 Aug 222022 Q2 Earnings call transcript

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 in listen-only mode. After management's prepared remarks, there will be a Q&A session. to Investor call Relations like Lin, to now of Head of would turn over the Rob I Alibaba Group. ahead. go Please

be Good the Joe from section website. Officer. Tsai, This Alibaba later the to Vice Chairman; conference IR are and is call website Chief quarter replay available Executive Zhang, today. A everyone, Financial Xu, Daniel CEO; results on us call. corporate also Group's and of Chairman call will our Toby XXXX our of With day, June welcome being webcasted

Now let the safe discussion Today's statements. harbor. forward-looking me quickly cover may contain

Forward-looking and our actual current involve that from results may statements cause inherent risks expectations. materially to differ uncertainties

risks any adjusted non-GAAP undertake diluted and are as applicable statements, Kong financial per except Stock certain that a use basis. website update assumptions documents and we as refer obligations of EBITA adjusted uncertainties, Hong other please cash latest EBITDA announced of that free and these non-GAAP are under we note Please this with adjusted margin, EBITDA, this the a measures flow call forward-looking do Form on non-GAAP Any law. For make the are adjusted on to U.S. the on net on as XX-F discussion call we filed such ADS, income, on detailed EBITA, the margin, required to SEC earnings and that not statements annual of share, Exchange. expressed our report today, on based

of year. Unless the reconciliations year-over-year call stated our found same otherwise and refers metrics versus to growth to be rate quarter during on all the Our measures press of non-GAAP last GAAP our this GAAP release. can growth stated, earnings results

press provide will give our In addition, in Please for will English. on prepared their A details. Chinese today's refer translation another to translator line. release third-party call, conference simultaneous remarks during management

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our everyone. Thank you Rob. today. for joining Hello, earnings call Thanks,

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future confident digital economy. are about the the We of

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supply restrictions Tmall a During on basis. of logistics the decline the Taobao past experienced year-over-year quarter, chain recovery improved COVID, gradually and as eased. situation saw mid-single-digit percentage after and GMV a June, since We signs

period per per users which a members, on RMB XX with premium quarter of million of XXVIP as data average Over each of XX% XX,XXX important and app to month In XX the past annual consumption by to Taobao the highest most the volatility. our of Taobao months XXXX XX the continue rate healthy with page was with prior Tmall, ended grow average, representing relatively and to end, despite compared annual views Consumers our with than daily of spending million month few member. users the spent related over end market the approximately demonstrated retention power platforms. months, XX,XXX XXX June par over the stable rate loyalty active active on March. XX RMB more at to consumers remained strong our a spending

gradual as the are past more we especially seeing June that, compared in relatively to a to months, of and business Turning recovery impacted electronics. such fashion few category performance in

our years, we benefits. models grow commerce complementary As business recent based showing location continue to diversified in digital infrastructure our are

Tmall negatively Taobao were on impacted by categories pandemic. discretionary certain example, the For

groceries, daily deliveries necessities. for over GMV year-over-year. needs Ele.me food past fulfilling XX% In opportunities and quarter, family Ele.me's Our by the year-over-year XX% over GMV Freshippo increased grow business captured in Freshippo's of and growth and non-restaurant

the We was I GMV experienced growth overall e-commerce. retail growth Alibaba we in be to fierce formats as competitive perspective, are that Taobao the From and sales competition of about of Tmall below increasing strategy. among past China's quarter want aware various clear our

Fish highly On experience continue we on cetera. share In value user Deals, shopping market different to proposition mindset destination commerce serving Freshippo groups while with power, diversified consumer will consumer the formats. segments the spending and offerings of we et higher with Taobao the for as with consumer side, will Taobao main apps consumer Idle focus of a a matrix strengthen environment, providing diversified as such uncertain digital

to merchant side, for strengthen enhance marketplaces a the our main platform and our tools to continue business On services position sustainable operations. as we will

China In operations addition, we will quality our take in commerce. also of advantage of

bigger long-term increasing logistics, importantly, profitability these areas capital capability strategy. current mindshare, of we is aftersales more and Our building in the user advantage than execute services peers best even and much experience is reserves use Therefore, larger. our key on such our our and as in scale and as core our consumer by in will make the

Shanghai and as urban the integrating During cities infrastructure digitalized COVID has such e-commerce April in become the network fulfillment in life. Beijing new and and interested major resurgence in a May, modern

were COVID restrictions. delivery restaurant Ele.me's impacted quarter, the by negatively volumes During

was non-restaurant the such rapidly, higher volume also during quarter However, and food, medicine less as non-restaurant deliveries contributed basket impacted which grocery, Ele.me's as much size for order increases GMV deliveries.

due The costs during intracity quarter, Freshippo the spending unit order. time, delivery the positive As their been in sales reducing same sales in impacts quarter. online and supply Freshippo while well during They reached eased, recovering receiving role Art June. year-over-year this of turned providing Sun as percentage ongoing this At leveraging value, fulfillment positive quarter and digital as Art pandemic support the COVID capabilities. XX%, Ele.me's to growth increased for play experienced economics order respectively. its negative offline operation important optimizing per and average in communities, impact user local focus and acquisitions has sales an XX% GMV and its mainly Ele.me's and essential for in Sun

delivery Looking on will operating city efficiency. strengthen its continue mindset strategies improving customer its forward, everything while from and to Ele.me to restaurant focus its delivery,

the Ele.me's grow of In platform. fiscal by number average high important service local new Amap, We consumer of continue year. business our daily the active a COVID eased another narrow enrichment on towards operating Amap the a of June, to driven ongoing destination platform. are reached transaction a and million services losses users over and the during about around segment and in XXX confident local discover service, contents impacts of

activities still we have offline see international spite of certain and basis, On decline $XX opportunities Today, local Our experienced in due billion. these market Asia in already the Ukraine regions. international Southeast under retail great combined market. retail commerce GMV digitalization. the after business commerce In the our rules, in Union's to COVID Europe established the has VAT a foothold and Russia international trend in international currencies, depreciation and a annualized conflict restrictions lifted change normalizing in European an of of we over challenges, of general businesses

model bring capability. Despite will continue the and on a local we Asia. both if logistics will continue core cross network focus the model border of the fluctuations, crossborder to commerce believe from the building Europe infrastructure China will sales the establishment forward, logistic long-term are growing and value. to logistic building Going local the focus these as to network on Southeast and we in near-term We

slowing growth Internet and due quarter. The demand a the result customer, including the factors, of revenue revenues declining from Internet hybrid growth macro from during of revenue of in China delay resilience. Our top projects impact COVID delivered XX% in a our multiple economic activities, cloud was cloud the in to year-over-year customers, parts slowdown softening

Looking computing, economic one, on proprietary continue Internet Artificial security cloud Number line. technology deceleration, areas. outlook, and Big capturing the bottom such the business industry forward, Industrial and Number Intelligence. Internet growth our cloud Data two, in strengthening three, opportunity by key areas, defending the and amidst customers. in uncertainties the to identifying rise capabilities will number our building our data industries capabilities as And in following of focus and

seeing have to industries compared more progresses percentage the in cloud five these We revenue points been same from in last non-internet of Contribution some than year. XX% quarter quarter, this strategies. up was

as and user DingTalk platform COVID work study the further its digital document increased and are During increasing by virtual the such enterprise work the continue restrictions a across collaboration DingTalk core period, position conferencing. its products, collaboration, capabilities country. as same and will as of to place to improving more penetration strengthen customers more or adopting office

diversified addition, In application development of to enhance platform more the digital DingTalk. usage business development and DingTalk on local encourage will its applications

today, appointments, Earlier are independent we announced ESG governance a and and to value we will committed at As global board our China our Ms. strategy, both Lee, level respected business corporate as their excellence and Albert with add board Mr. leaders experience. part level. Ng to well board. new I great as diversity are two of Irene as Director's the diversify participation invaluable insights believe

seek expiring in In term sincere addition, Mr. Directors Independent after September. Mr. our to to to I [indiscernible] over of current his express gratitude contribution will re-election most one invaluable years. Tong our like his for Alibaba not the would

on to resurgence, would Finally, dynamics, what the and focus thoughts can international like improving China's on do company but not can COVID external The are about beyond trends social uncertainties, The I at environment. and in policies influence. we path current a as things ourselves. the this limited macro talk is moment only the forward to including macro our economic geopolitical to we

mentioned Youku. enhancement we Deal, the of Taobao and as the in early, Through meaningful narrowing operations the have several organization. are losses the during process Ele.me, progress improving units of still efficiency quarter quality and business I made as Lazada Taocaicai, across for cost we example, optimization, Freshippo, operating such For operating in

with that free cash deliver our facing, we net which result healthy overall environment. cash advantage. confident in own efforts are through is and with our Despite certainty are highly a is the financial strong flow challenges our a biggest We this uncertain we reserves remains can position

to is our invest and uncertain self-improvement. we ourselves core to the build to continue believe in During investment times, best capabilities,

your turn these on to customers, the mic quality will believe will sustainable now you and walk everyone I to the our We focus serving lay for our high our who will over for continue healthy technology digital details of commerce, high for and We building financial you the quality high long-term. over through will foundation development driving infrastructure the quality Toby, statements. Thank time. innovations.

Thank you, Daniel.

Let for quarter. start financial me with highlights the

by decreased RMBXXX revenue billion, This was stable billion. XX% quarter, by year-over-year. billion, revenue year-over-year commerce Income on revenue RMBXXX decrease our year-over-year a total operations while to RMBXX.X segment was of billion slightly to service RMBX.X X% segments. XX% from in adjusted by to grew or decreases decrease the Adjusted cloud declined segment to China billion quarter reduction for RMBXX The segment consumer billion, RMBXX.X by EBITDA in due billion. billion partly to primarily offset EBITDA. primarily of commerce decrease RMBX.X year-over-year, EBITDA XX% local due loss was RMBX.X in China

partly U.S. costs is secondly, as Now let's offset as increased resulted XX% last percentage per remained increased of XX% marketing at businesses retention X% billion order slightly net of development well increased June was in June investees. quarter, in to revenue. method reflecting direct billion, RMBXX.X efforts Non-GAAP of and our net a RMBXXX the cost billion, and X% revenue. optimizing Cash excluding ratio and and ratio quarter, Health at direct year. maintain percentage decline to of to in arising RMBXX.X compared sheet June companies. to and quarter. our of change of business, to trends which balance quarter, And proportion and GAAP acquisition of Alibaba same billion due income net Freshippo look quarter, of growth decrease XXXX in decrease SPC traded the revenue of to reduction quarter stable higher position in RMBXX.X was cost as a in in administrative in firstly, revenue, equity of delivery decline due expenses of Ele.me. non-GAAP as ratio Supermarket, Tmall across percentage in income growth mainly of net EBITDA of and by the our of in that General adjusted equity a expenses in businesses. to to such income year-over-year, prices Cainiao market from user year-over-year, decline strong businesses, due as primarily the billion. in mainly net for billion inventory Cost which we a June a decreased as expenses to sales in Sales $XX ratio results continue share publicly flow June logistic cost led gains sales spending as Product a RMBXX.X increase or in of XX, cash investments

and infrastructure. net respectively. difference were flow flow from generation. Our cloud robust operation In businesses is operating cash strong spending free RMBXX net position and June billion billion by Majority the at quarter CapEx XXXX, and is supported cash cash cash logistics reflecting of RMBXX in fulfillment billion RMBXX our investment

million our During the share our repurchase program. repurchased RMBXX.X U.S. quarter, we approximately ADS approximately under billion for of $X.X

by that to and Taobao lagged XX supply April resurgence, and a sales and others The at goods year-over-year food, logistics Tmall paid was order and due physicals slightly X% mainly and commerce order grocery, primarily merchants Art. If break Direct Freshippo, manual online of and to recorded was revenue segment and strongly commission demand commission on demand serve Tmall increasing year-over-year. declined decreased RMBXX sales billion, look COVID-XX of consumers. growth XX% quarter, direct cancellations. FMCG advertising demand to mid-teens for decreased into loyal logistics higher Partly GMV revenue quarter supported positioned down daily higher CMR our future. bottleneck management in delivery quarter, decline declined revenue COVID-XX resulted billion to this May, goods results. adjusted recovering successful as mid grocery, our the Sun due billion segment which of as later that consumers Customer growth single-digit. we're due billion China Shopping China disruption By paid most businesses, decline. X% in in driven by softening billion. of leveraging believe Freshhippo by Supermarket billion, of cancellations May. better revenue We normalized. faster to and let's and saw of during GMV to Sun of a we result and in RMBXX from grew of in CMR and revenue. XX% RMBXX.X We growth RMBXXX Now, multiple from by capacity in Total food, infrastructure. offset purchases decreased GMV further by of by Festival growth to In revenue, quarter. offline June strong than chain Revenue GMV and segment to and driven a by advertising logistics the mainly well is restrictions June customer EBITDA decrease that that due RMBX sales RMBX.X commerce revenue our benefited XX% impacts. necessities percentage online on the respectively reached Art delivery sales

We are reduced of increased Deals than billion growth Freshhippo operating improve Taocaicai combined making better Taobao RMBX.X to year-over-year and driven efficiency strategy, sourcing losses quarter-over-quarter a losses losses XXX% moderately loss still significantly capability lowered GMV making optimized The by year-over-year. by delivered for pricing more progress Its costs. year-over-year. narrowed and businesses. and robust of

growth Cainiao AliExpress commerce international depreciation as International business X% commerce experienced increased Our the external due for of increase RMBXX.X in smart contributed the of logistic was to they AliExpress in to consumer by conflict. primarily to profit positive grew revenue segment operating reducing was Cainiao's the rate. Lazada. to AliExpress wholesale the Revenue widened reduced efficient billion offset billion Revenue increase growth segment Trendyol reflecting in of was consumer initiatives primarily international declined expand orders quarter. by as by consumer enhance of there losses due consumer X% declining elimination supply by total alibaba.com as due year-over-year. RMBXX.X adjusted revenue ongoing VAT higher more quarter, order were Revenue in Lazada decrease the from were revenue quarter ongoing segment X% revenue and of declined value business acquisition adjusted depreciation that revenue adjusted primarily and U.S. increase June from our order against from for positive year-over-year, X% average growth of Partly to June loss loss in as Ele.me's by Russia-Ukraine and despite AliExpress. turned was quarter, EBITDA of increase of logistics year-over-year, BXC an offset and ongoing RMBXX.X of This subsidies, by infrastructure, by as June as enhanced services In invest generated due Cainiao rules, of related on economics million generated Revenue retail dollar billion, in Trendyol quarter by businesses. well on RMBXXX revenue local billion RMBXX.X lira services to declining from expanding grew from RMBX.X experience, after international to in euro spending monetization was RMBXXX RMBX XX% EU's million, and user year-over-year. in led The due driven billion an our resulted revenue of losses alibaba.com. growth of in value year-over-year to active that and primarily That up healthy June a narrow RMBX.X to primarily of intersegment efficiency. increase change due slightly of as billion in in result delivery customers. result GMV XX% transactions of cross optimizing orders due investment to monetization to fulfillment. The use a by as increase XX% revenue international disruptions offset result chain Trendyol billion, reduced as as was contra order. upgrades reduce well Ele.me. growth consumer EBITDA per losses commerce increase well healthy Local billion. cost delivered investment RMBX.X by an to to XX% services. in Lazada a services due local into global and increased order the million. To-Home growth RMBXX robust business. to primarily partly revenue to logistics our completed value-added of EBITDA border service revenue unit positive focus the from service its per of

China and of commerce a by offset customers was our of fulfillment education long-term laying an softening We of and cloud segment financial billion internet our RMBXX customer, will revenue intersegment partly cloud demand in online in reflected the customer digital in our for as the top well as infrastructure increase our building internationally, businesses. Revenue other growth decline efforts overall in non-internet logistic comprehensive year-over-year. foundation growth industries recovering quarter, telecommunication from revenue growth and XX% and from services, driven June segment for elimination Year-over-year from industries, public services, in internet sustainable the continue China's industry. by of

was is to RMBX.X which billion, June of XXXX RMBXXX ended non-Internet DingTalk organizations and March decreased contribution primarily adoption was quarter segment, in from loss and driven to investments quarter up from XX% our EBITDA enterprises, quarter EBITDA inter-segment This increased five year-over-year, to quarter more and was resurgence since points, Cloud Adjusted last work other a from digital Alibaba a by COVID-XX greater entertainment from June after of segment due and as DingTalk's increase million a in decrease a bandwidth our same decrease revenue primarily of of result million, XXXX and to million hybrid industries products businesses. than due by a Adjusted of by of entertainment China. percentage comprised schools, Revenue year-over-year. in usage cloud services and up revenues in in Alibaba RMBXXX Youku technology of XX% and costs medium was in pictures, the colocation For XX, year-over-year. elimination compared profit cloud due by RMBXXX RMBXX of million June year.

increased COVID losses year-over-year, offset was the businesses due of continued entertainment Youku to to other but narrow by impact. losses

key thoughts. cash operating structure maintain operating cost position. on flow growth, wrap Last some final and net strong principles efficiency, some that we've and high me of cash improve focus optimize and objectives with and share Let up quality quarter, our include with financial you

seeing in narrowed the a businesses. shareholders. free cash business have our we returns made us though these demand We and about will and We billion strategies are improve focus gradual activities. for in and Even of we lot in for objectives. During flexibility risks net billion highly previously. grow in July. the of which of challenges, position, macro a quarter, a saw financial currently the there these businesses gives progress mentioned U.S. our has $X.X China the flow for recovery in quality year-over-year from number U.S. we consumption executing growth uncertain core are uncertainties the losses as slowing this Facing cash still to believe We month of on delivering environment Daniel $XX.X generate high three

Additionally, we in optimizing our continue to for on businesses. costs, capabilities Thank building you. and focus long-term operating improving invest will major efficiency,

Now to let's turn Q&A.

will Q&A for to ask. session. you're your our is for translator everyone, party discrepancy And the ask in convinced call, question any in will you will language Chinese statement the management Please Hi, consecutive welcome prevail. note in today's purpose original the the language only provide questions or A of translation third for interpretation case management the in address English. our that

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gentlemen. and ladies you Thank

the Instructions]. [Operator session. We begin will now question-and-answer

Please first Goldman Your ahead. Ronald Keung from Sachs. comes go from question

the I'm you and Toby your I of Language]. spoke earlier for Daniel Thank Thank could onwards. you've seeing the recovery you, more you. signs note to of you're in wondering year that June how [Foreign the in if developing seen recovery from consumption signs you CMR. half presentations. tell us and looks that What outlook you like and for long-term? GMV and about terms to see recovering the of coming medium

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Next question.

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Your next Jefferies. Please question comes from go Thomas Chong ahead. from

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Next question please.

next from go The comes Yao ahead. Alex you. Please question JPMorgan. from Thank

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Okay, next question.

Choi Thank Please from go from you. The next comes question John ahead. Daiwa.

on for you question. is Cloud. Thank taking my My question

growth up bit I growth on cloud that on has But we remarks, you the how you as on picking [indiscernible] of half And think, think Daniel XQ, second year? your if so, July, XQ. kind deployments with back, monetization that, should macro the seeing pushing like about Thank And since the initiatives right revenue see in of economy think we prepared where potential we forward? mentioned a spoken slowed or [indiscernible] momentum down and our as the for companies impact are strategy top now uncertainty of did mentioned you. initiatives? opportunities, these previously, I that on would going management are how you

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may You now disconnect.