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
(�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. The
increase was primarily due to the growth in revenue generated by
Lazada and Trendyol, which was partially offset by the decrease in
revenue from AliExpress as a result of the deconsolidation of
AliExpress Russia businesses in October 2019, as well as ongoing
supply chain and logistics disruptions caused by the COVID-19
pandemic.
- International commerce wholesale business Revenue from
our international commerce wholesale business in the quarter ended
June 30, 2020 was RMB3,204 million (US$454 million), an increase of
43% compared to RMB2,245 million in the same quarter of 2019. The
increase was primarily due to an increase in the number of paying
members on Alibaba.com, as well as an increase in revenue generated
by cross-border related value-added services.
- Cainiao logistics services Revenue from Cainiao
Network’s logistics services, which represents revenue from its
domestic and international one-stop-shop logistics services and
supply chain management solutions, after elimination of
inter-company transactions, was RMB7,713 million (US$1,092 million)
in the quarter ended June 30, 2020, an increase of 54% compared to
RMB5,005 million in the same quarter of 2019, primarily due to the
increases in both average revenue per order and volume of orders
fulfilled from our fast growing cross-border and international
commerce retail businesses.
- Local consumer services Revenue from local consumer
services, which primarily represents platform commissions, fees
from provision of delivery services and other services provided by
our on-demand delivery and local services platform Ele.me, was
RMB7,101 million (US$1,005 million) in the quarter ended June 30,
2020, an increase of 15% compared to RMB6,180 million in the same
quarter of 2019, primarily due to an increase in average order
value.
Cloud computing
Revenue from our cloud computing business in the quarter ended
June 30, 2020 was RMB12,345 million (US$1,747 million), an increase
of 59% compared to RMB7,787 million in the same quarter of 2019,
primarily driven by increased revenue contributions from both
public cloud and hybrid cloud businesses.
Digital media and entertainment
Revenue from our digital media and entertainment segment in the
quarter ended June 30, 2020 was RMB6,994 million (US$990 million),
an increase of 9% compared to RMB6,426 million in the same quarter
of 2019. The increase was primarily due to the increase in revenues
from online games and membership subscriptions, partly offset by
the decrease in revenue from customer management.
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.
Innovation initiatives and others
Revenue from innovation initiatives and others in the quarter
ended June 30, 2020 was RMB1,094 million (US$155 million), a
decrease of 6% compared to RMB1,167 million in the same quarter of
2019.
As mentioned above, starting this quarter, we reclassified
revenue from our self-developed online games business, which was
previously reported under the innovation initiatives and others
segment, as revenue from digital media and entertainment
segment.
Costs and Expenses
The following tables set forth a breakdown of our costs and
expenses, share-based compensation expense and costs and expenses
excluding share-based compensation expense by function for the
periods indicated.
Three months ended June
30,
% of Revenue YoY
change
2019
2020
RMB
% of Revenue
RMB
US$
% of Revenue
(in millions, except
percentages)
Costs and expenses:
Cost of revenue
59,987
53
%
84,523
11,963
55
%
2
%
Product development expenses
10,478
9
%
11,082
1,569
7
%
(2
)%
Sales and marketing expenses
10,698
9
%
13,652
1,932
9
%
0
%
General and administrative expenses
6,320
5
%
6,837
968
4
%
(1
)%
Amortization of intangible assets
3,066
3
%
2,952
418
2
%
(1
)%
Total costs and expenses
90,549
79
%
119,046
16,850
77
%
(2
)%
Share-based compensation expense by
function:
Cost of revenue
1,747
2
%
1,934
274
1
%
(1
)%
Product development expenses
3,009
2
%
3,125
442
2
%
0
%
Sales and marketing expenses
862
1
%
738
104
1
%
0
%
General and administrative expenses
1,497
1
%
1,918
272
1
%
0
%
Total share-based compensation expense
7,115
6
%
7,715
1,092
5
%
(1
)%
Costs and expenses excluding
share-based compensation expense:
Cost of revenue
58,240
51
%
82,589
11,689
54
%
3
%
Product development expenses
7,469
7
%
7,957
1,127
5
%
(2
)%
Sales and marketing expenses
9,836
8
%
12,914
1,828
8
%
0
%
General and administrative expenses
4,823
4
%
4,919
696
3
%
(1
)%
Amortization of intangible assets
3,066
3
%
2,952
418
2
%
(1
)%
Total costs and expenses excluding
share-based compensation expense
83,434
73
%
111,331
15,758
72
%
(1
)%
Cost of revenue – Cost of revenue in the quarter ended
June 30, 2020 was RMB84,523 million (US$11,963 million), or 55% of
revenue, compared to RMB59,987 million, or 53% of revenue, in the
same quarter of 2019. Without the effect of share-based
compensation expense, cost of revenue as a percentage of revenue
would have increased from 51% in the quarter ended June 30, 2019 to
54% in the quarter ended June 30, 2020. The increase was primarily
due to increased revenue contributions from our direct sales
businesses such as Tmall Supermarket and New Retail, which resulted
in increased cost of inventory, as well as our consolidation of
Kaola, partly offset by a decrease in delivery costs of our local
consumer services and a decrease in content cost by Youku.
Product development expenses – Product development
expenses in the quarter ended June 30, 2020 were RMB11,082 million
(US$1,569 million), or 7% of revenue, compared to RMB10,478
million, or 9% of revenue, in the same quarter of 2019. Without the
effect of share-based compensation expense, product development
expenses as a percentage of revenue would have decreased from 7% in
the quarter ended June 30, 2019 to 5% in the quarter ended June 30,
2020.
Sales and marketing expenses – Sales and marketing
expenses in the quarter ended June 30, 2020 were RMB13,652 million
(US$1,932 million), or 9% of revenue, compared to RMB10,698
million, or 9% of revenue, in the same quarter of 2019. Without the
effect of share-based compensation expense, sales and marketing
expenses as a percentage of revenue would have remained stable at
8% in the quarter ended June 30, 2020 and the same quarter last
year.
General and administrative expenses – General and
administrative expenses in the quarter ended June 30, 2020 were
RMB6,837 million (US$968 million), or 4% of revenue, compared to
RMB6,320 million, or 5% of revenue, in the same quarter of 2019.
Without the effect of share-based compensation expense, general and
administrative expenses as a percentage of revenue would have
decreased from 4% in the quarter ended June 30, 2019 to 3% in the
quarter ended June 30, 2020, reflecting operating leverage.
Share-based compensation expense – Total share-based
compensation expense included in the cost and expense items above
in the quarter ended June 30, 2020 was RMB7,715 million (US$1,092
million), an increase of 8% compared to RMB7,115 million in the
same quarter of 2019. Share-based compensation expense as a
percentage of revenue decreased to 5% in the quarter ended June 30,
2020, as compared to 6% in the same quarter last year.
The following table sets forth our analysis of share-based
compensation expense for the quarters indicated by type of
share-based awards:
Three months ended
June 30, 2019
March 31, 2020
June 30, 2020
% Change
RMB
% of Revenue
RMB
% of Revenue
RMB
US$
% of Revenue
YoY
QoQ
(in millions, except
percentages)
By type of awards:
Alibaba Group share-based awards(1)
5,898
5%
6,832
6%
6,758
956
4%
15
%
(1
)%
Ant Group share-based awards granted to
our employees(2)
352
0%
259
0%
273
39
0%
(22
)%
5
%
Others(3)
865
1%
1,561
2%
684
97
1%
(21
)%
(56
)%
Total share-based compensation expense
7,115
6%
8,652
8%
7,715
1,092
5%
8
%
(11
)%
______________________
(1)
This includes awards granted to our
employees, Ant Group employees and other consultants. Commencing
upon the receipt of the 33% equity interest in Ant Group on
September 23, 2019, the expense relating to Alibaba Group
share-based awards granted to Ant Group employees are recognized in
share of results of equity method investees.
(2)
Awards subject to mark-to-market
accounting treatment.
(3)
Others primarily relates to share-based
awards of our subsidiaries.
Share-based compensation expense related to Alibaba Group
share-based awards granted to our employees remained stable in this
quarter compared to the previous quarter. Share-based compensation
expense related to share-based awards of our subsidiaries decreased
in this quarter compared to the previous quarter, mainly due to the
one-time impact arising from the cash settlement of certain
subsidiary awards in the previous quarter.
We expect that our share-based compensation expense will
continue to be affected by changes in the fair value of our shares,
our subsidiaries’ share-based awards and the quantity of awards we
grant to our employees and consultants in the future. Furthermore,
we expect that our share-based compensation expense may be
materially affected by any future changes in the valuation of Ant
Group, although such changes will not result in equity dilution to
our shareholders.
Amortization of intangible assets – Amortization of
intangible assets in the quarter ended June 30, 2020 was RMB2,952
million (US$418 million), a decrease of 4% from RMB3,066 million in
the same quarter of 2019.
Income from operations and operating
margin
Income from operations in the quarter ended June 30, 2020 was
RMB34,705 million (US$4,912 million), or 23% of revenue, an
increase of 42% compared to RMB24,375 million, or 21% of revenue,
in the same quarter of 2019.
Adjusted EBITDA and Adjusted
EBITA
Adjusted EBITDA increased 30% year-over-year to RMB51,039
million (US$7,224 million) in the quarter ended June 30, 2020,
compared to RMB39,238 million in the same quarter of 2019. Adjusted
EBITA increased 31% year-over-year to RMB45,372 million (US$6,422
million) in the quarter ended June 30, 2020, compared to RMB34,556
million in the same quarter of 2019. A reconciliation of net income
to adjusted EBITDA and adjusted EBITA is included at the end of
this results announcement.
Adjusted EBITA and adjusted EBITA
margin by segments
Adjusted EBITA and adjusted EBITA margin by segments are set
forth in the table below. See the section entitled “Information
about Segments” above for a reconciliation of income from
operations to adjusted EBITA.
Three months ended June
30,
2019
2020
RMB
% of Segment Revenue
RMB
US$
% of Segment Revenue
(in millions, except
percentages)
Core commerce
41,025
41
%
51,237
7,252
38
%
Cloud computing
(358
)
(5
)%
(342
)
(48
)
(3
)%
Digital media and entertainment(1)
(2,331
)
(36
)%
(1,321
)
(187
)
(19
)%
Innovation initiatives and others(1)
(1,867
)
(160
)%
(2,705
)
(383
)
(247
)%
______________________
(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.
Core commerce segment – Adjusted EBITA increased by 25%
to RMB51,237 million (US$7,252 million) in the quarter ended June
30, 2020, compared to RMB41,025 million in the same quarter of
2019, primarily due to an increase in marketplace-based core
commerce adjusted EBITA to RMB55,476 million (US$7,852 million), as
well as reduced losses for local consumer services and Cainiao
Network, reflecting our improved delivery and fulfillment network
efficiency. Adjusted EBITA margin decreased from 41% in the quarter
ended June 30, 2019 to 38% in the quarter ended June 30, 2020,
primarily due to increased revenue contribution from our
self-operated New Retail and direct sales businesses, where revenue
is recorded on a gross basis, including the cost of inventory, as
well as the effects of our consolidation of Kaola starting in
September 2019.
A reconciliation of adjusted EBITA for core commerce to
marketplace-based core commerce adjusted EBITA is included at the
end of this results announcement.
We expect that our core commerce adjusted EBITA margin will
continue to be affected by the pace of our investment in new
businesses and the growth of our self-operated New Retail and
direct sales businesses.
Cloud computing segment – Adjusted EBITA in the quarter
ended June 30, 2020 was a loss of RMB342 million (US$48 million),
compared to a loss of RMB358 million in the same quarter of 2019.
Adjusted EBITA margin improved to negative 3% in the quarter ended
June 30, 2020 from negative 5% in the quarter ended June 30,
2019.
Digital media and entertainment segment – Adjusted EBITA
in the quarter ended June 30, 2020 was a loss of RMB1,321 million
(US$187 million), compared to a loss of RMB2,331 million in the
same quarter of 2019. Adjusted EBITA margin improved to negative
19% in the quarter ended June 30, 2020 from negative 36% in the
quarter ended June 30, 2019, primarily due to reduced losses in
Youku, mainly as a result of the decrease in content cost, as well
as the increased contribution from our online games business.
As mentioned above, 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.
Innovation initiatives and others segment – Adjusted
EBITA in the quarter ended June 30, 2020 was a loss of RMB2,705
million (US$383 million), compared to a loss of RMB1,867 million in
the same quarter of 2019, primarily due to the increased loss from
DingTalk as it expands its business, as well as our investments in
technological research and innovation.
As mentioned above, 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.
Interest and investment income,
net
Interest and investment income, net in the quarter ended June
30, 2020 was RMB22,137 million (US$3,133 million), compared to
RMB187 million in the same quarter of 2019, primarily due to a net
gain arising from the increase 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. The above-mentioned gains and losses were excluded from our
non-GAAP net income.
Other income, net
Other income, net in the quarter ended June 30, 2020 was
RMB1,493 million (US$212 million), compared to RMB2,101 million in
the same quarter of 2019. The decrease in other income, net was
primarily due to the termination of royalty fees and software
technology service fees from Ant Group upon our receipt of its 33%
equity interest in September 2019, partly offset by a decrease in
exchange loss.
Income tax expenses
Income tax expenses in the quarter ended June 30, 2020 were
RMB11,124 million (US$1,574 million), compared to RMB6,712 million
in the same quarter of 2019.
Our effective tax rate was 19% in the quarter ended June 30,
2020, compared to 27% in the same quarter of 2019. Excluding
share-based compensation expense, revaluation and disposal
gains/losses of investments, impairment of investments, as well as
the deferred tax effects arising from our share of results of
equity method investees, our effective tax rate would have been 20%
in the quarter ended June 30, 2020.
Share of results of equity method
investees
Share of results of equity method investees in the quarter ended
June 30, 2020 was RMB349 million (US$49 million), compared to
RMB517 million in the same quarter of 2019. Share of results of
equity method investees in the quarter ended June 30, 2020 and the
comparative periods consisted of the following:
Three months ended
June 30, 2019
March 31, 2020
June 30, 2020
RMB
RMB
RMB
US$
(in millions)
Share of profit (loss) of equity method
investees
- Ant Group
—
5,109
3,034
429
- Others
941
164
(1,471
)
(208
)
Impairment loss
—
(234
)
—
—
Dilution loss
(5
)
(249
)
(6
)
(1
)
Others(1)
(419
)
(1,245
)
(1,208
)
(171
)
Total
517
3,545
349
49
______________________
(1)
Others mainly include amortization of
intangible assets of equity method investees and share-based
compensation expense.
We record our share of results of all equity method investees
one quarter in arrears. The increase in share of loss of other
equity method investees in the quarter ended June 30, 2020 was
mainly due to a general decline in financial performance of our
equity method investees. In addition, the year-over-year increase
in expenses in “Others” in the quarter ended June 30, 2020 was
primarily due to the commencement of amortization of intangible
assets of Ant Group upon our receipt of its equity interest in
September 2019.
The COVID-19 pandemic has caused widespread disruptions to the
economy and the businesses of our equity method investees may be
adversely affected, which could negatively impact our share of
results of equity method investees in future periods.
Net income and Non-GAAP net
income
Our net income in the quarter ended June 30, 2020 was RMB46,437
million (US$6,573 million), an increase of 143% compared to
RMB19,122 million in the same quarter of 2019. The year-over-year
increase was mainly due to a net gain arising from the increase 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.
Excluding share-based compensation expense, revaluation and
disposal gains/losses of investments, impairment of investments and
certain other items, non-GAAP net income in the quarter ended June
30, 2020 was RMB39,474 million (US$5,587 million), an increase of
28% compared to RMB30,949 million in the same quarter of 2019. A
reconciliation of net income to non-GAAP net income is included at
the end of this results announcement.
Net income attributable to ordinary
shareholders
Net income attributable to ordinary shareholders in the quarter
ended June 30, 2020 was RMB47,591 million (US$6,736 million), an
increase of 124% compared to RMB21,252 million in the same quarter
of 2019. The year-over-year increase was mainly due to a net gain
arising from the increase 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.
Diluted earnings per ADS/share and
non-GAAP diluted earnings per ADS/share
Diluted earnings per ADS in the quarter ended June 30, 2020 was
RMB17.36 (US$2.46) on a weighted average of 21,926 million diluted
shares outstanding during the quarter, an increase of 115% compared
to RMB8.06 on a weighted average of 21,075 million diluted shares
outstanding during the same quarter in 2019. Excluding share-based
compensation expense, revaluation and disposal gains/losses of
investments, impairment of investments and certain other items,
non-GAAP diluted earnings per ADS in the quarter ended June 30,
2020 was RMB14.82 (US$2.10), an increase of 18% compared to
RMB12.55 in the same quarter of 2019.
Diluted earnings per share in the quarter ended June 30, 2020
was RMB2.17 (US$0.31 or HK$2.38), an increase of 115% compared to
RMB1.01 in the same quarter of 2019. Excluding share-based
compensation expense, revaluation and disposal gains/losses of
investments, impairment of investments and certain other items,
non-GAAP diluted earnings per share in the quarter ended June 30,
2020 was RMB1.85 (US$0.26 or HK$2.03), an increase of 18%, compared
to RMB1.57 in the same quarter of 2019.
A reconciliation of diluted earnings per ADS/share to non-GAAP
diluted earnings per ADS/share is included at the end of this
results announcement. Each ADS represents eight ordinary shares,
which reflects the share subdivision and ADS ratio change that
became effective on July 30, 2019.
Cash, cash equivalents and short-term
investments
As of June 30, 2020, cash, cash equivalents and short-term
investments were RMB381,578 million (US$54,009 million), compared
to RMB358,981 million as of March 31, 2020. The increase in cash,
cash equivalents and short-term investments during the quarter
ended June 30, 2020 was primarily due to free cash flow generated
from operations of RMB36,570 million (US$5,176 million), partly
offset by net cash used in investment and acquisition activities of
RMB9,993 million (US$1,414 million).
Cash flow from operating activities and
free cash flow
Net cash provided by operating activities in the quarter ended
June 30, 2020 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, in the quarter
ended June 30, 2020 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.
Net cash used in investing
activities
During the quarter ended June 30, 2020, net cash used in
investing activities of RMB67,728 million (US$9,586 million)
primarily reflected (i) an increase in short-term investments by
RMB44,009 million (US$6,229 million), (ii) capital expenditures of
RMB13,638 million (US$1,930 million), which included cash outflow
for acquisition of land use rights and construction in progress
relating to office campuses of RMB266 million (US$37 million), as
well as (iii) cash outflow of RMB12,153 million (US$1,720 million)
for investment and acquisition activities. These cash outflows were
partly offset by cash inflow of RMB2,160 million (US$306 million)
from disposal of various investments.
We adopted ASU 2019-02, “Entertainment — Films — Other Assets —
Film Costs (Subtopic 926-20) and Entertainment — Broadcasters —
Intangibles — Goodwill and Other (Subtopic 920-350),” on April 1,
2020. As a result of our adoption of this new accounting update, we
are now reporting cash outflows for the acquisition of licensed
copyrights as operating activities in the consolidated statements
of cash flows prospectively beginning in the first quarter of this
fiscal year. Prior to our adoption of ASU 2019-02, cash outflows
for the acquisition of licensed copyrights were previously
classified as investing activities in the consolidated statements
of cash flows.
Employees
As of June 30, 2020, we had a total of 120,535 employees,
compared to 117,600 as of March 31, 2020.
WEBCAST AND CONFERENCE CALL INFORMATION
Alibaba Group’s management will hold a conference call to
discuss the financial result at 7:30 a.m. U.S. Eastern Time (7:30
p.m. Hong Kong Time) on August 20, 2020.
Details of the conference call are as follows: International:
+65 6713 5330 U.S.: +1 347 549 4094 U.K.: +44 203 713 5084 Hong
Kong: +852 3018 8307 China Landline: 800 8700 532 China Mobile: 400
624 0407 Conference ID: 9264889 (English) Conference ID: 7490169
(simultaneous interpretation in Chinese, listen only mode)
A live webcast of the earnings conference call can be accessed
at http://www.alibabagroup.com/en/ir/earnings. An archived webcast
will be available through the same link following the call. A
replay of the conference call will be available for one week
(dial-in number: +61 2 8199 0299; same conference ID as shown
above).
Our results announcement and accompanying slides are available
at Alibaba Group’s Investor Relations website at
http://www.alibabagroup.com/en/ir/home on August 20, 2020.
ABOUT ALIBABA GROUP
Alibaba Group's mission is to make it easy to do business
anywhere. The company aims to build the future infrastructure of
commerce. It envisions that its customers will meet, work and live
at Alibaba, and that it will be a good company that lasts for 102
years.
SAFE HARBOR STATEMENTS
This announcement contains forward-looking statements. These
statements are made under the “safe harbor” provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
“will,” “expects,” “anticipates,” “future,” “intends,” “plans,”
“believes,” “estimates,” “potential,” “continue,” “ongoing,”
“targets,” “guidance” and similar statements. In addition,
statements that are not historical facts, including statements
about Alibaba’s strategies and business plans, Alibaba’s beliefs,
expectations and guidance regarding the growth of its business and
its revenue, the business outlook and quotations from management in
this announcement, as well as Alibaba’s strategic and operational
plans, are or contain forward-looking statements. Alibaba may also
make forward-looking statements in its periodic reports to the U.S.
Securities and Exchange Commission (the “SEC”), in announcements
made on the website of The Stock Exchange of Hong Kong Limited (the
“Hong Kong Stock Exchange”), in press releases and other written
materials and in oral statements made by its officers, directors or
employees to third parties. Forward-looking statements involve
inherent risks and uncertainties. A number of factors could cause
actual results to differ materially from those contained in any
forward-looking statement, including but not limited to the
following: impact of the COVID-19 pandemic, Alibaba’s expected
revenue growth; Alibaba’s goals and strategies; Alibaba’s future
business development; Alibaba’s ability to maintain the trusted
status of its digital economy; risks associated with sustained
investments in Alibaba’s business and strategic acquisitions and
investments; Alibaba’s ability to maintain or grow its revenue or
business; Alibaba’s ability to continue to compete effectively and
maintain and improve the network effects of its digital economy;
company culture; Alibaba’s ability to continue to innovate; risks
and challenges associated with operating a complex and large-scale
company, risks associated with international and cross-border
businesses and operations, including protectionist or national
security policies; uncertainties arising from competition among
countries and geopolitical tensions; changes in laws, regulations
and regulatory environment that affect Alibaba’s business
operations; privacy and regulatory concerns; security breaches;
risks associated with the performance of our business partners,
including but not limited to Ant Group; and fluctuations in general
economic and business conditions in China and globally and
assumptions underlying or related to any of the foregoing. Further
information regarding these and other risks is included in
Alibaba’s filings with the SEC and announcements on the website of
the Hong Kong Stock Exchange. All information provided in this
results announcement is as of the date of this results announcement
and are based on assumptions that we believe to be reasonable as of
this date, and Alibaba does not undertake any obligation to update
any forward-looking statement, except as required under applicable
law.
NON-GAAP FINANCIAL MEASURES
To supplement our consolidated financial statements, which are
prepared and presented in accordance with GAAP, we use the
following non-GAAP financial measures: for our consolidated
results, adjusted EBITDA (including adjusted EBITDA margin),
adjusted EBITA (including adjusted EBITA margin), marketplace-based
core commerce adjusted EBITA, non-GAAP net income, non-GAAP diluted
earnings per share/ADS and free cash flow. For more information on
these non-GAAP financial measures, please refer to the section
entitled “Information about Segments” and the table captioned
“Reconciliations of Non-GAAP Measures to the Nearest Comparable
GAAP Measures” in this results announcement.
We believe that adjusted EBITDA, adjusted EBITA,
marketplace-based core commerce adjusted EBITA, non-GAAP net income
and non-GAAP diluted earnings per share/ADS help identify
underlying trends in our business that could otherwise be distorted
by the effect of certain income or expenses that we include in
income from operations, net income and diluted earnings per
share/ADS. We believe that these non-GAAP measures provide useful
information about our core operating results, enhance the overall
understanding of our past performance and future prospects and
allow for greater visibility with respect to key metrics used by
our management in its financial and operational decision-making. We
present three different income measures, namely adjusted EBITDA,
adjusted EBITA and non-GAAP net income, as well as one measure that
provides supplemental information on our core commerce segment,
namely marketplace-based core commerce adjusted EBITA, in order to
provide more information and greater transparency to investors
about our operating results.
We consider free cash flow to be a liquidity measure that
provides useful information to management and investors about the
amount of cash generated by our business that can be used for
strategic corporate transactions, including investing in our new
business initiatives, making strategic investments and acquisitions
and strengthening our balance sheet.
Adjusted EBITDA, adjusted EBITA, marketplace-based core commerce
adjusted EBITA, non-GAAP net income, non-GAAP diluted earnings per
share/ADS and free cash flow should not be considered in isolation
or construed as an alternative to income from operations, adjusted
EBITA for core commerce, net income, diluted earnings per
share/ADS, cash flows or any other measure of performance or as an
indicator of our operating performance. These non-GAAP financial
measures presented here do not have standardized meanings
prescribed by U.S. GAAP and may not be comparable to similarly
titled measures presented by other companies. Other companies may
calculate similarly titled measures differently, limiting their
usefulness as comparative measures to our data.
Adjusted EBITDA represents net income before (i) interest
and investment income, net, interest expense, other income, net,
income tax expenses and share of results of equity method
investees, (ii) certain non-cash expenses, consisting of
share-based compensation expense, amortization of intangible
assets, depreciation of property and equipment, and operating lease
cost relating to land use rights, which we do not believe are
reflective of our core operating performance during the periods
presented.
Adjusted EBITA represents net income before (i) interest
and investment income, net, interest expense, other income, net,
income tax expenses and share of results of equity method
investees, (ii) certain non-cash expenses, consisting of
share-based compensation expense and amortization of intangible
assets, which we do not believe are reflective of our core
operating performance during the periods presented.
Marketplace-based core commerce adjusted EBITA represents
adjusted EBITA for core commerce excluding the effects of (i) local
consumer services, (ii) Lazada, (iii) New Retail and direct import
and (iv) Cainiao Network. Marketplace-based core commerce adjusted
EBITA reflects the performance of our most established businesses,
namely, those of our China retail marketplaces and wholesale
marketplaces which primarily adopt a marketplace-based approach. By
excluding certain businesses that are in the earlier stages of
their development and with business approaches that continue to
evolve, marketplace-based core commerce adjusted EBITA enables
investors to clearly evaluate the performance of our most
established businesses on a like-for-like basis.
Non-GAAP net income represents net income before
share-based compensation expense, amortization of intangible
assets, impairment of investments, gain or loss on deemed
disposals/disposals/revaluation of investments, amortization of
excess value receivable arising from the restructuring of
commercial arrangements with Ant Group and others, as adjusted for
the tax effects on non-GAAP adjustments.
Non-GAAP diluted earnings per share represents non-GAAP
net income attributable to ordinary shareholders divided by the
weighted average number of shares outstanding during the periods on
a diluted basis.
Non-GAAP diluted earnings per ADS represents non-GAAP
diluted earnings per share after adjustment to the ordinary
share-to-ADS ratio.
Free cash flow represents net cash provided by operating
activities as presented in our consolidated cash flow statement
less purchases of property and equipment (excluding acquisition of
land use rights and construction in progress relating to office
campuses) and other intangible assets, as well as adjustments to
exclude from net cash provided by operating activities the consumer
protection fund deposits from merchants on our China retail
marketplaces. Prior to this quarter, we also deducted acquisition
of licensed copyrights from cash flows from investing activities.
After our adoption of ASU 2019-02, “Entertainment — Films — Other
Assets — Film Costs (Subtopic 926-20) and Entertainment —
Broadcasters — Intangibles — Goodwill and Other (Subtopic
920-350),” on April 1, 2020, we changed the classification of cash
outflows for the acquisition of licensed copyrights from investing
activities to operating activities in the consolidated statements
of cash flows, prospectively beginning in the first quarter of this
fiscal year. We deduct certain items of cash flows from investing
activities in order to provide greater transparency into cash flow
from our revenue-generating business operations. We exclude
“acquisition of land use rights and construction in progress
relating to office campuses” because the office campuses are used
by us for corporate and administrative purposes and are not
directly related to our revenue-generating business operations. We
also exclude consumer protection fund deposits from merchants on
our China retail marketplaces because these deposits are restricted
for the purpose of compensating consumers for claims against
merchants.
The section entitled “Information about Segments” and the table
captioned “Reconciliations of Non-GAAP Measures to the Nearest
Comparable GAAP Measures” in this results announcement have more
details on the non-GAAP financial measures that are most directly
comparable to GAAP financial measures and the related
reconciliations between these financial measures.
ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONSOLIDATED INCOME
STATEMENTS
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions, except per share
data)
Revenue
114,924
153,751
21,762
Cost of revenue
(59,987
)
(84,523
)
(11,963
)
Product development expenses
(10,478
)
(11,082
)
(1,569
)
Sales and marketing expenses
(10,698
)
(13,652
)
(1,932
)
General and administrative expenses
(6,320
)
(6,837
)
(968
)
Amortization of intangible assets
(3,066
)
(2,952
)
(418
)
Income from operations
24,375
34,705
4,912
Interest and investment income, net
187
22,137
3,133
Interest expense
(1,346
)
(1,123
)
(159
)
Other income, net
2,101
1,493
212
Income before income tax and share of
results of equity method investees
25,317
57,212
8,098
Income tax expenses
(6,712
)
(11,124
)
(1,574
)
Share of results of equity method
investees
517
349
49
Net income
19,122
46,437
6,573
Net loss attributable to noncontrolling
interests
2,326
1,096
155
Net income attributable to Alibaba Group
Holding Limited
21,448
47,533
6,728
Accretion of mezzanine equity
(196
)
58
8
Net income attributable to ordinary
shareholders
21,252
47,591
6,736
Earnings per share attributable to
ordinary shareholders(1)
Basic
1.02
2.21
0.31
Diluted
1.01
2.17
0.31
Earnings per ADS attributable to
ordinary shareholders(1)
Basic
8.18
17.64
2.50
Diluted
8.06
17.36
2.46
Weighted average number of shares used
in calculating earnings per ordinary share (million
shares)(1)
Basic
20,776
21,581
Diluted
21,075
21,926
______________________
(1)
Each ADS represents eight ordinary shares,
which reflects the share subdivision and ADS ratio change that
became effective on July 30, 2019
ALIBABA GROUP HOLDING LIMITED REVENUE
The following table sets forth our revenue by segments for the
periods indicated:
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions)
Core commerce(1)
99,544
133,318
18,870
Cloud computing(2)
7,787
12,345
1,747
Digital media and entertainment(3)(5)
6,426
6,994
990
Innovation initiatives and
others(4)(5)
1,167
1,094
155
Total
114,924
153,751
21,762
______________________
(1)
Revenue from core commerce is primarily
generated from our China retail marketplaces, Freshippo, 1688.com,
Lazada.com, AliExpress, Alibaba.com, Cainiao logistics services and
local consumer services.
(2)
Revenue from cloud computing is primarily
generated from the provision of services, such as elastic
computing, database, storage, network virtualization services,
large scale computing, security, management and application
services, big data analytics, a machine learning platform and IoT
services.
(3)
Revenue from digital media and
entertainment is primarily generated from Youku, online games and
UCWeb.
(4)
Revenue from innovation initiatives and
others is primarily generated from businesses such as Amap, Tmall
Genie and other innovation initiatives. Other revenue also includes
SME annual fee received from Ant Group and its affiliates.
(5)
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.
ALIBABA GROUP HOLDING LIMITED INFORMATION ABOUT
SEGMENTS
The following table sets forth our income (loss) from operations
by segments for the periods indicated:
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions)
Core commerce
35,049
45,192
6,397
Cloud computing
(1,509
)
(1,774
)
(251
)
Digital media and entertainment(1)
(3,282
)
(2,018
)
(286
)
Innovation initiatives and others(1)
(2,877
)
(3,565
)
(505
)
Unallocated
(3,006
)
(3,130
)
(443
)
Total
24,375
34,705
4,912
______________________
(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.
The following table sets forth our adjusted EBITA by segments
for the periods indicated:
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions)
Core commerce
41,025
51,237
7,252
Cloud computing
(358
)
(342
)
(48
)
Digital media and entertainment(1)
(2,331
)
(1,321
)
(187
)
Innovation initiatives and others(1)
(1,867
)
(2,705
)
(383
)
Unallocated
(1,913
)
(1,497
)
(212
)
Total
34,556
45,372
6,422
______________________
(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.
ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONSOLIDATED BALANCE
SHEETS
As of March 31,
As of June 30,
2020
2020
RMB
RMB
US$
(in millions)
Assets
Current assets:
Cash and cash equivalents
330,503
309,267
43,774
Short-term investments
28,478
72,311
10,235
Restricted cash and escrow receivables
15,479
14,126
1,999
Equity securities and other
investments
4,234
4,980
705
Prepayments, receivables and other
assets
84,229
90,628
12,828
Total current assets
462,923
491,312
69,541
Equity securities and other
investments
161,329
182,209
25,790
Prepayments, receivables and other
assets
57,985
58,152
8,231
Investment in equity method investees
189,632
191,567
27,114
Property and equipment, net
103,387
111,461
15,776
Intangible assets, net
60,947
57,580
8,150
Goodwill
276,782
276,896
39,192
Total assets
1,312,985
1,369,177
193,794
Liabilities, Mezzanine Equity and
Shareholders’ Equity
Current liabilities:
Current bank borrowings
5,154
4,543
643
Income tax payable
20,190
22,327
3,160
Escrow money payable
3,014
1,635
231
Accrued expenses, accounts payable and
other liabilities
161,536
164,711
23,313
Merchant deposits
13,640
14,080
1,993
Deferred revenue and customer advances
38,338
40,797
5,775
Total current liabilities
241,872
248,093
35,115
ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
As of March 31,
As of June 30,
2020
2020
RMB
RMB
US$
(in millions)
Deferred revenue
2,025
2,141
303
Deferred tax liabilities
43,898
46,557
6,590
Non-current bank borrowings
39,660
40,504
5,733
Non-current unsecured senior notes
80,616
80,390
11,378
Other liabilities
25,263
23,010
3,257
Total liabilities
433,334
440,695
62,376
Commitments and contingencies
—
—
—
Mezzanine equity
9,103
7,820
1,107
Shareholders’ equity:
Ordinary shares
1
1
—
Additional paid-in capital
343,707
349,742
49,503
Treasury shares at cost
—
—
—
Subscription receivables
(51
)
(51
)
(7
)
Statutory reserves
6,100
6,392
905
Accumulated other comprehensive loss
(643
)
(909
)
(129
)
Retained earnings
406,287
453,528
64,192
Total shareholders’ equity
755,401
808,703
114,464
Noncontrolling interests
115,147
111,959
15,847
Total equity
870,548
920,662
130,311
Total liabilities, mezzanine equity and
equity
1,312,985
1,369,177
193,794
ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions)
Net cash provided by operating
activities(1)
34,612
50,099
7,091
Net cash used in investing
activities(1)
(21,136
)
(67,728
)
(9,586
)
Net cash provided by (used in) financing
activities
4,493
(4,609
)
(653
)
Effect of exchange rate changes on cash
and cash equivalents, restricted cash and escrow receivables
1,377
(351
)
(50
)
Increase (Decrease) in cash and cash
equivalents, restricted cash and escrow receivables
19,346
(22,589
)
(3,198
)
Cash and cash equivalents, restricted cash
and escrow receivables at beginning of period
198,494
345,982
48,971
Cash and cash equivalents, restricted cash
and escrow receivables at end of period
217,840
323,393
45,773
______________________
(1)
We adopted ASU 2019-02, “Entertainment —
Films — Other Assets — Film Costs (Subtopic 926-20) and
Entertainment — Broadcasters — Intangibles — Goodwill and Other
(Subtopic 920-350),” on April 1, 2020. As a result of our adoption
of this new accounting update, we are now reporting cash outflows
for the acquisition of licensed copyrights as operating activities
in the consolidated statements of cash flows prospectively
beginning in the first quarter of this fiscal year. Prior to our
adoption of ASU 2019-02, cash outflows for the acquisition of
licensed copyrights were previously classified as investing
activities in the consolidated statements of cash flows.
ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
The table below sets forth a reconciliation of our net income to
adjusted EBITA and adjusted EBITDA for the periods indicated:
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions)
Net income
19,122
46,437
6,573
Less: Interest and investment income,
net
(187
)
(22,137
)
(3,133
)
Add: Interest expense
1,346
1,123
159
Less: Other income, net
(2,101
)
(1,493
)
(212
)
Add: Income tax expenses
6,712
11,124
1,574
Add: Share of results of equity method
investees
(517
)
(349
)
(49
)
Income from operations
24,375
34,705
4,912
Add: Share-based compensation expense
7,115
7,715
1,092
Add: Amortization of intangible assets
3,066
2,952
418
Adjusted EBITA
34,556
45,372
6,422
Add: Depreciation of property and
equipment, and operating lease cost relating to land use rights
4,682
5,667
802
Adjusted EBITDA
39,238
51,039
7,224
ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
(CONTINUED)
The table below sets forth a reconciliation of adjusted EBITA
for core commerce to marketplace-based core commerce adjusted EBITA
for the periods indicated:
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions)
Adjusted EBITA for core
commerce
41,025
51,237
7,252
Less: Effects of local consumer services,
Lazada, New Retail and direct import and Cainiao Network
5,775
4,239
600
Marketplace-based core commerce
adjusted EBITA
46,800
55,476
7,852
ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
(CONTINUED)
The table below sets forth a reconciliation of our net income to
non-GAAP net income for the periods indicated:
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions)
Net income
19,122
46,437
6,573
Add: Share-based compensation expense
7,115
7,715
1,092
Add: Amortization of intangible assets
3,066
2,952
418
Add: Impairment of investments
250
103
15
Less: (Loss) Gain on deemed
disposals/disposals/ revaluation of investments and others
1,626
(19,030
)
(2,694
)
Add: Amortization of excess value
receivable arising from the restructuring of commercial
arrangements with Ant Group
66
—
—
Adjusted for tax effects on
non-GAAP adjustments(1)
(296
)
1,297
183
Non-GAAP net income
30,949
39,474
5,587
______________________
(1)
Tax effects on non-GAAP adjustments
primarily comprised of tax effects relating to the share-based
compensation expense, certain gains and losses from investments and
amortization of intangible assets.
ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
(CONTINUED)
The table below sets forth a reconciliation of our diluted
earnings per share/ADS to non-GAAP diluted earnings per share/ADS
for the periods indicated:
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions, except per share
data)
Net income attributable to ordinary
shareholders – basic
21,252
47,591
6,736
Dilution effect on earnings arising from
option plans operated by equity method investees and
subsidiaries
(11
)
(13
)
(2
)
Net income attributable to ordinary
shareholders – diluted
21,241
47,578
6,734
Add: Non-GAAP adjustments to net
income(1)
11,827
(6,963
)
(986
)
Non-GAAP net income attributable
to ordinary shareholders for computing non-GAAP diluted earnings
per share/ADS
33,068
40,615
5,748
Weighted average number of shares on a
diluted basis (million shares)(5)
21,075
21,926
Diluted earnings per
share(2)(5)
1.01
2.17
0.31
Add: Non-GAAP adjustments to net income
per share(3)(5)
0.56
(0.32
)
(0.05
)
Non-GAAP diluted earnings per
share(4)(5)
1.57
1.85
0.26
Diluted earnings per ADS(2)(5)
8.06
17.36
2.46
Add: Non-GAAP adjustments to net income
per ADS(3)(5)
4.49
(2.54
)
(0.36
)
Non-GAAP diluted earnings per
ADS(4)(5)
12.55
14.82
2.10
______________________
(1)
See the table above for the reconciliation
of net income to non-GAAP net income for more information of these
non-GAAP adjustments.
(2)
Diluted earnings per share is derived from
net income attributable to ordinary shareholders for computing
diluted earnings per share divided by weighted average number of
shares on a diluted basis. Diluted earnings per ADS is derived from
the diluted earnings per share after adjustment to the ordinary
share-to-ADS ratio.
(3)
Non-GAAP adjustments to net income per
share is derived from non-GAAP adjustments to net income divided by
weighted average number of shares on a diluted basis. Non-GAAP
adjustments to net income per ADS is derived from the non-GAAP
adjustments to net income per share after adjustment to the
ordinary share-to-ADS ratio.
(4)
Non-GAAP diluted earnings per share is
derived from non-GAAP net income attributable to ordinary
shareholders for computing non-GAAP diluted earnings per share
divided by weighted average number of shares on a diluted basis.
Non-GAAP diluted earnings per ADS is derived from the non-GAAP
diluted earnings per share after adjustment to the ordinary
share-to-ADS ratio.
(5)
Each ADS represents eight ordinary shares,
which reflects the share subdivision and ADS ratio change that
became effective on July 30, 2019.
ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
(CONTINUED)
The table below sets forth a reconciliation of net cash provided
by operating activities to free cash flow for the periods
indicated:
Three months ended June
30,
2019
2020
RMB
RMB
US$
(in millions)
Net cash provided by operating
activities(1)
34,612
50,099
7,091
Less: Purchase of property and equipment
(excluding land use rights and construction in progress relating to
office campuses)
(5,856
)
(13,372
)
(1,893
)
Less: Acquisition of licensed
copyrights(1) and other intangible assets
(2,395
)
(56
)
(8
)
Less: Changes in the consumer protection
fund deposits
—
(101
)
(14
)
Free cash flow
26,361
36,570
5,176
______________________
(1)
We adopted ASU 2019-02, “Entertainment —
Films — Other Assets — Film Costs (Subtopic 926-20) and
Entertainment — Broadcasters — Intangibles — Goodwill and Other
(Subtopic 920-350),” on April 1, 2020. As a result of our adoption
of this new accounting update, we are now reporting cash outflows
for the acquisition of licensed copyrights as operating activities
in the consolidated statements of cash flows prospectively
beginning in the first quarter of this fiscal year. Prior to our
adoption of ASU 2019-02, cash outflows for the acquisition of
licensed copyrights were previously classified as investing
activities in the consolidated statements of cash flows.
ALIBABA GROUP HOLDING LIMITED SELECTED OPERATING DATA
Annual active consumers
The table below sets forth the number of active consumers on our
China retail marketplaces for the periods indicated:
Twelve months ended
Sep 30, 2018
Dec 31, 2018
Mar 31, 2019
Jun 30, 2019
Sep 30, 2019
Dec 31, 2019
Mar 31, 2020
Jun 30, 2020
(in millions)
Annual active consumers
601
636
654
674
693
711
726
742
Mobile MAUs
The table below sets forth the mobile MAUs on our various mobile
apps that access our China retail marketplaces for the periods
indicated:
The month ended
Sep 30, 2018
Dec 31, 2018
Mar 31, 2019
Jun 30, 2019
Sep 30, 2019
Dec 31, 2019
Mar 31, 2020
Jun 30, 2020
(in millions)
Mobile MAUs
666
699
721
755
785
824
846
874
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200820005395/en/
Investor Relations Contact: Rob Lin
investor@alibabagroup.com Media Contacts: Brion Tingler
brion.tingler@alibaba-inc.com Cathy Yan
cathy.yan@alibaba-inc.com
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