Alibaba Group Announces March Quarter and Full Fiscal Year 2019 Results

HANGZHOU, China–(BUSINESS WIRE)–Alibaba Group Holding Limited (NYSE: BABA) today announced its financial
results for the quarter and fiscal year ended March 31, 2019.

More and more, Alibaba is becoming synonymous with everyday consumption
in China, growing our base to 654 million annual active consumers and
extending our penetration in less-developed cities,” said Daniel Zhang,
Chief Executive Officer of Alibaba Group. “Our cloud and data technology
and tremendous traction in New Retail have enabled us to continuously
transform the way businesses operate in China and other emerging
markets, which will contribute to our long-term growth.”

We delivered another strong quarter and excellent fiscal year, led by
fiscal year revenue growth of 51% as well as robust user growth and
engagement across our ecosystem. Excluding the effects of consolidating
acquired businesses, revenue would have increased by 39%
year-over-year,” said Maggie Wu, Chief Financial Officer of Alibaba
Group. “Over the years, our steady profit growth and cash flow have
enabled us to strengthen our core business, invest in new businesses and
create unique value for our customers. These investments have expanded
our total addressable market and positioned us well for long-term
growth. Looking ahead to fiscal 2020, we expect revenue to be over
RMB500 billion, reflecting our confidence and positive momentum going
forward.”

BUSINESS HIGHLIGHTS

In the quarter ended March 31, 2019:

  • Revenue was RMB93,498 million (US$13,932 million), an increase
    of 51% year-over-year.
  • Annual active consumers on our China retail marketplaces
    reached 654 million, an increase of 18 million from the 12-month
    period ended December 31, 2018.
  • Mobile MAUs on our China retail marketplaces reached 721
    million in March 2019, an increase of 22 million over December 2018.
  • Income from operations was RMB8,765 million (US$1,306 million),
    a decrease of 5% year-over-year mainly due to our US$250 million
    settlement of a U.S. federal class action lawsuit. Adjusted EBITDA
    increased 29% year-over-year to RMB25,166 million (US$3,750 million).
  • Adjusted EBITA for core commerce was RMB27,484 million
    (US$4,095 million), an increase of 24% year-over-year. Our marketplace-based
    core commerce adjusted EBITA
    (see definition at the end of this
    results announcement), a non-GAAP measurement, increased 38%
    year-over-year to RMB34,688 million (US$5,169 million).
  • Net income attributable to ordinary shareholders was RMB25,830
    million (US$3,849 million), and net income was RMB23,379
    million (US$3,484 million). Non-GAAP net income was RMB20,056
    million (US$2,988 million), an increase of 42% year-over-year.
  • Diluted EPS was RMB9.84 (US$1.47) and non-GAAP diluted EPS
    was RMB8.57 (US$1.28), an increase of 50% year-over-year.
  • Net cash provided by operating activities was RMB18,553 million
    (US$2,764 million) and non-GAAP free cash flow was RMB10,714
    million (US$1,596 million).

In the fiscal year ended March 31, 2019:

  • Revenue was RMB376,844 million (US$56,152 million), an increase
    of 51% year-over-year. Excluding the effects of consolidating acquired
    businesses, revenue would have increased by 39% year-over-year.
  • Annual active consumers on our China retail marketplaces
    reached 654 million, an increase of 102 million from the 12-month
    period ended March 31, 2018.
  • Mobile MAUs on our China retail marketplaces reached 721
    million in March 2019, an increase of 104 million over March 2018.
  • GMV transacted on our China retail marketplaces was RMB5,727
    billion (US$853 billion) for fiscal year 2019, representing a
    year-over-year growth rate of 19%. Excluding unpaid orders, total physical
    goods GMV
    from our China retail marketplaces grew 25%
    year-over-year, Tmall physical goods GMV increased 31%
    year-over-year and Taobao physical goods GMV increased 19%
    year-over-year.
  • Income from operations was RMB57,084 million (US$8,506 million)
    and adjusted EBITDA increased 15% year-over-year to RMB121,943
    million (US$18,170 million);
  • Adjusted EBITA for core commerce was RMB136,167 million
    (US$20,290 million), an increase of 19% year-over-year. Our marketplace-based
    core commerce adjusted EBITA
    , a non-GAAP measurement, increased
    31% year-over-year to RMB161,589 million (US$24,078 million).
  • Net income attributable to ordinary shareholders was RMB87,600
    million (US$13,053 million) and net income was RMB80,234
    million (US$11,955 million). Non-GAAP net income was RMB93,407
    million (US$13,918 million), an increase of 12% year-over-year.
  • Diluted EPS was RMB33.38 (US$4.97) and non-GAAP diluted EPS
    was RMB38.40 (US$5.72), an increase of 17% year-over-year.
  • Net cash provided by operating activities was RMB150,975
    million (US$22,496 million) and non-GAAP free cash flow was
    RMB104,478 million (US$15,568 million).

BUSINESS AND STRATEGIC UPDATES

Core Commerce

Our Core Commerce segment delivered robust revenue growth of 51%
year-over-year in fiscal year 2019. The strong performance of the Core
Commerce segment was primarily driven by:

  • effective user acquisition and penetration into less developed cities;
  • solid revenue growth of China retail marketplaces reflecting higher
    user engagement driving improving click-through rate and better
    purchase conversion; and
  • expansion of our total addressable market by investing in local
    consumer services and New Retail businesses that captured additional
    consumer wallet share and improved user loyalty.

China Retail – Solid increase in annual active users catalyzes GMV
growth; improved merchant sentiment in allocating marketing spend.

In March 2019, our China retail marketplaces had 721 million mobile
MAUs, representing an annual and quarterly net increase of 104 million
and 22 million, respectively. Annual active consumers on our China
retail marketplaces was 654 million for the 12 months ended March 31,
2019, representing an annual and quarterly net increase of 102 million
and 18 million, respectively. This robust growth reflects successful
user acquisition programs, such as referrals through the Alipay app, and
has been a leading indicator of increased consumption activities on our
platforms. In fiscal year 2019, more than 70% of the increase in annual
active consumers was from less developed cities.

During fiscal year 2019, our China retail marketplaces recorded total
GMV of RMB5,727 billion (US$853 billion), up 19% year-over-year,
primarily driven by an increase in the number of annual active
consumers, putting us on track to achieve our US$1 trillion total GMV
target by fiscal year end 2020. Total physical goods GMV from our China
retail marketplaces, excluding unpaid orders, exhibited strong growth of
25% year-over-year in fiscal year 2019. Tmall physical goods GMV,
excluding unpaid orders, grew 31% year-over-year, which continued to
exceed the sector average. Taobao physical goods GMV, excluding unpaid
orders, delivered healthy and accelerated growth of 19% in fiscal year
2019.

The number of paying merchants that generate customer management revenue
increased during the quarter, which we believe reflects improved
merchant confidence in allocating marketing spend. We are making
progress on the monetization of recommendation feeds and enhancing
recommendation algorithms. During the quarter, we allocated more traffic
for testing of recommendation monetization, which generated incremental
customer management revenue in a quarter with seasonally lower revenue.

Taobao – fast growing consumer community and new shopping experience. Taobao
is a fast growing consumer community that continues to redefine the
shopping experience through content innovation and intelligent
personalized recommendations. We are improving the user experience and
adding greater value to merchants with our proprietary consumption
knowledge graph.

In fiscal year 2019, we successfully launched a new Taobao app
interface, which delivers a customized shopping experience by segmenting
users based on behavior data and providing them with more
recommendations to enhance product and content discovery. The new
interface also includes Taobao’s innovative content, such as curated
posts, short-form videos and live-broadcast events. These initiatives
drove strong growth in user engagement, purchase conversion and annual
active consumers.

Tmall – the leading consumer engagement and distribution platform for
brands in China.
Tmall continues to gain wallet share and grow
faster than the sector average. The growth of physical goods GMV,
excluding unpaid orders, accelerated to 33% year-over-year in the
quarter ended March 31, 2019, compared to the year-on-year growth rate
of 29% in the previous quarter. This robust growth was driven primarily
by strong performance of fast-moving consumer goods (FMCG), apparel,
electronics and home furnishing categories during the March quarter.

In fiscal year 2019, Tmall extended its leadership position as the
consumer engagement and distribution platform of choice for brands in
China. We have had great success in identifying new consumption trends
in China that drove robust sub-category growth within consumer
electronics and personal care product categories. To help brands build
awareness of new products with our large base of annual active
consumers, we developed a suite of product-launch marketing solutions,
including tools that assist brands to measure the effectiveness of new
product-launch campaigns along the full consumer journey, from discovery
to purchase.

As an example of Tmall’s powerful capabilities to enable brands to build
their business in China, Alexander McQueen and Mulberry launched
flagship stores on Tmall and joined the premium Luxury Pavilion channel
during this quarter. As of March 31, 2019, our Tmall Luxury Pavilion had
more than 100 luxury brands, all of which have also opened Tmall
flagship stores.

New Retail – digital transformation of brick-and-mortar retailing. Through
our New Retail strategy, we are at the forefront of transforming the
retail industry by digitizing all aspects of store-based operations. We
enable traditional retailers to deliver an unrivalled consumer
experience and achieve operating efficiency through our consumer insight
technology, on-demand delivery, inventory tracking, supply chain
management and mobile payments.

In fiscal year 2019, Alibaba Group and Starbucks Coffee Company jointly
announced a comprehensive strategic New Retail partnership to enable a
seamless Starbucks Experience and enhance the way customers enjoy
their food and beverages. By the end of April 2019, we had enabled
on-demand delivery of Starbucks offerings in more than 2,100 stores
across 35 cities throughout China. We have also helped accelerate
membership acquisition for its new Starbucks Reward program through the
Alipay and Taobao apps.

At the end of March 2019, we had digitized about 470 Sun Art stores with
our New Retail know-how and proprietary technology. The transformation
enables these stores to accelerate the integration of their various
retail systems, while allowing consumers to place orders through the
Taobao app and secure delivery through our on-demand delivery platform
operated by Ele.me.

Our self-owned-and-operated grocery retail chain Freshippo (known as
“Hema” in Chinese) continues to achieve robust same-store sales growth,
expand its footprint, optimize its stores and introduce new initiatives
to improve customer experience. As of March 31, 2019, we had 135
self-operated Freshippo stores in China, primarily located in tier one
and tier two cities.

Local consumer services – ecosystem synergy and focus on market share
gains in less developed cities.

In fiscal year 2019, we acquired the on-demand food delivery platform
Ele.me and integrated it with restaurant and local service guide
platform Koubei to create a business which revenues are reported under
“local consumer services” within the core commerce segment. Our strategy
for the local consumer services business is to leverage the 654 million
annual active consumers on our China retail marketplaces and our data
technology to expand our offerings from shopping to services, further
tapping into new addressable markets for consumption in China.

We are focused on gaining market share by integrating the local consumer
services business with the Alibaba ecosystem and penetrating into less
developed cities. For example, the local consumer services business has
acquired users and increased orders by leveraging the Alipay and Taobao
apps, which have more than 600 million MAUs each and have gained a
significant number of users in less developed cities in recent quarters.
Approximately 30% of Ele.me platform’s total orders are generated
through these two mobile apps.

Cainiao Network and logistics investments – achieving progress in
last-mile solutions as well as international and cross-border
fulfillment.
During the 2019 fiscal year, Cainiao Network focused on
delivering a comprehensive last-mile solution to consumers through both
organic growth and strategic investments. In urban areas, Cainiao
Network has developed neighborhood delivery solutions with a combination
of community and campus stations and residential self-pickup lockers,
which we call Cainiao Post. These solutions have become an important
complement to the last-mile delivery network of Cainiao’s express
delivery partners. In March 2019, these Cainiao Post stations handled
over 10% of total daily packages generated by our China retail
marketplaces. In addition, during the fiscal year, we enhanced our
relationship with the express delivery industry through our investments
in ZTO Express and STO Express, two of the major express delivery
companies in China.

In international logistics, Cainiao Network and the logistics arm of
Lazada have developed a strong and growing network of assets and
partners to support our international commerce retail businesses
(AliExpress and Lazada). In March 2019, our proprietary fulfillment and
logistics solutions served over 75% of AliExpress packages and about 80%
of Lazada packages were delivered out of its own sortation centers. From
a China import standpoint, Cainiao Network is focused on developing
cross-border fulfillment solutions for Tmall Global, utilizing a
combination of bonded warehouses in China and direct shipping from
foreign countries. In March 2019, these cross-border fulfillment
solutions served over 90% of all Tmall Global packages.

International – building foundation for long-term growth. Our
cross-border and international retail businesses continue to show
promising growth. In the twelve months ended March 31, 2019, Lazada and
AliExpress had a total of more than 120 million annual active consumers.

In fiscal year 2019, we strengthened Lazada’s third party marketplace
business, management team and technology infrastructure. At the same
time, Lazada reduced its exposure to direct product sales of low-margin
categories, such as electronics, as we believe this strategy will better
position Lazada for sustainable, scalable and less capital-intensive
long-term growth. Lazada will continue to invest in logistics
infrastructure in order to improve user experience and reduce delivery
cost, as factors such as delivery speed and convenience have become key
competitive advantages in the Southeast Asian market.

To address increasing Chinese consumer demand for international products
and brands, Tmall Global serves as the premier platform that helps
overseas brands and merchants reach Chinese consumers directly, build
brand awareness and gain valuable consumer insight that inform their
overall China strategy. Some of the brands and merchants that have a
presence on Tmall Global are well established names, such as nutritional
products from Chemists Warehouse and Blackmores, baby products from
Pampers, accessories from Emporio Armani and nuts from Kirkland. Tmall
Global was the number one e-commerce import platform in China based on
transaction value in calendar year 2018, according to Analysys.

Cloud Computing

Cloud computing revenue grew 76% year-over-year to RMB7,726 million
(US$1,151 million) during the March 2019 quarter, primarily driven by an
increase in average spending per customer. We are seeing significant
traction and diversification of customers and revenue. In fiscal year
2019, Alibaba Cloud served more than half of the A-share listed
companies in China. We will continue to invest to further expand our
market share by developing value-added products and features.

During the March 2019 quarter, Alibaba Cloud launched major products in
the areas of graph database, anti-bot protection,
blockchain-as-a-service and real time communications. We continue to use
our scale to lower the pricing of products and services in the areas of
content delivery network, security, database and network infrastructure
so that we are able to pass on cost savings to our customers.

According to Gartner (April 2019), Alibaba Cloud is the largest cloud
computing service provider in Asia Pacific, as measured by market share
for IaaS (Infrastructure as a Service) and IUS (Infrastructure Utility
Service).

Digital Media and Entertainment

Digital Media and Entertainment is a key piece of our Live@Alibaba
vision and an extension of our strategy to capture consumption beyond
our core commerce businesses. In fiscal year 2019, we emphasized
developing our original content production capabilities in order to
attain greater control over content quality, format and scheduling. We
will continue to execute this strategy as we believe original content
will drive paying subscriber and advertising revenue growth. Youku’s
daily average subscriber base continues to grow at a healthy rate,
increasing about 88% and 50% year-over-year during fiscal year 2019 and
March 2019 quarter, respectively.

In March 2019, we increased our shareholding in Alibaba Pictures to 51%
and aligned the management of Digital Media and Entertainment and
Alibaba Pictures. Alibaba Pictures is principally engaged in the
production, promotion and distribution of theatrical entertainment,
serving consumers, studios, and cinema operators. Alibaba Pictures was
involved in the production, promotion and distribution of highly popular
films, including Chinese box-office hit The Wandering Earth,
which to-date is the second highest grossing domestic film in China, and
the Oscar-winning movie Green Book. We believe the alignment of
management and content strategy between Alibaba Pictures and our Digital
Media and Entertainment businesses will support and enhance our original
content strategy in the future.

Innovation Initiatives & Technology Development

Amap app is the largest provider of mobile digital map, navigation and
real-time traffic information in China by daily active users. Amap also
operates a leading open digital maps platform that powers many major
mobile apps in different industries, such as food delivery, ride
service, taxi-hailing and social networking.

Tmall Genie, our AI-powered smart speaker, connects consumers with
interactive services offered by participants in our digital economy.
Since Tmall Genie’s official launch in August 2017, more than 10 million
units have been activated.

Cash Flow from Operating Activities and Free
Cash Flow

In the quarter ended March 31, 2019, net cash provided by operating
activities was RMB18,553 million (US$2,764 million), an increase of 29%
compared to RMB14,383 million in the same quarter of 2018. Free cash
flow, a non-GAAP measurement of liquidity, in the quarter ended March
31, 2019 increased by 22% to RMB10,714 million (US$1,596 million), from
RMB8,767 million in the same quarter of 2018.

In the fiscal year ended March 31, 2019, net cash provided by operating
activities was RMB150,975 million (US$22,496 million), an increase of
20% compared to RMB125,805 million in the fiscal year 2018. Free cash
flow, a non-GAAP measurement of liquidity, in fiscal year 2019 increased
by 4% to RMB104,478 million (US$15,568 million), from RMB99,996 million
in fiscal year 2018, primarily due to an increase in capital
expenditures (excluding acquisition of land use rights and construction
in progress relating to office campus) by RMB16,735 million and an
increase in acquisition of licensed copyrights and other intangible
assets by RMB3,953 million.

A reconciliation of net cash provided by operating activities to free
cash flow is included at the end of this results announcement.

Share Repurchase

In September 2018, we announced an ADS repurchase plan to implement the
previously announced US$6 billion share repurchase program. As of the
end of March 2019, we had repurchased approximately 10.9 million of our
ADSs for a total of approximately US$1.57 billion.

Guidance

Looking ahead, we are confident about our value proposition to consumers
and merchants, and we will focus on solid execution to build our
businesses. In fiscal year 2020, we expect to generate over RMB500
billion in revenue.

KEY OPERATIONAL METRICS*

 

March 31,
2018

 

December 31,
2018

 

March 31,
2019

  Net adds
YoY   QoQ
 
China Commerce Retail:
Annual active consumers(1) (in millions) 552 636 654 102 18
Mobile monthly active users (MAUs)(2) (in millions) 617 699 721 104 22

__________________

*   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, 2018.
(1) For the twelve months ended on the respective dates.
(2) For the month ended on the respective dates.
 

MARCH QUARTER SUMMARY FINANCIAL RESULTS

  Three months ended March 31,  
2018     2019
RMB RMB   US$(1)

YoY %
Change

(in millions, except percentages and per share amounts)
 
Revenue 61,932 93,498 13,932 51%
 
Income from operations 9,221 8,765 1,306 (5)%(3)
Operating margin 15 % 9 %
Adjusted EBITDA(2) 19,454 25,166 3,750 29%
Adjusted EBITDA margin(2) 31 % 27 %
Adjusted EBITA(2) 16,805 20,757 3,093 24%
Adjusted EBITA margin(2) 27 % 22 %
 
Net income 6,641 23,379 3,484 252%(4)
Net income attributable to ordinary shareholders 7,561 25,830 3,849 242%(4)
Non-GAAP net income(2) 14,099 20,056 2,988 42%
 
Diluted earnings per share/ADS (EPS) 2.88 9.84 1.47 242%
Non-GAAP diluted EPS(2) 5.73 8.57 1.28 50%

__________________

(1)   This results announcement contains translations of certain Renminbi
(“RMB”) amounts into U.S. dollars (“US$”) for the convenience of the
reader. Unless otherwise stated, all translations of RMB into US$
were made at RMB6.7112 to US$1.00, the exchange rate on March 29,
2019 as set forth in the H.10 statistical release of the Federal
Reserve Board. The percentages stated in this announcement are
calculated based on the RMB amounts.
(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 decrease was primarily due to our US$250
million settlement of a U.S. federal class action lawsuit.
Excluding this impact, our income from operations would have
increased by 13%.

(4) Includes revaluation gains of investments and businesses, as
discussed in detail in “Interest and investment income, net” below.
 

MARCH QUARTER INFORMATION BY SEGMENTS

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

  Three months ended March 31, 2019

Core
commerce

 

Cloud
computing

 

Digital media
and
entertainment

 

Innovation
initiatives
and others

 

 

Unallocated(1)

 

 

Consolidated

RMB RMB RMB RMB RMB RMB   US$
(in millions, except percentages)
Revenue 78,894 7,726 5,671 1,207

 

93,498 13,932
 
Income (loss) from operations 21,632 (1,036 ) (3,854 ) (3,270 ) (4,707 ) 8,765 1,306
Add: Share-based compensation expense 3,054 869 691 1,318 1,178 7,110 1,060
Add: Amortization of intangible assets 2,798 3 335 20 47 3,203 477

Add: Settlement of U.S. federal class action lawsuit

        1,679   1,679  

250

 
 
Adjusted EBITA

27,484

(2)

(164 ) (2,828 ) (1,932 ) (1,803 ) 20,757   3,093  
Adjusted EBITA margin 35 % (2 )% (50 )% (160 )%

 

22 %
 
Three months ended March 31, 2018

Core
commerce

Cloud
computing

Digital media
and
entertainment

Innovation
initiatives
and others

 

Unallocated(1)

 

Consolidated

RMB RMB RMB RMB RMB RMB
(in millions, except percentages)
Revenue 51,287 4,385 5,272 988 61,932
 
Income (loss) from operations 18,660 (1,063 ) (3,541 ) (2,019 ) (2,816 )

 

9,221

Add: Share-based compensation expense

2,693

707

536

1,153

1,166

6,255

Add: Amortization of intangible assets

833   3   410   6   77   1,329  
 
Adjusted EBITA 22,186   (353 ) (2,595 ) (860 ) (1,573 ) 16,805  
Adjusted EBITA margin 43 % (8 )% (49 )% (87 )% 27 %

__________________

Contacts

Investor Relations Contact
Rob Lin
investor@alibabagroup.com

Media Contacts
Brion Tingler
brion.tingler@alibaba-inc.com

Adam Najberg
adam.najberg@alibaba-inc.com

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