Alibaba Group Holding Limited (NYSE: BABA) today announced its
financial results for the quarter ended December 31, 2018.
“Alibaba had another strong quarter. Our resilient operating and
financial performance is a direct reflection of our persistent
focus on better serving our growing base of nearly 700 million
consumers across retail, digital entertainment and local consumer
services,” said Daniel Zhang, Chief Executive Officer of Alibaba
Group. “Our growth is also driven by the power of Alibaba’s cloud
and data technology that helps expedite the digital transformation
of millions of enterprises.”
“In the December quarter, we delivered strong top-line growth of
41% year-over-year,” said Maggie Wu, Chief Financial Officer of
Alibaba Group. “The profitability of our marketplace-based core
commerce business, as measured by adjusted EBITA, was RMB54.3
billion (US$7.9 billion), representing a 31% year-over-year growth.
This profitability and US$7.5 billion in free cash flow generated
this quarter enable us to continue to invest in other important
strategic businesses and technology to support the growth of our
ecosystem.”
BUSINESS HIGHLIGHTS
In the quarter ended December 31,
2018:
- Revenue was RMB117,278 million
(US$17,057 million), an increase of 41% year-over-year.
- Revenue from core commerce increased
40% year-over-year to RMB102,843 million (US$14,958 million).
- Revenue from cloud computing increased
84% year-over-year to RMB6,611 million (US$962 million).
- Revenue from digital media and
entertainment increased 20% year-over-year to RMB6,491 million
(US$944 million).
- Revenue from innovation initiatives and
others increased 73% year-over-year to RMB1,333 million (US$193
million).
- Annual active consumers on our
China retail marketplaces reached 636 million, an increase of 35
million from the 12-month period ended September 30, 2018.
- Mobile MAUs on our China retail
marketplaces reached 699 million in December 2018, an increase of
33 million over September 2018.
- Income from operations was
RMB26,798 million (US$3,898 million), an increase of 3%
year-over-year. Adjusted EBITDA increased 13% year-over-year
to RMB40,708 million (US$5,921 million).
- Adjusted EBITA for core commerce
was RMB46,079 million (US$6,702 million), an increase of 20%
year-over-year. Our marketplace-based core commerce adjusted
EBITA (see definition at the end of this results announcement),
a non-GAAP measurement, increased 31% year-over-year to RMB54,303
million (US$7,898 million).
- Net income attributable to ordinary
shareholders was RMB33,052 million (US$4,807 million), and
net income was RMB30,964 million (US$4,504 million),
representing a year-over-year increase of 37% and 33%,
respectively.
- Non-GAAP net income was
RMB29,797 million (US$4,334 million). Diluted EPS was
RMB12.64 (US$1.84) and non-GAAP diluted EPS was RMB12.19
(US$1.77).
- Net cash provided by operating
activities was RMB64,898 million (US$9,439 million) and
non-GAAP free cash flow was RMB51,373 million (US$7,472
million).
BUSINESS AND STRATEGIC UPDATES
Core Commerce
Taobao – robust user growth and enhanced engagement. In
December 2018, our China retail marketplaces had 699 million mobile
MAUs, representing a quarterly net increase of 33 million. Annual
active consumers on our China retail marketplaces was 636 million
for the 12 months ended December 31, 2018, compared to 601 million
for the 12 months ended September 30, 2018, reflecting successful
user acquisition programs, such as referrals through the Alipay
App, and is an early indicator of transaction activity on our
platforms. Over 70% of the increase in annual active consumers was
from third-and-lower tier cities, demonstrating the success of our
initiatives to cater to a broader base of users through simpler
interfaces for first-time or less frequent users. Ongoing
enhancements in search and personalized recommendations on the
Taobao App drove increased user engagement and purchase
conversion.
Tmall – extending B2C market leadership. Tmall continued
to extend its B2C market leadership and consumer wallet share.
Excluding unpaid orders, Tmall physical goods GMV grew 29%
year-over-year in the quarter ended December 31, 2018, outpacing
the industry and reflecting strong secular consumption trends. This
robust growth was driven by strength in the fast-moving consumer
goods (FMCG), apparel and home furnishing categories.
Our annual 11.11 Global Shopping Festival was another
record-breaking event, generating RMB213.5 billion in GMV settled
through Alipay on our marketplaces, up 27% year-over-year. The
robust GMV growth was driven by an increase in the number of buyers
through higher user traffic generation and improved conversion
rates. Over 40% of Chinese consumers on 11.11 made purchases from
international brands, and overseas consumers from 230 countries and
regions also made purchases during the festival. This year’s Global
Shopping Festival saw the most extensive participation and synergy
creation by our business units, which this year went well beyond
our China retail marketplaces, to encompass our offerings in online
video entertainment, local services, cross-border e-commerce and
store-based retail. The success of the festival demonstrated the
strength of our technology and logistics infrastructure, as well as
payment and other e-commerce ecosystem partners, operating at
massive scale.
Tmall extended its leadership position as the engagement and
distribution platform of choice in China for global brands. During
the quarter, brands including Valentino, Ermenegildo Zegna, Stuart
Weitzman and Sergio Rossi opened Tmall flagship stores and joined
the Tmall Luxury Pavilion.
New Retail – redefining the future of brick-and-mortar.
Our New Retail strategy is transforming the traditional retail
industry by digitizing all aspects of store-based retail
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 payment
solutions. As of the end of the quarter, we have digitized
approximately 470 Sun Art stores with our New Retail know-how and
technology, enabling these stores to better manage their retail
systems, while allowing consumers to place orders through the
Taobao App and secure delivery through our on-demand delivery
platform.
Our proprietary grocery retail chain Freshippo (formerly Hema)
continued to expand its footprint, optimize its stores and
introduce new initiatives that improve customer experience. As of
December 31, 2018, there were 109 self-operated Freshippo stores in
China, primarily located in tier 1 and tier 2 cities. During the
quarter, Freshippo continued to achieve robust same-store sales
growth.
Local consumer services – driving greater value to consumers
and merchants in the local consumer service industry. In
December 2018, we combined our on-demand food delivery platform
Ele.me with our restaurant and local service guide platform Koubei
to create a discrete business that we call “local consumer
services.” This business is financed with over US$3 billion in
equity capital from Alibaba, SoftBank and other third party
investors. During the quarter, daily on-demand orders and GMV
continued to show strong growth. Our local consumer services
business is an important part of our consumer-facing platform,
which leverages our 636 million annual active consumers to further
penetrate the local services market, increasing our ability to tap
into China’s ongoing consumption upgrade. In addition, we expect
that our commerce platform technology, know-how and infrastructure
will deliver consumer insights and digitized operational solutions
to empower local merchants on the platform.
Cainiao Network – facilitating enhanced delivery experiences
for the continuing consumption upgrade of Chinese consumers.
During the 2018 11.11 Global Shopping Festival, Cainiao processed
an unprecedented over 1 billion delivery orders, demonstrating
Cainiao’s capability to coordinate a complex logistics ecosystem at
massive scale. Internationally, we saw continued growth in Chinese
consumer demand for high quality imports from Japan, the United
States, South Korea, Australia and Germany – the top five countries
selling into China during the festival. To ensure a smooth and
timely delivery experience for consumers during the festival,
Cainiao and its partners operated 34 bonded warehouses in major
ports throughout China to facilitate same-day or next-day delivery
of overseas orders.
International – building foundation for growth in Southeast
Asia. During the quarter, we emphasized strengthening Lazada’s
third-party marketplace business, which witnessed robust growth in
GMV. At the same time, we reduced exposure to direct product sales
in select merchandise categories, as we believe this strategy will
best position Lazada for sustainable and scalable long-term growth.
We have upgraded Lazada’s technology, which resulted in robust
increase in active users and greater user engagement on Lazada’s
mobile app. We continue to invest resources to integrate Lazada’s
business and technology operations into Alibaba with the aim of
building a strong foundation for us to extend our offerings in
Southeast Asia.
As it relates to cross-border, our priority is to meet rising
demand for high-quality imported products to serve Chinese
consumers. At China’s inaugural Global Import Leadership Summit
held in Shanghai in November, we announced a commitment to import
US$200 billion of goods from all over the world over the next five
years. To this end, we expect to significantly invest in our supply
chain capabilities, overseas supplier enablement, import platform
operations as well as cross-border logistics.
Cloud Computing
Cloud computing revenue grew 84% year-over-year to RMB6,611
million (US$962 million), primarily driven by increased spending
from enterprise customers. During the December 2018 quarter,
Alibaba Cloud launched 678 new products and features, including
those related to core cloud offerings, data intelligence, AI
applications, security and enterprise solutions.
In November 2018, we appointed Jeff Zhang as president of
Alibaba Cloud, adding to his responsibility on top of his role as
our Chief Technology Officer. We believe that placing Alibaba Cloud
under the leadership of our group’s overall technology management
will enable our cloud business to leverage the best-in-class
technology innovations of the entire group. Under this framework,
we can make available to customers of Alibaba Cloud much of the
proprietary technology we use in our own business, such as
infrastructure technology, data management and value-added
services.
Digital Media and
Entertainment
The synergies between our commerce and entertainment businesses
continue to deliver a superior user experience that helps us
increase paying subscribers for the Youku online video platform.
During the quarter, Youku’s average daily subscribers increased 64%
year-over-year.
To more closely align the distribution business with our content
strategy, during the quarter, we agreed to increase our stake in
Alibaba Pictures to approximately 51%, subject to approval by
Alibaba Pictures’ independent shareholders. Upon closing, Alibaba
Pictures will become our consolidated subsidiary, and our digital
media and entertainment businesses, including Youku, Damai and
Alibaba Literature, will begin to collaborate more closely with
Alibaba Pictures. We have also named Luyuan Fan, the Chairman and
CEO of Alibaba Pictures, as the president of our digital media and
entertainment business. We believe increased alignment of strategy
and management will put our digital media and entertainment
business in a stronger position to deliver competitive offerings to
consumers.
Cash Flow from Operating Activities and
Free Cash Flow
Net cash provided by operating activities in the quarter ended
December 31, 2018 was RMB64,898 million (US$9,439 million), an
increase of 17% compared to RMB55,428 million in the same quarter
of 2017. Free cash flow, a non-GAAP measurement of liquidity, in
the quarter ended December 31, 2018 increased by 11% to RMB51,373
million (US$7,472 million), from RMB46,399 million in the same
quarter of 2017. 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. Including the repurchase of approximately 9.12 million
ADSs already announced in our prior earnings release on November 2,
2018, we have now repurchased approximately 10.86 million of our
ADSs for a total of approximately US$1.57 billion as of January 29,
2019.
KEY OPERATIONAL METRICS*
December 31,2017
September 30,2018
December 31,2018
Net adds YoY QoQ China
Commerce Retail: Annual active consumers(1) (in millions) 515
601 636 121 35 Mobile monthly active users (MAUs)(2) (in millions)
580 666 699 119 33
__________________
*
For definitions of terms used but not
defined in this results announcement, please refer to our annual
report on Form 20-F for the fiscal year ended March 31, 2018.
(1) For the twelve months ended on the respective dates. (2) For
the month ended on the respective dates.
DECEMBER QUARTER SUMMARY FINANCIAL
RESULTS
Three months ended December 31,
2017 2018 YoY %
RMB RMB
US$(1)
Change (in millions, except percentages and per share
amounts) Revenue 83,028 117,278 17,057 41 %
Income from operations 25,996 26,798 3,898 3 % Operating margin 31
% 23 % Adjusted EBITDA(2) 36,183 40,708 5,921 13 % Adjusted EBITDA
margin(2) 44 % 35 % Adjusted EBITA(2) 33,662 36,567 5,318 9 %
Adjusted EBITA margin(2) 41 % 31 % Net income 23,332 30,964
4,504 33 % Net income attributable to ordinary shareholders 24,073
33,052 4,807 37 % Non-GAAP net income(2) 27,007 29,797 4,334 10 %
Diluted earnings per share/ADS (EPS) 9.20 12.64 1.84 37 %
Non-GAAP diluted EPS(2) 10.61 12.19 1.77 15 %
__________________
(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 RMB6.8755 to US$1.00, the
exchange rate on December 31, 2018 as set forth in the H.10
statistical release of the Federal Reserve Board. The percentages
stated in this announcement are calculated based on the RMB
amounts. (2) See the sections entitled “Information about
Segments,” “Non-GAAP Financial Measures” and “Reconciliations of
Non-GAAP Measures to the Nearest Comparable GAAP Measures” for more
information about the non-GAAP measures referred to within this
results announcement.
DECEMBER QUARTER INFORMATION BY SEGMENTS
The table below sets forth selected financial information of our
operating segments for the periods indicated:
Three months ended December 31, 2018
Digital media Innovation
Core Cloud and initiatives
commerce computing entertainment and
others
Unallocated(1)
Consolidated RMB RMB RMB RMB
RMB RMB US$ (in millions, except
percentages) Revenue 102,843 6,611
6,491 1,333 — 117,278 17,057
Income (loss) from operations 40,368
(1,233 ) (7,097 ) (2,549
) (2,691 ) 26,798 3,898
Add: Share-based compensation expense
3,253
954
769
940
1,044
6,960
1,012
Add: Amortization of intangible assets 2,458 5 294
13 39 2,809 408
Adjusted EBITA
46,079
(2)
(274 ) (6,034 )(3) (1,596
) (1,608 ) 36,567 5,318
Adjusted EBITA margin 45 % (4
)% (93 )% (120 )%
31 % Three months ended December 31,
2017 Digital media Innovation Core
Cloud and initiatives commerce
computing entertainment and others
Unallocated(1)
Consolidated RMB RMB RMB RMB
RMB RMB (in millions, except percentages)
Revenue 73,244 3,599 5,413 772
— 83,028 Income (loss) from operations
35,439 (793 ) (3,828 )
(1,814 ) (3,008 ) 25,996 Add:
Share-based compensation expense
2,226
608
510
808
963
5,115
Add: Amortization of intangible assets 865 4 1,105
— 83
2,057 Add: Impairment of goodwill
— —
— — 494 494
Adjusted EBITA 38,530 (181 )
(2,213 ) (1,006 ) (1,468
) 33,662 Adjusted EBITA margin
53 % (5 )% (41 )%
(130 )% 41 %
__________________
(1) Unallocated expenses are primarily related to corporate
administrative costs and other miscellaneous items that are not
allocated to individual segments. (2)
Marketplace-based core commerce adjusted
EBITA increased 31% year-over-year to RMB54,303 million (US$7,898
million).
(3)
Adjusted EBITA loss include impairment
charges on licensed copyrights of RMB2.8 billion (US$407
million).
DECEMBER QUARTER OPERATIONAL AND FINANCIAL RESULTS
Revenue
Revenue for the quarter ended December 31, 2018 was RMB117,278
million (US$17,057 million), an increase of 41% compared to
RMB83,028 million in the same quarter of 2017. The increase was
mainly driven by the robust revenue growth of our China commerce
retail business, the consolidation of Ele.me, as well as strong
revenue growth of Alibaba Cloud.
The following table sets forth a breakdown of our revenue by
segment for the periods indicated:
Three months ended December 31, 2017
2018 % of % of
YoY % RMB Revenue RMB US$
Revenue Change (in millions, except
percentages) Core commerce: China commerce retail - Customer
management 38,800 47% 49,592 7,213 42% 28% - Commission 16,221 19%
20,165 2,933 17% 24% - Others 5,084 6% 11,298 1,643 10% 122% 60,105
72% 81,055 11,789 69% 35% China commerce wholesale 1,926 2% 2,694
392 2% 40% International commerce retail 4,733 6% 5,834 849 5% 23%
International commerce wholesale 1,666 2% 2,175 316 2% 31% Cainiao
logistics services 3,907 5% 4,491 653 4% 15% Local consumer
services
— — 5,159 750 5% N/A Others 907 1% 1,435 209
1% 58% Total core commerce 73,244 88% 102,843 14,958 88% 40%
Cloud computing 3,599 4% 6,611 962 6% 84% Digital media and
entertainment 5,413 7% 6,491 944 5% 20% Innovation initiatives and
others 772 1% 1,333 193 1% 73% Total 83,028 100% 117,278 17,057
100% 41%
Core commerce
- China commerce retail
businessRevenue – Revenue from our China commerce
retail business in the quarter ended December 31, 2018 was
RMB81,055 million (US$11,789 million), an increase of 35% compared
to RMB60,105 million in the same quarter of 2017. Revenue from our
China retail marketplaces continued to see strong growth. Combined
customer management and commission revenues grew 27%
year-over-year, which represents an increase of 28% in customer
management revenue and an increase of 24% in commission revenue.
The growth of customer management revenue was primarily the result
of increases in the volume of paid clicks driven by higher
click-through rate. The growth of commission revenue was primarily
due to strong 29% year-over-year growth of Tmall physical goods GMV
(excluding unpaid orders). The discrepancy of growth rates between
commission revenue and Tmall physical goods GMV (excluding unpaid
orders) is primarily due to our adoption of a new accounting
requirement, which has the effect of spreading out recognition of
revenue from annual service fees received from Tmall merchants,
whereas we previously recognized these fees at the end of each
calendar year. “Others” revenue was RMB11,298 million (US$1,643
million), a significant increase compared to RMB5,084 million in
the same quarter of 2017, primarily driven by contributions from
Freshippo, Tmall Direct Import and other direct sale
businesses.Mobile MAUs – Mobile MAUs on our China retail
marketplaces grew to 699 million in December 2018, compared to 666
million in September 2018, representing a net addition of 33
million MAUs in the quarter, a 21% increase from 580 million in
December 2017.Annual active consumers – Our China
retail marketplaces had 636 million annual active consumers for the
12 months ended December 31, 2018, compared to 601 million for the
12 months ended September 30, 2018, representing a net addition of
35 million, and a 23% increase from 515 million in the 12 months
ended December 31, 2017. During the quarter, over 70% of the
increase in annual active consumers was from third-and-lower tier
cities, demonstrating the success of our initiatives to cater to a
broader base of users through simpler interfaces for first-time or
less frequent users. The longer consumers have been with our
platform, the more they spend and the more orders they place across
more product categories.
- China commerce wholesale
businessRevenue from our China commerce wholesale business in
the quarter ended December 31, 2018 was RMB2,694 million (US$392
million), an increase of 40% compared to RMB1,926 million in the
same quarter of 2017. The increase was primarily due to an increase
in the average revenue from paying members on 1688.com, our
domestic wholesale marketplace.
- International commerce retail
businessRevenue from our international commerce retail business
in the quarter ended December 31, 2018 was RMB5,834 million (US$849
million), an increase of 23% compared to RMB4,733 million in the
same quarter of 2017. The increase was primarily due to our
consolidation of Trendyol, Turkey’s leading e-commerce platform.
Lazada’s revenue growth was slower than prior quarters primarily
due to a decrease in revenue generated from our direct sales
business (where revenue is recorded on a gross basis including the
cost of inventory). During the quarter, Lazada strengthened its
core marketplace businesses and reduced exposure to direct sales in
select merchandise categories. This business model shift resulted
in accelerating marketplace GMV growth, although direct sales
revenue declined during the same period.
- International commerce wholesale
businessRevenue from our international commerce wholesale
business in the quarter ended December 31, 2018 was RMB2,175
million (US$316 million), an increase of 31% compared to RMB1,666
million in the same quarter of 2017. The increase was primarily due
to increases in the average revenue from paying members and the
number of paying members on Alibaba.com, our global wholesale
marketplace.
- Cainiao logistics
servicesRevenue from Cainiao logistics services, which
represents revenue from the domestic and international
one-stop-shop logistics services and supply chain management
solutions provided by Cainiao Network, after elimination of
inter-company transactions, was RMB4,491 million (US$653 million),
an increase of 15% compared to RMB3,907 million in the same quarter
of 2017.
- Local consumer servicesRevenue
from local consumer services, which primarily represents revenues
from platform commissions, provision of food delivery services and
other services provided by our on-demand food delivery platform
Ele.me, was RMB5,159 million (US$750 million). We started to
consolidate Ele.me in May 2018 and Koubei in December 2018.
Cloud computing
Revenue from our cloud computing business in the quarter ended
December 31, 2018 was RMB6,611 million (US$962 million), an
increase of 84% compared to RMB3,599 million in the same quarter of
2017, primarily driven by increased spending from enterprise
customers.
Digital media and entertainment
Revenue from our digital media and entertainment business in the
quarter ended December 31, 2018 was RMB6,491 million (US$944
million), an increase of 20% compared to RMB5,413 million in the
same quarter of 2017. The increase was primarily due to an increase
in revenue from mobile value-added services provided by UCWeb, such
as mobile search and game publishing, and an increase in
subscription revenue from Youku.
Innovation initiatives and others
Revenue from innovation initiatives and others in the quarter
ended December 31, 2018 was RMB1,333 million (US$193 million), an
increase of 73% compared to RMB772 million in the same quarter of
2017. The increase was mainly due to an increase in revenue from
Tmall Genie and Amap.
Costs and Expenses
The following tables set forth a breakdown of our costs and
expenses, share-based compensation expense and costs and expenses
excluding share-based compensation expense by function for the
periods indicated.
Three months ended December 31,
%
ofRevenueYoYchange
2017 2018 RMB
% ofRevenue
RMB US$
% ofRevenue
(in millions, except percentages) Costs and expenses:
Cost of revenue 35,078 42 % 60,813 8,845 52 % 10 % Product
development expenses 6,289 7 % 8,901 1,295 8 % 1 % Sales and
marketing expenses 8,542 10 % 12,104 1,760 10 % 0 % General and
administrative expenses 4,572 6 % 5,853 851 5 % (1 )% Amortization
of intangible assets 2,057 3 % 2,809 408 2 % (1 )% Impairment of
goodwill 494 1 % — — — (1 )% Total costs and expenses 57,032
69 % 90,480 13,159 77 % 8 %
Share-based compensation
expense by function: Cost of revenue 1,328 2 % 1,582 230 2 % 0
% Product development expenses 1,895 2 % 2,987 434 3 % 1 % Sales
and marketing expenses 469 0 % 838 122 0 % 0 % General and
administrative expenses 1,423 2 % 1,553 226 1 % (1 )% Total
share-based compensation expense 5,115 6 % 6,960 1,012 6 % 0 %
Costs and expenses excluding share-based compensation
expense: Cost of revenue 33,750 40 % 59,231 8,615 50 % 10 %
Product development expenses 4,394 5 % 5,914 861 5 % 0 % Sales and
marketing expenses 8,073 10 % 11,266 1,638 10 % 0 % General and
administrative expenses 3,149 4 % 4,300 625 4 % 0 % Amortization of
intangible assets 2,057 3 % 2,809 408 2 % (1 )% Impairment of
goodwill 494 1 % — — — (1 )% Total costs and expenses
excluding share-based compensation expense 51,917 63 % 83,520
12,147 71 % 8 %
Cost of revenue – Cost of revenue in the quarter ended
December 31, 2018 was RMB60,813 million (US$8,845 million), or 52%
of revenue, compared to RMB35,078 million, or 42% of revenue, in
the same quarter of 2017. Without the effect of share-based
compensation expense, cost of revenue as a percentage of revenue
would have increased from 40% in the quarter ended December 31,
2017 to 50% in the quarter ended December 31, 2018. The increase
was primarily due to (i) our consolidation of Ele.me, (ii) an
increase of the cost of inventory and logistics from our New Retail
and direct import businesses, as well as (iii) an increase in
content spending by Youku on original content and impairment
charges on licensed copyrights of RMB2.8 billion (US$407
million).
Product development expenses – Product development
expenses in the quarter ended December 31, 2018 were RMB8,901
million (US$1,295 million), or 8% of revenue, compared to RMB6,289
million, or 7% of revenue, in the same quarter of 2017. Without the
effect of share-based compensation expense, product development
expenses as a percentage of revenue would have remained stable at
5% in the quarter ended December 31, 2018 and the same quarter last
year.
Sales and marketing expenses – Sales and marketing
expenses in the quarter ended December 31, 2018 were RMB12,104
million (US$1,760 million), or 10% of revenue, compared to RMB8,542
million, or 10% of revenue, in the same quarter of 2017. Without
the effect of share-based compensation expense, sales and marketing
expenses as a percentage of revenue would have remained stable at
10% in the quarter ended December 31, 2018 and the same quarter
last year.
General and administrative expenses – General and
administrative expenses in the quarter ended December 31, 2018 were
RMB5,853 million (US$851 million), or 5% of revenue, compared to
RMB4,572 million, or 6% of revenue, in the same quarter of 2017.
Without the effect of share-based compensation expense, general and
administrative expenses as a percentage of revenue would have
remained stable at 4% in the quarter ended December 31, 2018 and
the same quarter last year.
Share-based compensation expense – Total share-based
compensation expense included in the cost and expense items above
in the quarter ended December 31, 2018 was RMB6,960 million
(US$1,012 million), an increase of 36% compared to RMB5,115 million
in the same quarter of 2017. Share-based compensation expense as a
percentage of revenue remained stable at 6% in the quarter ended
December 31, 2018 and the same quarter last year. The following
table sets forth our analysis of share-based compensation expense
for the quarters indicated by type of share-based awards:
Three months ended December 31,
2017 September 30, 2018 December 31,
2018 % Change % of % of
% of RMB Revenue RMB
Revenue RMB US$ Revenue YoY
QoQ (in millions, except percentages) By type of
awards: Alibaba Group share-based awards granted to:
- Our employees
4,371 5 % 6,060 7 % 5,853 851 5 % 34 % (3 )%
- Ant Financial employees and other
consultants(1)
293
1
%
105
0
%
26
4
0
%
(91
)%
(75
)%
Ant Financial share-based awards granted to our employees(1)
232
0
%
438
0
%
505
73
0
%
118
%
15
%
Others 219 0 % 440 1 % 576 84 1 % 163 % 31 %
Total share-based compensation expense
5,115 6 % 7,043 8 % 6,960 1,012 6 %
36
%
(1
)%
__________________
(1) Awards subject to mark-to-market accounting treatment.
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. 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 will continue to be
affected by future changes in the valuation of Ant Financial,
although any such changes will be non-cash and will not result in
any economic cost or equity dilution to our shareholders.
Amortization of intangible assets – Amortization of
intangible assets in the quarter ended December 31, 2018 was
RMB2,809 million (US$408 million), an increase of 37% from RMB2,057
million in the same quarter of 2017, primarily due to an increase
in amortization of intangible assets acquired from business
combinations of Ele.me and Koubei.
Income from operations and operating
margin
Income from operations in the quarter ended December 31, 2018
was RMB26,798 million (US$3,898 million), or 23% of revenue, an
increase of 3% compared to RMB25,996 million, or 31% of revenue, in
the same quarter of 2017.
Adjusted EBITDA and Adjusted
EBITA
Adjusted EBITDA increased 13% year-over-year to RMB40,708
million (US$5,921 million) in the quarter ended December 31, 2018,
compared to RMB36,183 million in the same quarter of 2017. Adjusted
EBITA increased 9% year-over-year to RMB36,567 million (US$5,318
million) in the quarter ended December 31, 2018, compared to
RMB33,662 million in the same quarter of 2017. Reconciliations of
net income to adjusted EBITDA and adjusted EBITA are included at
the end of this results announcement.
Adjusted EBITA and adjusted EBITA
margin by segments
Adjusted EBITA and adjusted EBITA margin by segments are set
forth in the table below. See the section entitled “Information
about Segments” above for a reconciliation of income from
operations to adjusted EBITA.
Three months ended December 31, 2017
2018 % of % of RMB
Revenue RMB US$ Revenue (in
millions, except percentages) Core commerce 38,530 53 %
46,079 6,702 45 % Cloud computing (181 ) (5 )% (274 ) (40 ) (4 )%
Digital media and entertainment (2,213 ) (41 )% (6,034 ) (878 ) (93
)% Innovation initiatives and others (1,006 )
(130
)%
(1,596 ) (232 ) (120 )%
Core commerce segment – Adjusted EBITA increased by 20%
to RMB46,079 million (US$6,702 million) in the quarter ended
December 31, 2018, compared to RMB38,530 million in the same
quarter of 2017. Marketplace-based core commerce adjusted EBITA
increased 31% year-over-year to RMB54,303 million (US$7,898
million). Adjusted EBITA margin decreased from 53% in the quarter
ended December 31, 2017 to 45% in the quarter ended December 31,
2018 due to strategic investments, primarily including aggressive
investment in local consumer services and gradual revenue mix shift
towards self-operated New Retail and direct import businesses where
revenue is recorded on a gross basis including the cost of
inventory. 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 investments in new
businesses and revenue mix shift to self-operated New Retail and
direct import businesses.
Cloud computing segment – Adjusted EBITA in the quarter
ended December 31, 2018 was a loss of RMB274 million (US$40
million), compared to a loss of RMB181 million in the same quarter
of 2017. Adjusted EBITA margin improved to negative 4% in the
quarter ended December 31, 2018 from negative 5% in the quarter
ended December 31, 2017.
Digital media and entertainment segment – Adjusted EBITA
in the quarter ended December 31, 2018 was a loss of RMB6,034
million (US$878 million), compared to a loss of RMB2,213 million in
the same quarter of 2017. Adjusted EBITA margin decreased to
negative 93% in the quarter ended December 31, 2018 from negative
41% in the quarter ended December 31, 2017, primarily due to our
investments in the production of original content and licensing
rights and impairment charges on licensed copyrights of RMB2.8
billion (US$407 million), following a regular evaluation of
programming that did not generate expected returns.
Innovation initiatives and others segment – Adjusted
EBITA in the quarter ended December 31, 2018 was a loss of RMB1,596
million (US$232 million), compared to a loss of RMB1,006 million in
the same quarter of 2017. The increase in adjusted EBITA loss was
primarily due to investments in new business initiatives, including
Tmall Genie.
Interest and investment income,
net
Interest and investment income, net in the quarter ended
December 31, 2018 was RMB11,560 million (US$1,681 million), which
mainly included a non-cash gain of RMB21,990 million (US$3,198
million) arising from the revaluation of our previously held equity
interest in Koubei when we obtained control in December 2018. The
gain was partly offset by impairment charges of RMB7,059 million
(US$1,026 million) on certain investments, as well as net loss
arising from the change in fair value of certain equity
investments.
Other income (loss), net
Other income, net in the quarter ended December 31, 2018 was
RMB387 million (US$56 million), compared to other loss, net of
RMB348 million in the same quarter of 2017. The increase in other
income was primarily due to a decrease in exchange loss from a loss
of RMB907 million in the quarter ended December 31, 2017 to a loss
of RMB101 million (US$15 million) in the quarter ended December 31,
2018. During the quarter, we did not recognize any royalty fees and
software technology service fees under our profit sharing
arrangement with Ant Financial. In the current quarter, Ant
Financial continued its strategic investments to acquire new users
and capture growth opportunities in the offline payment market.
Currently, Alipay and its affiliates have over 1 billion annual
active users globally. In the coming quarters, Ant Financial
expects to continue investments aimed at capturing the strategic
opportunities amid the digital transformation of China’s real
economy.
Income tax expenses
Income tax expenses in the quarter ended December 31, 2018 were
RMB5,586 million (US$812 million), compared to RMB6,663 million in
the same quarter of 2017.
Our effective tax rate was 15% in the quarter ended December 31,
2018, compared to 14% in the same quarter of 2017. Excluding
share-based compensation expense, investment gain/loss and
impairment of investments, our effective tax rate would have been
21% in the quarter ended December 31, 2018.
Share of results of equity
investees
Share of results of equity investees in the quarter ended
December 31, 2018 was a loss of RMB861 million (US$125 million),
compared to a loss of RMB18,452 million in the same quarter of
2017. We record our share of results of equity investees one
quarter in arrears. Share of results of equity investees in the
quarter ended December 31, 2018 and the comparative periods
consisted of the following:
Three months ended December 31, 2017
September 30, 2018 December 31, 2018
RMB RMB RMB US$ (in
millions) Share of (loss) profit of equity investees:
- Koubei(1)
(580 )
— — —
- Other equity investees
681 1,735 22 3 Impairment loss (18,153 )(3)
— (493 ) (72 )
Dilution (loss) gain (10 ) (41 ) 26 4 Others(2) (390 ) (440 ) (416
) (60 ) Total (18,452 ) 1,254 (861 ) (125 )
__________________
(1) We started to consolidate Koubei in December 2018 after
we obtained control. (2) Others mainly include amortization of
intangible assets of equity investees and share-based compensation
expense. (3) As previously disclosed, in the quarter ended December
31, 2017, we took an impairment loss of RMB18,116 million with
respect to Alibaba Pictures, one of our affiliated movie production
businesses.
Net income and Non-GAAP net
income
Our net income in the quarter ended December 31, 2018 was
RMB30,964 million (US$4,504 million), an increase of 33% compared
to RMB23,332 million in the same quarter of 2017.
Excluding share-based compensation expense, non-recurring
disposal gains and certain other items, non-GAAP net income in the
quarter ended December 31, 2018 was RMB29,797 million (US$4,334
million), an increase of 10% compared to RMB27,007 million in the
same quarter of 2017. 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 December 31, 2018 was RMB33,052 million (US$4,807 million),
an increase of 37% compared to RMB24,073 million in the same
quarter of 2017.
Diluted EPS and non-GAAP diluted
EPS
Diluted EPS in the quarter ended December 31, 2018 was RMB12.64
(US$1.84) on a weighted average of 2,614 million diluted shares
outstanding during the quarter, an increase of 37% compared to
RMB9.20 on a weighted average of 2,615 million diluted shares
outstanding during the same quarter of 2017. Excluding share-based
compensation expense, non-recurring disposal gains and certain
other items, non-GAAP diluted EPS in the quarter ended December 31,
2018 was RMB12.19 (US$1.77), an increase of 15% compared to
RMB10.61 in the same quarter of 2017. A reconciliation of diluted
EPS to non-GAAP diluted EPS is included at the end of this results
announcement.
Cash, cash equivalents and short-term
investments
As of December 31, 2018, cash, cash equivalents and short-term
investments were RMB192,317 million (US$27,972 million), compared
to RMB171,875 million as of September 30, 2018. The increase in
cash, cash equivalents and short-term investments during the
quarter ended December 31, 2018 was primarily due to free cash flow
generated from operations of RMB51,373 million (US$7,472 million),
partly offset by cash used in investment and acquisition activities
of RMB22,888 million (US$3,329 million) and share repurchase of
RMB8,989 million (US$1,307 million). Since announcing the ADS
repurchase plan in September 2018, we have repurchased
approximately 10.86 million of our ADSs for a total of
approximately US$1.57 billion as of January 29, 2019.
Cash flow from operating activities and
free cash flow
Net cash provided by operating activities in the quarter ended
December 31, 2018 was RMB64,898 million (US$9,439 million), an
increase of 17% compared to RMB55,428 million in the same quarter
of 2017. Free cash flow, a non-GAAP measurement of liquidity, in
the quarter ended December 31, 2018 was RMB51,373 million (US$7,472
million), compared to RMB46,399 million in the same quarter of
2017. 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 December 31, 2018, net cash used in
investing activities of RMB31,055 million (US$4,517 million)
primarily reflected (i) cash outflow of RMB22,888 million (US$3,329
million) for investment and acquisition activities, including
investments in Focus Media and Tokopedia, (ii) capital expenditures
of RMB10,100 million (US$1,469 million), which included cash
outflow for acquisition of land use rights and construction in
progress relating to office campus of RMB89 million (US$13
million), as well as (iii) acquisition of licensed copyrights and
other intangible assets of RMB3,514 million (US$511 million).
Employees
As of December 31, 2018, we had a total of 101,550 employees,
compared to 93,397 as of September 30, 2018. The number of
employees as of December 31, 2018 increased by 8,153 from September
30, 2018, primarily due to our consolidation of newly acquired
businesses and our expansion in local consumer services.
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 (8:30
p.m. Hong Kong Time) on January 30, 2019.
Details of the conference call are as follows: International: +65
6713 5090 U.S.: +1 845 675 0437 U.K.: +44 203 621 4779 Hong Kong:
+852 3018 6771 Conference ID: 6099834
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; conference ID: 6099834).
Our results announcement and accompanying slides are available
at Alibaba Group’s Investor Relations website at
http://www.alibabagroup.com/en/ir/home on January 30, 2019.
ABOUT ALIBABA GROUP
Alibaba Group’s mission is to make it easy to do business
anywhere and the company aims to achieve sustainable growth for 102
years. For fiscal year ended March 2018, the company reported
revenue of US$39.9 billion.
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 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: 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 ecosystem, reputation and brand; risks associated with
increased investments in Alibaba’s business and new business
initiatives; risks associated with strategic acquisitions and
investments; Alibaba’s ability to retain or increase engagement of
consumers, merchants and other participants in its ecosystem and
enable new offerings; Alibaba’s ability to maintain or grow its
revenue or business; risks associated with limitation or
restriction of services provided by Alipay; changes in laws,
regulations and regulatory environment that affect Alibaba’s
business operations; privacy and regulatory concerns; competition;
security breaches; the continued growth of the e-commerce market in
China and globally; risks associated with the performance of our
business partners, including but not limited to Ant Financial; 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. 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
EPS 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, non-GAAP net
income and non-GAAP diluted EPS help investors identify and
understand underlying trends in our business without the effect of
certain income or expenses that are reflected in income from
operations, net income and diluted EPS. We believe that
marketplace-based core commerce adjusted EBITA is a measure that
can help investors better understand the performance of our
marketplace commerce business, which is the contributor of the
large majority of our revenue. We believe that adjusted EBITDA,
adjusted EBITA, non-GAAP net income, non-GAAP diluted EPS and
marketplace-based core commerce adjusted EBITA 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 our financial and operational decision-making. 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. These non-GAAP measures should not
be considered in isolation or construed as an alternative to income
from operations, net income, diluted EPS, cash flows or any other
measure of performance or as an indicator of our operating
performance. These non-GAAP financial measures presented here 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 (loss),
net, income tax expenses and share of results of equity investees,
and (ii) certain non-cash expenses, consisting of share-based
compensation expense, amortization, depreciation and impairment of
goodwill, 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 (loss),
net, income tax expenses and share of results of equity investees,
and (ii) certain non-cash expenses, consisting of share-based
compensation expense, amortization and impairment of goodwill,
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.
Non-GAAP net income represents net income before
share-based compensation expense, amortization, impairment of
goodwill and 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 Financial, immediate recognition
of unamortized professional fees and upfront fees upon termination
of bank borrowings and others, as adjusted for the tax effects on
non-GAAP adjustments.
Non-GAAP diluted EPS 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, including accounting for the effects of the assumed
conversion of convertible preference shares.
Free cash flow represents net cash provided by operating
activities as presented in our consolidated cash flow statement
less purchases of property and equipment, licensed copyrights and
other intangible assets (excluding acquisition of land use rights
and construction in progress relating to office campus).
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 December 31, Nine months ended December 31,
2017 2018 2017 2018
RMB RMB US$ RMB RMB
US$ (in millions, except per share data)
(in millions, except per share data) Revenue 83,028
117,278 17,057 188,334 283,346 41,211 Cost of revenue (35,078 )
(60,813 ) (8,845 ) (74,540 ) (151,319 ) (22,009 ) Product
development expenses (6,289 ) (8,901 ) (1,295 ) (16,068 ) (28,776 )
(4,185 ) Sales and marketing expenses (8,542 ) (12,104 ) (1,760 )
(19,658 ) (30,131 ) (4,382 ) General and administrative expenses
(4,572 ) (5,853 ) (851 ) (11,690 ) (17,277 ) (2,513 ) Amortization
of intangible assets (2,057 ) (2,809 ) (408 ) (5,791 ) (7,524 )
(1,094 ) Impairment of goodwill (494 ) — — (494 )
— — Income from
operations 25,996 26,798 3,898 60,093 48,319 7,028 Interest and
investment income, net 23,643 11,560 1,681 28,550 25,441 3,700
Interest expense (844 ) (1,334 ) (194 ) (2,391 ) (3,887 ) (565 )
Other (loss) income, net (348 ) 387 56 3,276
(1,228 ) (179 )
Income before income tax and share of
results of equity investees 48,447 37,411 5,441 89,528 68,645
9,984 Income tax expenses (6,663 ) (5,586 ) (812 ) (14,035 )
(11,528 ) (1,677 ) Share of results of equity investees (18,452 )
(861 ) (125 ) (20,722 ) (262 ) (38 )
Net income
23,332 30,964 4,504 54,771 56,855 8,269 Net loss attributable to
noncontrolling interests 741 2,156 313 1,653
5,118 745 Net income attributable to
Alibaba Group Holding Limited 24,073 33,120 4,817 56,424 61,973
9,014 Accretion of mezzanine equity — (68 ) (10 ) —
(203 ) (30 )
Net income attributable to ordinary
shareholders 24,073 33,052 4,807 56,424
61,770 8,984
Earnings per share
attributable to ordinary shareholders Basic 9.41 12.83
1.87 22.12 23.94 3.48 Diluted 9.20 12.64 1.84 21.64 23.54 3.42
Weighted average number of share used in calculating
earnings per ordinary share Basic 2,557 2,576 2,551 2,580
Diluted 2,615 2,614 2,607 2,623
ALIBABA GROUP HOLDING LIMITED
REVENUE
The following table sets forth our revenue by segments for the
periods indicated:
Three months ended December 31, Nine months
ended December 31, 2017 2018 2017
2018 RMB RMB US$
RMB RMB US$ (in millions) (in
millions) Core commerce(1) 73,244 102,843 14,958 162,733
244,506 35,562 Cloud computing(2) 3,599 6,611 962 9,005 16,976
2,469 Digital media and entertainment(3) 5,413 6,491 944 14,292
18,406 2,677 Innovation initiatives and others(4) 772 1,333 193
2,304 3,458 503 Total 83,028 117,278 17,057 188,334 283,346
41,211
__________________
(1) Revenue from core commerce is primarily generated from
our China retail marketplaces, 1688.com, AliExpress, Alibaba.com,
Lazada.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
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 Financial and its affiliates.
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 December 31, Nine months
ended December 31, 2017 2018 2017
2018 RMB RMB US$
RMB RMB US$ (in millions) (in
millions) Core commerce 35,439 40,368 5,871 84,083 87,680
12,752 Cloud computing (793 ) (1,233 ) (179 ) (2,022 ) (4,472 )
(650 ) Digital media and entertainment (3,828 ) (7,097 ) (1,032 )
(10,599 ) (16,192 ) (2,355 ) Innovation initiatives and others
(1,814 ) (2,549 ) (371 ) (4,882 ) (8,525 ) (1,240 ) Unallocated
(3,008 ) (2,691 ) (391 ) (6,487 ) (10,172 ) (1,479 ) Total
25,996 26,798 3,898 60,093 48,319
7,028
The following table sets forth our adjusted EBITA by segments
for the periods indicated:
Three months ended December 31, Nine months
ended December 31, 2017 2018 2017
2018 RMB RMB US$
RMB RMB US$ (in millions) (in
millions) Core commerce 38,530 46,079 6,702 91,914 108,683
15,807 Cloud computing (181 ) (274 ) (40 ) (446 ) (994 ) (145 )
Digital media and entertainment (2,213 ) (6,034 ) (878 ) (5,710 )
(12,968 ) (1,886 ) Innovation initiatives and others (1,006 )
(1,596 ) (232 ) (2,136 ) (4,039 ) (587 ) Unallocated (1,468 )
(1,608 ) (234 ) (3,424 ) (4,458 ) (648 ) Total 33,662
36,567 5,318 80,198 86,224 12,541
The table below sets forth selected financial information of our
operating segments for nine months ended December 31, 2018:
Nine months ended December 31, 2018
Digital media Innovation
Core Cloud and initiatives
commerce computing entertainment and
others
Unallocated(1)
Consolidated RMB RMB RMB RMB
RMB RMB US$ (in millions, except
percentages) Revenue 244,506 16,976
18,406 3,458 — 283,346 41,211
Income (loss) from operations 87,680
(4,472 ) (16,192 ) (8,525
) (10,172 ) 48,319 7,028
Add: Share-based compensation expense
14,640 3,463 2,297 4,456 5,525 30,381 4,419 Add: Amortization of
intangible assets 6,363 15 927 30 189
7,524 1,094
Adjusted EBITA
108,683
(2)
(994 ) (12,968
) (3)
(4,039 ) (4,458 ) 86,224
12,541 Adjusted EBITA margin 44
% (6 )% (70 )% (117
)%
30 % Nine months ended December 31,
2017 Digital media Innovation Core
Cloud and initiatives commerce
computing entertainment and others
Unallocated(1)
Consolidated RMB RMB RMB RMB
RMB RMB (in millions, except percentages)
Revenue 162,733 9,005 14,292
2,304 — 188,334 Income (loss) from
operations 84,083 (2,022 ) (10,599
) (4,882 ) (6,487 )
60,093
Add: Share-based compensation expense
5,773
1,567
1,606
2,554
2,320
13,820
Add: Amortization of intangible assets 2,058 9 3,283 192 249 5,791
Add: Impairment of goodwill
— —
— — 494 494
Adjusted EBITA 91,914 (446 )
(5,710 ) (2,136 ) (3,424
) 80,198 Adjusted EBITA margin
56 % (5 )% (40 )%
(93 )% 43 %
__________________
(1) Unallocated expenses are primarily related to corporate
administrative costs and other miscellaneous items that are not
allocated to individual segments. (2)
Marketplace-based core commerce adjusted
EBITA increased 30% year-over-year to RMB126,901 million (US$18,457
million).
(3)
Adjusted EBITA loss included impairment
charges on licensed copyrights of RMB2.8 billion (US$407
million).
ALIBABA GROUP HOLDING LIMITED UNAUDITED
CONSOLIDATED BALANCE SHEETS
As of March 31,
As of December 31,
2018
2018
RMB
RMB
US$
(in millions)
Assets Current assets: Cash and cash equivalents 199,309
189,204 27,519 Short-term investments 6,086 3,113 453 Restricted
cash and escrow receivables 3,417 7,911 1,150 Investment securities
4,815 8,274 1,203 Prepayments, receivables and other assets 43,228
53,178 7,735 Total current assets 256,855 261,680 38,060
Investment securities (1) 38,192 137,000 19,926 Prepayments,
receivables and other assets 26,274 25,363 3,689 Investment in
equity investees (1) 139,700 90,831 13,211 Property and equipment,
net 66,489 90,814 13,208 Intangible assets, net 27,465 67,994 9,889
Goodwill 162,149 244,261 35,526
Total assets 717,124 917,943
133,509
Liabilities, Mezzanine Equity and Shareholders’
Equity Current liabilities: Current bank borrowings 6,028 7,361
1,071 Current unsecured senior notes
— 15,451 2,247 Income
tax payable 13,689 17,348 2,523 Escrow money payable 3,053 6,790
988 Accrued expenses, accounts payable and other liabilities 81,165
114,477 16,650 Merchant deposits 9,578 18,401 2,676 Deferred
revenue and customer advances 22,297 28,944 4,210 Total current
liabilities 135,810 208,772 30,365
ALIBABA GROUP HOLDING
LIMITED UNAUDITED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
As of March 31,
As of December 31,
2018
2018
RMB
RMB US$ (in millions) Deferred
revenue 993 1,301 189 Deferred tax liabilities 19,312 21,006 3,055
Non-current bank borrowings 34,153 35,085 5,103 Non-current
unsecured senior notes 85,372 78,156 11,367 Other liabilities 2,045
5,536 805
Total liabilities 277,685
349,856 50,884 Commitments and
contingencies
— — —
Mezzanine equity
3,001 7,165 1,042
Shareholders’ equity:
Ordinary shares 1 1
— Additional paid-in capital 186,764
225,328 32,773 Treasury shares at cost (2,233 ) (386 ) (56 )
Restructuring reserve (361 ) (163 ) (24 ) Subscription receivables
(163 ) (179 ) (26 ) Statutory reserves 4,378 4,561 664 Accumulated
other comprehensive income (loss) (1) 5,083 (1,119 ) (163 )
Retained earnings (1) 172,353 232,850 33,866
Total shareholders’ equity 365,822 460,893 67,034
Noncontrolling interests 70,616 100,029 14,549
Total equity 436,438 560,922 81,583
Total liabilities, mezzanine equity and equity 717,124
917,943 133,509
__________________
(1) We adopted ASU 2016-01, “Financial Instruments — Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities” beginning in the first quarter of fiscal
year 2019. After our adoption of this new accounting update, equity
investments other than those accounted for under the equity method
or those that result in the consolidation of the investee are
required to be measured at fair value, with subsequent changes in
fair value recognized in the income statement. We have adopted this
new accounting update using the modified retrospective method. For
available-for-sale securities, RMB8,196 million in unrealized
gains, net of tax recorded in accumulated other comprehensive
income as of March 31, 2018 was reclassified into retained earnings
upon the initial adoption as of April 1, 2018. Investments measured
under the cost method of RMB59,942 million as of March 31, 2018 was
reclassified into investment securities as of April 1, 2018. The
consolidated balance sheets as of March 31, 2018 was not
retrospectively adjusted.
ALIBABA GROUP HOLDING
LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS Three months ended December 31,
Nine months ended December 31, 2017
2018 2017 2018 RMB RMB
US$ RMB RMB US$ (in
millions) (in millions) Net cash provided by
operating activities(1) 55,428 64,898 9,439 111,422 132,422 19,260
Net cash used in investing activities(1) (24,304) (31,055) (4,517)
(63,788) (134,309) (19,534) Net cash provided by (used in)
financing activities 34,274 (8,915) (1,297) 24,964 (8,111) (1,180)
Effect of exchange rate changes on cash and cash equivalents,
restricted cash and escrow receivables (1) (1,508) (66) (9) (3,412)
4,387 638 Increase (decrease) in cash and cash equivalents,
restricted cash and escrow receivables 63,890 24,862 3,616 69,186
(5,611) (816) Cash and cash equivalents, restricted cash and escrow
receivables at beginning of period 151,687 172,253 25,053 146,391
202,726 29,485 Cash and cash equivalents, restricted cash
and escrow receivables at end of period 215,577 197,115 28,669
215,577 197,115 28,669
__________________
(1) We adopted ASU 2016-18, “Statement of Cash Flows (Topic
230): Restricted Cash,” beginning in the first quarter of fiscal
year 2019. As a result of adopting this new accounting update, we
retrospectively adjusted the consolidated statements of cash flows
to include restricted cash and escrow receivables in cash and cash
equivalents when reconciling the beginning-of-period and
end-of-period total amounts shown on the consolidated statements of
cash flows. The impact of the retrospective reclassification on
cash flows from operating activities, investing activities and
effect of exchange rate changes for the nine months ended December
31, 2017 was an increase of RMB431 million, an increase of RMB286
million and an increase of RMB9 million, respectively.
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 December 31, Nine
months ended December 31, 2017 2018
2017 2018 RMB RMB
US$ RMB RMB US$ (in
millions) (in millions) Net income 23,332
30,964 4,504 54,771 56,855 8,269
Less: Interest and investment income, net (23,643) (11,560) (1,681)
(28,550) (25,441) (3,700) Add: Interest expense 844 1,334 194 2,391
3,887 565 Less: Other (loss) income, net 348 (387) (56) (3,276)
1,228 179 Add: Income tax expenses 6,663 5,586 812 14,035 11,528
1,677 Add: Share of results of equity investees 18,452 861 125
20,722 262 38
Income from operations 25,996
26,798 3,898 60,093 48,319 7,028
Add: Share-based compensation expense 5,115 6,960 1,012 13,820
30,381 4,419 Add: Amortization of intangible assets 2,057 2,809 408
5,791 7,524 1,094 Add: Impairment of goodwill 494
— —
494 — —
Adjusted EBITA 33,662 36,567
5,318 80,198 86,224 12,541 Add:
Depreciation and amortization of property and equipment and land
use rights
2,521
4,141
603
6,140
10,553
1,535
Adjusted EBITDA 36,183 40,708 5,921
86,338 96,777 14,076
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 December 31, Nine months
ended December 31, 2017 2018 2017
2018 RMB RMB US$
RMB RMB US$ (in millions) (in
millions) Adjusted EBITA for core commerce 38,530
46,079 6,702 91,914 108,683
15,807 Less: Effects of local consumer services, Lazada, New
Retail and direct import and Cainiao Network 2,905 8,224 1,196
5,869 18,218 2,650
Marketplace-based core commerce
adjusted EBITA
41,435 54,303 7,898 97,783
126,901 18,457 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 December 31, Nine months ended December 31,
2017 2018 2017 2018
RMB RMB US$ RMB RMB
US$ (in millions) (in millions)
Net income 23,332 30,964 4,504
54,771 56,855 8,269 Add: Share-based
compensation expense 5,115 6,960 1,012 13,820 30,381 4,419 Add:
Amortization of intangible assets 2,057 2,809 408 5,791 7,524 1,094
Add: Impairment of goodwill and investments 19,033 7,552 1,098
20,374 7,910 1,150 Less: Gain on deemed
disposals/disposals/revaluation of investments and others (22,406 )
(16,859 ) (2,452 ) (25,792 ) (27,564 ) (4,009 ) Add: Amortization
of excess value receivable arising from the restructuring of
commercial arrangements with Ant Financial 66 66 10 199 198 29 Add:
Immediate recognition of unamortized professional fees and upfront
fees upon termination of bank borrowings — — — 92 — — Adjusted for
tax effects on non-GAAP adjustments(1)
(190
)
(1,695
)
(246
)
(140
)
(1,953
)
(284
)
Non-GAAP net income 27,007
29,797 4,334 69,115
73,351 10,668
__________________
(1) Tax effects on non-GAAP adjustments are comprised of tax
provisions on the amortization of intangible assets and certain
investment gains.
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 EPS to non-GAAP diluted EPS for the
periods indicated:
Three months ended December
31, Nine months ended December 31, 2017
2018 2017 2018 RMB
RMB US$ RMB RMB
US$ (in millions, except per share data) (in
millions, except per share data) Net income
attributable to ordinary shareholders – basic 24,073
33,052 4,807 56,424 61,770 8,984
Dilution effect on earnings arising from option plans operated by
equity investees (4 ) (16 ) (2 ) (10 ) (31 ) (5 ) Net income
attributable to ordinary shareholders – diluted 24,069 33,036 4,805
56,414 61,739 8,979 Add: Non-GAAP adjustments to net income(1)
3,675
(1,167
)
(170
)
14,344
16,496
2,399
Non-GAAP net income attributable to
ordinary shareholders for computing non-GAAP diluted EPS
27,744 31,869 4,635
70,758 78,235 11,378
Weighted average number of shares on a diluted basis
2,615 2,614 2,607 2,623 Diluted
EPS(2) 9.20 12.64 1.84 21.64
23.54 3.42 Add: Non-GAAP adjustments to net income
per share(3) 1.41 (0.45 ) (0.07 ) 5.50 6.29
0.92
Non-GAAP diluted EPS(4)
10.61 12.19 1.77
27.14 29.83 4.34
__________________
(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 EPS is derived from net income
attributable to ordinary shareholders for computing diluted EPS
divided by weighted average number of shares on a diluted basis.
(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. (4) Non-GAAP diluted EPS is
derived from non-GAAP net income attributable to ordinary
shareholders for computing non-GAAP diluted EPS divided by weighted
average number of shares on a diluted basis.
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 December 31, Nine
months ended December 31, 2017 2018
2017 2018 RMB RMB
US$ RMB RMB US$ (in
millions) (in millions) Net cash provided by
operating activities(1) 55,428 64,898
9,439 111,422 132,422 19,260 Less:
Purchase of property and equipment (excluding land use rights and
construction in progress relating to office campus) (6,463)
(10,011) (1,456) (12,998) (26,648) (3,876)
Less: Acquisition of licensed copyrights
and other intangible assets
(2,566)
(3,514)
(511)
(7,195)
(12,010)
(1,747)
Free cash flow 46,399 51,373
7,472 91,229 93,764 13,637
__________________
(1) We adopted ASU 2016-18, “Statement of Cash Flows (Topic
230): Restricted Cash,” beginning in the first quarter of fiscal
year 2019. As a result of adopting this new accounting update, we
retrospectively adjusted the consolidated statements of cash flows
to include restricted cash and escrow receivables in cash and cash
equivalents when reconciling the beginning-of-period and
end-of-period total amounts shown on the consolidated statements of
cash flows. The impact of our retrospective reclassification on
cash flows from operating activities for the nine months ended
December 31, 2017 was an increase of RMB431 million.
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 Mar 31, Jun
30, Sep 30, Dec 31, Mar
31, Jun 30,
Sep 30,
Dec 31, 2017 2017 2017
2017 2018 2018 2018 2018 (in
millions) Annual active consumers 454 466 488 515 552 576 601
636
Mobile
The table below sets forth the mobile MAUs on our China retail
marketplaces for the periods indicated:
The month ended Mar 31, Jun
30, Sep 30, Dec 31, Mar
31, Jun 30,
Sep 30,
Dec 31, 2017 2017 2017
2017 2018 2018 2018 2018 (in
millions) Mobile MAUs 507 529 549 580 617 634 666 699
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190130005338/en/
Investor Relations ContactRob Lininvestor@alibabagroup.comMedia
ContactsBrion Tinglerbrion.tingler@alibaba-inc.comKatie
Leek.lee@alibaba-inc.com
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