Alibaba Group Holding Limited (NYSE: BABA) today announced its
financial results for the quarter ended September 30, 2019.
“Alibaba Group celebrated its 20th anniversary in September,
marking an important milestone on our 102 year journey to make it
easy to do business anywhere,” said Daniel Zhang, Executive
Chairman and CEO of Alibaba Group. “Our digital economy continues
to thrive and prosper. We aim to serve over one billion annual
active consumers and help our merchants achieve over RMB10 trillion
in annual gross merchandise volume by end of fiscal 2024. We will
continue to invest in the user experience and innovative technology
to create new value for consumers, as well as the millions of
enterprises undergoing digital transformation in the new digital
economy.”
“We delivered a strong quarter with revenue growth of 40% and
adjusted EBITDA up 39% year-over-year,” said Maggie Wu, Chief
Financial Officer of Alibaba Group. “With sustained consumer
engagement and spending across the Alibaba Economy, we have
continued our revenue and profit growth, as well as strong free
cash flow that enable us to invest in long-term growth.”
BUSINESS HIGHLIGHTS
In the quarter ended September 30,
2019:
- Revenue was RMB119,017 million (US$16,651 million), an
increase of 40% year-over-year.
- Annual active consumers on our China retail marketplaces
reached 693 million, an increase of 19 million from the 12-month
period ended June 30, 2019.
- Mobile MAUs on our China retail marketplaces reached 785
million in September 2019, an increase of 30 million over June
2019.
- Income from operations was RMB20,364 million (US$2,849
million), an increase of 51% year-over-year. Adjusted
EBITDA, a non-GAAP measurement, increased 39% year-over-year to
RMB37,101 million (US$5,191 million).
- Adjusted EBITA for core commerce was RMB38,574 million
(US$5,397 million), an increase of 29% year-over-year. Our
marketplace-based core commerce adjusted EBITA, a non-GAAP
measurement, increased 28% year-over-year to RMB45,610 million
(US$6,381 million).
- Net income attributable to ordinary shareholders was
RMB72,540 million (US$10,149 million), and net income was
RMB70,748 million (US$9,898 million), which included a significant
one-time gain recognized upon the receipt of the 33% equity
interest in Ant Financial. Excluding this one-time gain of RMB69.2
billion (US$9.7 billion) and certain other items, non-GAAP net
income was RMB32,750 million (US$4,582 million), an increase of
40% year-over-year. A reconciliation of net income to non-GAAP net
income is included at the end of this results announcement.
- Diluted earnings per ADS was RMB27.51 (US$3.85) and
non-GAAP diluted earnings per ADS was RMB13.10 (US$1.83), an
increase of 36% year-over-year.
- Net cash provided by operating activities was RMB47,326
million (US$6,621 million) and non-GAAP free cash flow was
RMB30,488 million (US$4,265 million).
BUSINESS AND STRATEGIC UPDATES
Core Commerce
In September 2019, our China retail marketplaces had 785 million
mobile MAUs, representing a quarterly net increase of 30 million.
Annual active consumers on our China retail marketplaces reached
693 million for the 12 months ended September 30, 2019, compared to
674 million for the 12 months ended June 30, 2019.
Taobao – fast growing and dynamic consumer community.
Taobao continues to redefine the shopping experience through
content innovation, product enrichment and personalized
recommendation. By leveraging data technology and business
innovation, Taobao has incubated new community-based and
content-driven features. For example, as of the end of fiscal year
2019, Idle Fish, our active C2C community and marketplace, had 1.3
million interest-based communities and 60 million active sellers of
long-tail products including second-hand, recycled, refurbished and
for-rent products. In fiscal year 2019, over 50% of Tmall merchants
leveraged live streaming to engage with their customers. Each of
these features generated over RMB100 billion in annual GMV in
fiscal year 2019.
In the six months ended September 30, 2019, Taobao app’s DAU
growth accelerated as a result of healthy organic traffic growth
and effective user targeting as well as increasing user engagement
with interactive and entertainment features. The increase in annual
active consumers on our China Retail marketplaces also reflected
our continuing penetration into both developed and less developed
areas in China.
Tmall – the leading consumer engagement and distribution
platform for brands in China. Tmall continues to expand its
leadership position as the consumer engagement and distribution
platform of choice for brands in China. Tmall physical goods GMV,
excluding unpaid orders, grew 26% year-over-year in the quarter
ended September 30, 2019, with strong growth in fast-moving
consumer goods (FMCG) and consumer electronics. Our consumer
segmentation initiatives have been well received by users, as
evidenced by accelerating order growth from higher purchase
frequency.
On October 21, 2019, we kicked off preparations for our 2019
11.11 Global Shopping Festival. This year, the festival will focus
on catalyzing demand for new brands and products, as well as
supporting the ongoing consumption upgrade across China. Over
200,000 brands, including more than 22,000 brands on Tmall Global,
will participate in this event, with millions of new products
available to consumers. In preparation for the festival, about
1,000 brands and merchants have upgraded to Tmall Flagship Store
2.0, which enables brands to develop sustainable engagement with
their customers through interactive and personalized content, as
well as integrated online and offline services.
New Retail – digital transformation of brick-and-mortar
retailing.
Creating New – Our owned-and-operated grocery retail chain
Freshippo (known as “Hema” in Chinese) continues to achieve robust
same-store sales growth, implement multi-format retail strategies
and introduce new initiatives to improve user experience and
customer loyalty. In order to support its rapid growth, Freshippo
strengthened its direct procurement of agricultural products and
built a nationwide cold chain logistics network. As of September
30, 2019, there were 170 self-operated Freshippo stores in China,
primarily located in tier 1 and tier 2 cities. While we continue to
invest in the growth of this business, self-operated stores that
have been in operation for over 12 months have achieved positive
combined adjusted EBITDA during the quarter ended September 2019,
demonstrating the strength and sustainability of the business
model.
Transforming Old – We are making good progress in transforming
our grocery retail partners through our Taoxianda business, which
enables consumers to place orders through the Taobao app and
receive delivery through an on-demand logistics platform that
leverages the delivery network of our local consumer services
business. We had digitally connected 485 of SunArt’s hypermarket
stores as of the end of August 2019 and drove online grocery orders
to 6.5% of its overall revenue during August 2019. We continue to
sign up new grocery partners and had enabled the digitization of
over 800 offline retail stores across 278 cities as of August
2019.
Local consumer services – delivering strong growth and
driving value for local merchants in less developed areas.
During the quarter, we continued to achieve strong growth in daily
GMV driven by robust order growth and increasing user order
frequency. We are focusing on delivering value to restaurants and
local service merchants by offering digital technology solutions
and value-added services of the Alibaba Digital Economy. We also
continue to penetrate into less developed areas with strong growth
potential. During the quarter, GMV from less developed areas grew
45% year-over-year.
We are leveraging assets in the Alibaba Digital Economy to
further benefit our local consumer services business. In the
quarter ended September 30, 2019, about 39% of new food delivery
customers came from the Alipay mobile app. The potential for our
local consumer services to further penetrate users in other parts
of the Alibaba Digital Economy is significant as only 25% of annual
active consumers from our China retail marketplaces have tried
these services.
Cainiao Network – increasing adoption of Cainiao’s digital
logistics parcel network and solutions. In urban areas, Cainiao
has developed neighborhood delivery solutions with a combination of
neighborhood 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. The daily package volume handled by
Cainiao Post increased by over 100% year-over-year for the month
ended September 30, 2019.
Cainiao continues to focus on providing consumers with
comprehensive logistics solutions. For example, the Cainiao Guoguo
app offers crowdsourced parcel pick-up and delivery services that
allow consumers and small businesses to send packages on-demand.
For the twelve months ended August 31, 2019, the Cainiao Guoguo app
had 100 million annual users. For the quarter, Cainiao Guoguo’s
parcel volume grew over 100% year-over-year. The Cainiao Guoguo app
processed 38% of returned packages generated by consumers on our
China retail marketplaces during the same period.
International – Strong growth in global markets. Our
Southeast Asian e-commerce platform Lazada continues to witness
growth momentum. For the fourth consecutive quarter, Lazada
achieved over 100% year-over-year order growth, reflecting strong
consumption demand in the apparel and accessories and FMCG
categories. For the quarter, mobile DAUs continued to double
year-over year, driven by effective user acquisition and engagement
programs. Lazada leverages its proprietary logistics infrastructure
to achieve fast and efficient order delivery, lowering logistics
costs and enabling a better delivery experience for consumers.
Cloud Computing
Cloud computing revenue grew 64% year-over-year to RMB9,291
million (US$1,300 million) during the September 2019 quarter,
primarily driven by an increase in average revenue per customer.
Alibaba Cloud serves customers from a broad range of traditional
industries beyond Internet and media industries. As of August 2019,
59% of companies listed in China are customers of Alibaba Cloud.
The adoption of cloud services in China’s public sector and
traditional industries is driven not only by demand for
cost-effective IT solutions, but also by transformation of business
models and processes through digitization of customer insight,
inventory, work flow, resource planning and other aspects. As an
Internet technology company that has pioneered digital
transformation, we believe that we are uniquely positioned to
maintain our leadership in providing cloud services that are not
only cost-effective but also enable businesses to operate more
intelligently.
Digital Media and
Entertainment
The synergies between our commerce and entertainment businesses
continue to deliver a superior user experience that has helped to
bring more paying subscribers onto the Youku online video platform.
For the quarter, Youku’s average daily subscribers increased 47%
year-over-year. We continue to enrich our portfolio with original
content that resonates with Chinese audiences. We are investing in
original content production capability while ensuring cost
efficiencies and return on investment, resulting in narrowing EBITA
losses during the quarter.
Innovation Initiatives
The Amap app is the largest provider of mobile digital maps,
navigation and real-time traffic information in China by daily
active users. On October 1, 2019, the first day of the week-long
National Day holiday in China, the Amap app achieved a record high
of 118 million daily active users.
Update on Kaola
Acquisition
In September 2019, we acquired NetEase’s import e-commerce
platform Kaola. We see great opportunities in user, revenue and
cost synergies for the combined Tmall Global and Kaola businesses.
China’s import consumption market is still at an early growth
stage, and the two businesses will be able to provide greater
choices and better value for consumers. The Tmall Global and Kaola
platforms have relatively low consumer overlap, and we plan for the
Kaola app to continue to operate independently while integrating
the technology, consumer insight and middle office functions to
achieve optimization. As part of Alibaba, Kaola will benefit from
our advanced data technology infrastructure and unrivalled consumer
scale.
Update on Ant Financial
On September 23, 2019, we became a 33% equity stakeholder in Ant
Financial. We recognized a one-time gain of RMB69.2 billion (US$9.7
billion) upon the receipt of the equity interest in Ant Financial.
With our equity stake, the profit sharing arrangement under which
we received 37.5% of Ant Financial’s pre-tax profits has
terminated.
Ant Financial has expanded its user base and business scale by
building a unique value proposition through its ability to offer
comprehensive financial solutions, including digital payment and
digital finance services. As of June 30, 2019, annual active users
of Alipay and its local e-wallet partners increased to
approximately 1.2 billion globally, of which about 900 million were
users from China.
Cash Flow from Operating Activities and
Free Cash Flow
In the quarter ended September 30, 2019, net cash provided by
operating activities was RMB47,326 million (US$6,621 million), an
increase of 51% compared to RMB31,407 million in the same quarter
of 2018. Free cash flow, a non-GAAP measurement of liquidity, in
the quarter ended September 30, 2019 increased by 90% to RMB30,488
million (US$4,265 million), from RMB16,033 million in the same
quarter of 2018, which was primarily due to our robust
profitability growth as well as the timing of capital expenditure
spending and licensed copyright acquisition. A reconciliation of
net cash provided by operating activities to free cash flow is
included at the end of this results announcement.
KEY OPERATIONAL METRICS*
September 30, 2018
June 30, 2019
September 30, 2019
Net adds
YoY
QoQ
China Commerce Retail:
Annual active consumers(1) (in
millions)
601
674
693
92
19
Mobile monthly active users (MAUs)(2) (in
millions)
666
755
785
119
30
__________________
*
For definitions of terms used but not
defined in this results announcement, please refer to our annual
report on Form 20-F for the fiscal year ended March 31, 2019.
(1)
For the twelve months ended on the
respective dates.
(2)
For the month ended on the respective
dates.
SEPTEMBER QUARTER SUMMARY FINANCIAL RESULTS
Three months ended September
30,
2018
2019
YoY %
RMB
RMB
US$(1)
Change
(in millions, except
percentages and per share amounts)
Revenue
85,148
119,017
16,651
40
%
Income from operations
13,501
20,364
2,849
51
%
Operating margin
16
%
17
%
Adjusted EBITDA(2)
26,710
37,101
5,191
39
%
Adjusted EBITDA margin(2)
31
%
31
%
Adjusted EBITA(2)
23,155
32,091
4,490
39
%
Adjusted EBITA margin(2)
27
%
27
%
Net income
18,241
70,748
9,898
288
%(3)
Net income attributable to ordinary
shareholders
20,033
72,540
10,149
262
%(3)
Non-GAAP net income(2)
23,453
32,750
4,582
40
%
Diluted earnings per share(4)
0.95
3.44
0.48
262
% (3)
Diluted earnings per ADS(4)
7.62
27.51
3.85
261
% (3)
Non-GAAP diluted earnings per
share(2)(4)
1.20
1.64
0.23
37
%
Non-GAAP diluted earnings per
ADS(2)(4)
9.60
13.10
1.83
36
%
__________________
(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 RMB7.1477 to US$1.00,
the exchange rate on September 30, 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
and there may be minor differences due to rounding.
(2)
See the sections entitled “Information
about Segments,” “Non-GAAP Financial Measures” and “Reconciliations
of Non-GAAP Measures to the Nearest Comparable GAAP Measures” for
more information about the non-GAAP measures referred to within
this results announcement.
(3)
The year-over-year increase was primarily
due to a one-time gain of RMB69.2 billion (US$9.7 billion)
recognized upon the receipt of the 33% equity interest in Ant
Financial (as discussed in detail under the “Interest and
investment income, net” section below), partly offset by impairment
charges and net losses from changes in fair value relating to
certain investments and goodwill. Excluding these gains and losses,
our net income would have increased by 30% year-over-year.
(4)
Each ADS represents eight ordinary shares.
See the section entitled “Share Subdivision and ADS Ratio Change”
for more information.
SEPTEMBER QUARTER INFORMATION BY SEGMENTS
The table below sets forth selected financial information of our
operating segments for the periods indicated:
Three months ended September
30, 2019
Core commerce
Cloud computing
Digital media and
entertainment
Innovation initiatives and
others
Unallocated(1)
Consolidated
RMB
RMB
RMB
RMB
RMB
RMB
US$
(in millions, except
percentages)
Revenue
101,220
9,291
7,296
1,210
—
119,017
16,651
Income (loss) from operations
32,069
(1,928
)
(3,327
)
(3,073
)
(3,377
)
20,364
2,849
Add: Share-based compensation expense
3,901
1,400
790
1,136
918
8,145
1,140
Add: Amortization of intangible assets
2,604
7
330
20
45
3,006
420
Add: Impairment of goodwill
—
—
—
—
576
576
81
Adjusted EBITA
38,574
(2)
(521
)
(2,207
)
(1,917
)
(1,838
)
32,091
4,490
Adjusted EBITA margin
38
%
(6
)%
(30
)%
(158
)%
27
%
Three months ended September
30, 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
72,475
5,667
5,940
1,066
—
85,148
Income (loss) from operations
24,290
(1,165
)
(4,805
)
(2,201
)
(2,618
)
13,501
Add: Share-based compensation expense
3,292
928
710
952
1,161
7,043
Add: Amortization of intangible assets
2,225
5
293
8
80
2,611
Adjusted EBITA
29,807
(232
)
(3,802
)
(1,241
)
(1,377
)
23,155
Adjusted EBITA margin
41
%
(4
)%
(64
)%
(116
)%
27
%
__________________
(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 28% year-over-year to RMB45,610 million (US$6,381
million). A reconciliation of adjusted EBITA for core commerce to
marketplace-based core commerce adjusted EBITA is included at the
end of this results announcement.
SEPTEMBER QUARTER OPERATIONAL AND FINANCIAL RESULTS
Revenue
Revenue for the quarter ended September 30, 2019 was RMB119,017
million (US$16,651 million), an increase of 40% compared to
RMB85,148 million in the same quarter of 2018. The increase was
mainly driven by the robust revenue growth of our China commerce
retail business and Alibaba Cloud.
The following table sets forth a breakdown of our revenue by
segment for the periods indicated:
Three months ended September
30,
2018
2019
RMB
% of Revenue
RMB
US$
% of Revenue
YoY % Change
(in millions, except
percentages)
Core commerce:
China commerce retail
- Customer management
32,920
39%
41,301
5,778
35%
25%
- Commission
13,136
15%
16,275
2,277
14%
24%
- Others*
8,095
10%
18,210
2,548
15%
125%
54,151
64%
75,786
10,603
64%
40%
China commerce wholesale
2,497
3%
3,283
459
3%
31%
International commerce retail
4,464
5%
6,007
840
5%
35%
International commerce wholesale
2,022
2%
2,434
341
2%
20%
Cainiao logistics services
3,206
4%
4,759
666
4%
48%
Local consumer services
5,021
6%
6,835
956
6%
36%
Others
1,114
1%
2,116
296
1%
90%
Total core commerce
72,475
85%
101,220
14,161
85%
40%
Cloud computing
5,667
7%
9,291
1,300
8%
64%
Digital media and entertainment
5,940
7%
7,296
1,021
6%
23%
Innovation initiatives and others
1,066
1%
1,210
169
1%
14%
Total
85,148
100%
119,017
16,651
100%
40%
__________________
*
“Others” revenue under China commerce
retail is primarily generated by our New Retail and direct sales
businesses, mainly Freshippo, Tmall Supermarket, direct import and
Intime.
Core commerce
- China commerce retail business Revenue – Revenue
from our China commerce retail business in the quarter ended
September 30, 2019 was RMB75,786 million (US$10,603 million), an
increase of 40% compared to RMB54,151 million in the same quarter
of 2018. Revenue from our China retail marketplaces continued to
see strong growth. Combined customer management and commission
revenues grew 25% year-over-year, which represents an increase of
25% 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 average unit price per
click and to a lesser extent the volume of paid clicks. The growth
of commission revenue was primarily due to the strong 26%
year-over-year growth of Tmall physical goods GMV (excluding unpaid
orders). “Others” revenue under China commerce retail business was
RMB18,210 million (US$2,548 million), a significant increase
compared to RMB8,095 million in the same quarter of 2018, primarily
driven by contributions from direct sales businesses, including
Tmall Supermarket and Freshippo, as well as our consolidation of
Kaola starting in September 2019.
- China commerce wholesale business Revenue from our China
commerce wholesale business in the quarter ended September 30, 2019
was RMB3,283 million (US$459 million), an increase of 31% compared
to RMB2,497 million in the same quarter of 2018. The increase was
primarily due to an increase in revenue from customer management
services on 1688.com, our domestic wholesale marketplace, as well
as an increase in revenue from Lingshoutong, a digital sourcing
platform that connects FMCG brand manufacturers and their
distributors directly to local mom-and-pop stores in China.
- International commerce retail business Revenue from our
international commerce retail business in the quarter ended
September 30, 2019 was RMB6,007 million (US$840 million), an
increase of 35% compared to RMB4,464 million in the same quarter of
2018. The increase was primarily due to the growth in revenue
generated from AliExpress and Lazada.
- International commerce wholesale business Revenue from
our international commerce wholesale business in the quarter ended
September 30, 2019 was RMB2,434 million (US$341 million), an
increase of 20% compared to RMB2,022 million in the same quarter of
2018. The increase was primarily due to increases in the number of
paying members and the average revenue from paying members on
Alibaba.com, our global wholesale marketplace.
- Cainiao logistics services Revenue 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 RMB4,759 million (US$666
million) in the quarter ended September 30, 2019, an increase of
48% compared to RMB3,206 million in the same quarter of 2018,
mainly due to the increase in the volume of orders fulfilled.
- Local consumer services Revenue from local consumer
services, which primarily represents platform commissions, fees
from provision of delivery services and other services provided by
our on-demand delivery and local services platform Ele.me, was
RMB6,835 million (US$956 million) in the quarter ended September
30, 2019, an increase of 36% compared to RMB5,021 million in the
same quarter of 2018, primarily due to the increase in the volume
of orders delivered.
Cloud computing
Revenue from our cloud computing business in the quarter ended
September 30, 2019 was RMB9,291 million (US$1,300 million), an
increase of 64% compared to RMB5,667 million in the same quarter of
2018, primarily driven by an increase in average revenue per
customer.
Digital media and entertainment
Revenue from our digital media and entertainment business in the
quarter ended September 30, 2019 was RMB7,296 million (US$1,021
million), an increase of 23% compared to RMB5,940 million in the
same quarter of 2018. The increase was mainly due to our
consolidation of Alibaba Pictures starting in March 2019.
Innovation initiatives and others
Revenue from innovation initiatives and others in the quarter
ended September 30, 2019 was RMB1,210 million (US$169 million), an
increase of 14% compared to RMB1,066 million in the same quarter of
2018. The increase was mainly due to an increase in revenue from
Amap.
Costs and Expenses
The following tables set forth a breakdown of our costs and
expenses, share-based compensation expense and costs and expenses
excluding share-based compensation expense by function for the
periods indicated.
Three months ended September
30,
% of Revenue YoY
change
2018
2019
RMB
% of Revenue
RMB
US$
% of Revenue
(in millions, except
percentages)
Costs and expenses:
Cost of revenue
46,786
55
%
65,546
9,170
55
%
0
%
Product development expenses
8,365
10
%
10,938
1,530
9
%
(1
)%
Sales and marketing expenses
9,106
10
%
11,996
1,679
10
%
0
%
General and administrative expenses
4,779
6
%
6,591
922
6
%
0
%
Amortization of intangible assets
2,611
3
%
3,006
420
3
%
0
%
Impairment of goodwill
—
—
576
81
0
%
0
%
Total costs and expenses
71,647
84
%
98,653
13,802
83
%
(1
)%
Share-based compensation
expense:
Cost of revenue
1,566
2
%
2,033
284
2
%
0
%
Product development expenses
3,078
4
%
3,517
492
3
%
(1
)%
Sales and marketing expenses
746
0
%
990
139
1
%
1
%
General and administrative expenses
1,653
2
%
1,605
225
1
%
(1
)%
Total share-based compensation expense
7,043
8
%
8,145
1,140
7
%
(1
)%
Costs and expenses excluding
share-based compensation expense:
Cost of revenue
45,220
53
%
63,513
8,886
53
%
0
%
Product development expenses
5,287
6
%
7,421
1,038
6
%
0
%
Sales and marketing expenses
8,360
10
%
11,006
1,540
9
%
(1
)%
General and administrative expenses
3,126
4
%
4,986
697
5
%
1
%
Amortization of intangible assets
2,611
3
%
3,006
420
3
%
0
%
Impairment of goodwill
—
—
576
81
0
%
0
%
Total costs and expenses excluding
share-based compensation expense
64,604
76
%
90,508
12,662
76
%
0
%
Cost of revenue – Cost of revenue in the quarter ended
September 30, 2019 was RMB65,546 million (US$9,170 million), or 55%
of revenue, compared to RMB46,786 million, or 55% of revenue, in
the same quarter of 2018. Without the effect of share-based
compensation expense, cost of revenue as a percentage of revenue
would have remained stable at 53% in the quarter ended September
30, 2019 compared to the same quarter last year. This reflected an
increase in the cost of inventory from our direct sales and New
Retail businesses offset by a decrease in content spending by Youku
and efficiency gained from our logistics infrastructure and
technology.
Product development expenses – Product development
expenses in the quarter ended September 30, 2019 were RMB10,938
million (US$1,530 million), or 9% of revenue, compared to RMB8,365
million, or 10% of revenue, in the same quarter of 2018. Without
the effect of share-based compensation expense, product development
expenses as a percentage of revenue would have remained stable at
6% in the quarter ended September 30, 2019 compared to the same
quarter last year.
Sales and marketing expenses – Sales and marketing
expenses in the quarter ended September 30, 2019 were RMB11,996
million (US$1,679 million), or 10% of revenue, compared to RMB9,106
million, or 10% of revenue, in the same quarter of 2018. Without
the effect of share-based compensation expense, sales and marketing
expenses as a percentage of revenue would have decreased from 10%
in the quarter ended September 30, 2018 to 9% in the quarter ended
September 30, 2019.
General and administrative expenses – General and
administrative expenses in the quarter ended September 30, 2019
were RMB6,591 million (US$922 million), or 6% of revenue, compared
to RMB4,779 million, or 6% of revenue, in the same quarter of 2018.
Without the effect of share-based compensation expense, general and
administrative expenses as a percentage of revenue would have
increased from 4% in the quarter ended September 30, 2018 to 5% in
the quarter ended September 30, 2019.
Share-based compensation expense – Total share-based
compensation expense included in the cost and expense items above
in the quarter ended September 30, 2019 was RMB8,145 million
(US$1,140 million), an increase of 16% compared to RMB7,043 million
in the same quarter of 2018. Share-based compensation expense as a
percentage of revenue decreased to 7% in the quarter ended
September 30, 2019, as compared to 8% in the same quarter last
year. The following table sets forth our analysis of share-based
compensation expense for the quarters indicated by type of
share-based awards:
Three months ended
September 30, 2018
June 30, 2019
September 30, 2019
% Change
RMB
% of Revenue
RMB
% of Revenue
RMB
US$
% of Revenue
YoY
QoQ
(in millions, except
percentages)
By type of awards:
Alibaba Group share-based awards(1)
6,165
7
%
5,898
5
%
6,899
965
6
%
12
%
17
%
Ant Financial share-based awards granted
to our employees(2)
438
0
%
352
0
%
303
43
0
%
(31
)%
(14
)%
Others(3)
440
1
%
865
1
%
943
132
1
%
114
%
9
%
Total share-based compensation expense
7,043
8
%
7,115
6
%
8,145
1,140
7
%
16
%
14
%
__________________
(1)
This includes awards granted to our
employees, Ant Financial employees and other consultants. Awards
granted to nonemployees were subject to mark-to-market accounting
treatment until March 31, 2019. Beginning on April 1, 2019, we
adopted ASU 2018-07, “Compensation — Stock Compensation (Topic
718): Improvements to Nonemployee Share-Based Payment Accounting”
under US GAAP. As a result of adopting this new accounting update,
these awards are no longer subject to mark-to-market accounting
treatment.
(2)
Awards subject to mark-to-market
accounting treatment.
(3)
Others primarily relate to share-based
awards underlying the equity of our subsidiaries.
Share-based compensation expense related to Alibaba Group
share-based awards increased in this quarter compared to the
previous quarter. The increase reflected the full quarter effect of
the expense arising from the annual performance-based awards
granted in the middle of 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
that we grant 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 September 30, 2019 was
RMB3,006 million (US$420 million), an increase of 15% from RMB2,611
million in the same quarter of 2018.
Income from operations and operating
margin
Income from operations in the quarter ended September 30, 2019
was RMB20,364 million (US$2,849 million), or 17% of revenue, an
increase of 51% compared to RMB13,501 million, or 16% of revenue,
in the same quarter of 2018.
Adjusted EBITDA and Adjusted
EBITA
Adjusted EBITDA increased 39% year-over-year to RMB37,101
million (US$5,191 million) in the quarter ended September 30, 2019,
compared to RMB26,710 million in the same quarter of 2018. Adjusted
EBITA increased 39% year-over-year to RMB32,091 million (US$4,490
million) in the quarter ended September 30, 2019, compared to
RMB23,155 million in the same quarter of 2018. A reconciliation of
net income to adjusted EBITDA and adjusted EBITA is included at the
end of this results announcement.
Adjusted EBITA and adjusted EBITA
margin by segments
Adjusted EBITA and adjusted EBITA margin by segments are set
forth in the table below. See the section entitled “Information
about Segments” above for a reconciliation of income from
operations to adjusted EBITA.
Three months ended September
30,
2018
2019
RMB
% of Revenue
RMB
US$
% of Revenue
(in millions, except
percentages)
Core commerce
29,807
41
%
38,574
5,397
38
%
Cloud computing
(232
)
(4
)%
(521
)
(73
)
(6
)%
Digital media and entertainment
(3,802
)
(64
)%
(2,207
)
(309
)
(30
)%
Innovation initiatives and others
(1,241
)
(116
)%
(1,917
)
(268
)
(158
)%
Core commerce segment – Adjusted EBITA increased by 29%
to RMB38,574 million (US$5,397 million) in the quarter ended
September 30, 2019, compared to RMB29,807 million in the same
quarter of 2018. Marketplace-based core commerce adjusted EBITA
increased 28% year-over-year to RMB45,610 million (US$6,381
million). Adjusted EBITA margin decreased from 41% in the quarter
ended September 30, 2018 to 38% in the quarter ended September 30,
2019 primarily due to a continuing revenue mix shift towards
self-operated New Retail and direct sales 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 sales businesses.
Cloud computing segment – Adjusted EBITA in the quarter
ended September 30, 2019 was a loss of RMB521 million (US$73
million), compared to a loss of RMB232 million in the same quarter
of 2018. Adjusted EBITA margin decreased to negative 6% in the
quarter ended September 30, 2019 from negative 4% in the quarter
ended September 30, 2018 primarily due to our investments in talent
and technology infrastructure.
Digital media and entertainment segment – Adjusted EBITA
in the quarter ended September 30, 2019 was a loss of RMB2,207
million (US$309 million), compared to a loss of RMB3,802 million in
the same quarter of 2018. Adjusted EBITA margin improved to
negative 30% in the quarter ended September 30, 2019 from negative
64% in the quarter ended September 30, 2018, primarily due to the
measured content spending by Youku.
Innovation initiatives and others segment – Adjusted
EBITA in the quarter ended September 30, 2019 was a loss of
RMB1,917 million (US$268 million), compared to a loss of RMB1,241
million in the same quarter of 2018. The increase in adjusted EBITA
loss was primarily due to our investments in research and
innovation, as well as investments in other business
initiatives.
Interest and investment income,
net
Interest and investment income, net in the quarter ended
September 30, 2019 was RMB63,348 million (US$8,862 million),
compared to RMB6,635 million in the same quarter of 2018. The
increase was primarily due to a one-time gain of RMB69.2 billion
(US$9.7 billion) recognized upon the receipt of the 33% equity
interest in Ant Financial, which was partly offset by impairment
charges of RMB7,689 million (US$1,076 million) in relation to
certain investments, as well as net losses arising from changes in
the fair value of our equity investments.
The gain related to the 33% equity interest in Ant Financial
resulted from the transfer of certain intellectual property rights
and assets to Ant Financial as set forth under the 2014 transaction
agreements and the basis difference determined based on our share
of Ant Financial’s net assets, net of its corresponding deferred
tax effect. This gain was not determined on the basis of Ant
Financial’s current equity valuation.
The above-mentioned gains or losses were excluded from our
non-GAAP net income.
Other income, net
Other income, net in the quarter ended September 30, 2019 was
RMB3,171 million (US$444 million), compared to other loss, net of
RMB1,532 million in the same quarter of 2018. The increase in other
income, net was primarily due to an increase in royalty fees and
software technology service fees from Ant Financial and a decrease
in exchange loss. Royalty fees and software technology service fees
under our profit sharing arrangement with Ant Financial amounted to
RMB2,208 million (US$309 million) in the quarter ended September
30, 2019, as compared to a reversal of income in the amount of
RMB910 million in the same quarter last year. The profit sharing
arrangement was terminated in September 2019 upon our receipt of
the 33% equity interest in Ant Financial.
Income tax expenses
Income tax expenses in the quarter ended September 30, 2019 were
RMB2,815 million (US$394 million), compared to RMB277 million in
the same quarter of 2018.
Our effective tax rate was 3% in the quarter ended September 30,
2019, compared to 2% in the same quarter of 2018. The relatively
low effective tax rate reflected the recognition of tax credits of
approximately RMB4.1 billion (US$574 million) during the quarter
ended September 30, 2019, compared to RMB4.7 billion in the same
quarter last year, as certain key subsidiaries were notified this
quarter of the renewal of their Key Software Enterprise status for
calendar year 2018 by the relevant tax authorities. Excluding the
one-time gain in relation to the receipt of the 33% equity interest
in Ant Financial, impairment of investments and goodwill,
share-based compensation expense, revaluation and disposal
gains/losses of investments, as well as the above-mentioned tax
credits from the renewal of the Key Software Enterprise status, our
effective tax rate would have been 21% in the quarter ended
September 30, 2019.
Share of results of equity
investees
Share of results of equity investees in the quarter ended
September 30, 2019 was a loss of RMB11,960 million (US$1,673
million), compared to a profit of RMB1,254 million in the same
quarter of 2018. Share of results of equity investees in the
quarter ended September 30, 2019 and the comparative periods
consisted of the following:
Three months ended
September 30, 2018
June 30, 2019
September 30, 2019
RMB
RMB
RMB
US$
(in millions)
Share of profit (loss) of equity
investees(1)
1,735
941
(2
)
—
Impairment loss
—
—
(11,590
)
(1,621
)
Dilution loss
(41
)
(5
)
(20
)
(3
)
Others(2)
(440
)
(419
)
(348
)
(49
)
Total
1,254
517
(11,960
)
(1,673
)
__________________
(1)
We record our share of profit (loss) of
equity investees one quarter in arrears.
(2)
Others mainly include amortization of
intangible assets of equity investees and share-based compensation
expense.
The year-over-year decrease in share of results of equity
investees was mainly due to an impairment loss of RMB11,590 million
(US$1,621 million) with respect to certain equity investees as a
result of their prolonged decline in market values against our
carrying values.
Upon the receipt of the 33% equity interest in Ant Financial, we
account for our interest in Ant Financial under the equity method.
The initial carrying value of this investment was measured at cost,
as adjusted for the basis difference determined based on our share
of Ant Financial’s net assets as of the completion date of the
transaction. Similar to other equity method investees, we record
our share of profit (loss) of Ant Financial one quarter in
arrears.
Net income and Non-GAAP net
income
Our net income in the quarter ended September 30, 2019 was
RMB70,748 million (US$9,898 million), an increase of 288% compared
to RMB18,241 million in the same quarter of 2018.
Excluding the one-time gain of RMB69.2 billion (US$9.7 billion)
in relation to the receipt of the 33% equity interest in Ant
Financial, impairment of investments and goodwill, share-based
compensation expense, revaluation and disposal gains/losses of
investments and certain other items, non-GAAP net income in the
quarter ended September 30, 2019 was RMB32,750 million (US$4,582
million), an increase of 40% compared to RMB23,453 million in the
same quarter of 2018. 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 September 30, 2019 was RMB72,540 million (US$10,149 million),
an increase of 262% compared to RMB20,033 million in the same
quarter of 2018.
Diluted earnings per ADS and non-GAAP
diluted earnings per ADS
Diluted earnings per ADS in the quarter ended September 30, 2019
was RMB27.51 (US$3.85) on a weighted average of 21,093 million
diluted shares outstanding during the quarter, an increase of 261%
compared to RMB7.62 on a weighted average of 21,023 million diluted
shares outstanding during the same quarter of 2018. Excluding the
one-time gain in relation to the receipt of the 33% equity interest
in Ant Financial, impairment of investments and goodwill,
share-based compensation expense, revaluation and disposal
gains/losses of investments and certain other items, non-GAAP
diluted earnings per ADS in the quarter ended September 30, 2019
was RMB13.10 (US$1.83), an increase of 36% compared to RMB9.60 in
the same quarter of 2018. A reconciliation of diluted earnings per
ADS to non-GAAP diluted earnings per ADS is included at the end of
this results announcement. Each ADS represents eight ordinary
shares. See the section entitled “Share Subdivision and ADS Ratio
Change” for more information.
Cash, cash equivalents and short-term
investments
As of September 30, 2019, cash, cash equivalents and short-term
investments were RMB235,251 million (US$32,913 million), compared
to RMB212,189 million as of June 30, 2019. The increase in cash,
cash equivalents and short-term investments during the quarter
ended September 30, 2019 was primarily due to free cash flow
generated from operations of RMB30,488 million (US$4,265 million),
partly offset by net cash used in investment and acquisition
activities of RMB9,925 million (US$1,389 million).
Cash flow from operating activities and
free cash flow
Net cash provided by operating activities in the quarter ended
September 30, 2019 was RMB47,326 million (US$6,621 million), an
increase of 51% compared to RMB31,407 million in the same quarter
of 2018. Free cash flow, a non-GAAP measurement of liquidity, in
the quarter ended September 30, 2019 increased by 90% to RMB30,488
million (US$4,265 million), from RMB16,033 million in the same
quarter of 2018, which was primarily due to our robust
profitability growth as well as the timing of capital expenditure
spending and licensed copyright acquisition. 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 September 30, 2019, net cash used in
investing activities of RMB21,353 million (US$2,987 million)
primarily reflected (i) cash outflow of RMB12,877 million (US$1,802
million) for investment and acquisition activities, including those
relating to STO Express and the acquisition of Kaola, (ii) capital
expenditures of RMB9,826 million (US$1,375 million), which included
cash outflow for the acquisition of land use rights and
construction in progress relating to office campus of RMB650
million (US$91 million), as well as (iii) the acquisition of
licensed copyrights and other intangible assets of RMB2,451 million
(US$343 million). These cash outflows were partly offset by cash
inflow of RMB2,952 million (US$413 million) from the disposal of
various investments. In addition, in connection with the receipt of
the 33% equity interest in Ant Financial, the net cash impact is
minimal because the consideration paid was funded by the amount we
received for the transfer of certain intellectual property and
assets to Ant Financial.
Employees
As of September 30, 2019, we had a total of 111,524 employees,
compared to 103,699 as of June 30, 2019.
Share Subdivision and ADS Ratio
Change
On July 30, 2019, we effected a 1-to-8 share subdivision, as a
result of which each ordinary share was subdivided into eight
ordinary shares (the “Share Subdivision”). On the same day, we
changed our ordinary share-to-ADS ratio. Following the ADS ratio
change, each ADS now represents eight ordinary shares. Because the
ADS ratio change was exactly proportionate to the Share
Subdivision, no new ADSs were issued to any ADS holder and the
total number of our outstanding ADSs remains unchanged.
The tables below set forth the pre- and post-share subdivision
earnings per share/ADS attributable to ordinary shareholders and
weighted average number of shares used in calculating earnings per
ordinary share for the periods indicated.
Three months ended September
30,
2018
2019
Pre-Share Subdivision
Post-Share Subdivision
Pre-Share Subdivision
Post-Share Subdivision
RMB
RMB
RMB
US$
RMB
US$
(except share data)
Earnings per share attributable to
ordinary shareholders
Basic
7.75
0.97
27.90
3.90
3.49
0.49
Diluted
7.62
0.95
27.51
3.85
3.44
0.48
Non-GAAP diluted
9.60
1.20
13.10
1.83
1.64
0.23
Earnings per ADS attributable to
ordinary shareholders
Basic
7.75
7.75
27.90
3.90
27.90
3.90
Diluted
7.62
7.62
27.51
3.85
27.51
3.85
Non-GAAP diluted
9.60
9.60
13.10
1.83
13.10
1.83
Weighted average number of shares used
in calculating earnings per ordinary share (million shares)
Basic
2,584
20,669
2,600
20,800
Diluted
2,628
21,023
2,637
21,093
Six months ended September
30,
2018
2019
Pre-Share Subdivision
Post-Share Subdivision
Pre-Share Subdivision
Post-Share Subdivision
RMB
RMB
RMB
US$
RMB
US$
(except share data)
Earnings per share attributable to
ordinary shareholders
Basic
11.12
1.39
36.09
5.05
4.51
0.63
Diluted
10.93
1.37
35.58
4.98
4.45
0.62
Non-GAAP diluted
17.65
2.21
25.65
3.59
3.21
0.45
Earnings per ADS attributable to
ordinary shareholders
Basic
11.12
11.12
36.09
5.05
36.09
5.05
Diluted
10.93
10.93
35.58
4.98
35.58
4.98
Non-GAAP diluted
17.65
17.65
25.65
3.59
25.65
3.59
Weighted average number of shares used
in calculating earnings per ordinary share (million shares)
Basic
2,582
20,658
2,599
20,788
Diluted
2,627
21,018
2,636
21,084
WEBCAST AND CONFERENCE CALL INFORMATION
Alibaba Group’s management will hold a conference call to
discuss the financial results at 7:30 a.m. U.S. Eastern Time (7:30
p.m. Hong Kong Time) on November 1, 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: 4269015
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: 4269015).
Our results announcement and accompanying slides are available
at Alibaba Group’s Investor Relations website at
http://www.alibabagroup.com/en/ir/home on November 1, 2019.
ABOUT ALIBABA GROUP
Alibaba Group's mission is to make it easy to do business
anywhere. The company aims to build the future infrastructure of
commerce. It envisions that its customers will meet, work and live
at Alibaba, and that it will be a company that lasts at least 102
years.
SAFE HARBOR STATEMENTS
This announcement contains forward-looking statements. These
statements are made under the “safe harbor” provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
“will,” “expects,” “anticipates,” “future,” “intends,” “plans,”
“believes,” “estimates,” “potential,” “continue,” “ongoing,”
“targets,” “guidance” and similar statements. In addition,
statements that are not historical facts, including statements
about Alibaba’s strategies and business plans, Alibaba’s beliefs,
expectations and guidance regarding the growth of its business and
its revenue, the business outlook and quotations from management in
this announcement, as well as Alibaba’s strategic and operational
plans, are or contain forward-looking statements. Alibaba may also
make forward-looking statements in its periodic reports to the U.S.
Securities and Exchange Commission (the “SEC”), in 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
earnings per share/ADS and free cash flow. For more information on
these non-GAAP financial measures, please refer to the section
entitled “Information about Segments” and the table captioned
“Reconciliations of Non-GAAP Measures to the Nearest Comparable
GAAP Measures” in this results announcement.
We believe that adjusted EBITDA, adjusted EBITA,
marketplace-based core commerce adjusted EBITA, non-GAAP net income
and non-GAAP diluted earnings per share/ADS help identify
underlying trends in our business that could otherwise be distorted
by the effect of certain income or expenses that we include in
income from operations, net income and diluted earnings per
share/ADS. We believe that these non-GAAP measures provide useful
information about our core operating results, enhance the overall
understanding of our past performance and future prospects and
allow for greater visibility with respect to key metrics used by
our management in its financial and operational decision-making. We
present three different income measures, namely adjusted EBITDA,
adjusted EBITA and non-GAAP net income, as well as one measure that
provides supplemental information on our core commerce segment,
namely marketplace-based core commerce adjusted EBITA, in order to
provide more information and greater transparency to investors
about our operating results.
We consider free cash flow to be a liquidity measure that
provides useful information to management and investors about the
amount of cash generated by our business that can be used for
strategic corporate transactions, including investing in our new
business initiatives, making strategic investments and acquisitions
and strengthening our balance sheet.
Adjusted EBITDA, adjusted EBITA, marketplace-based core commerce
adjusted EBITA, non-GAAP net income, non-GAAP diluted earnings per
share/ADS and free cash flow should not be considered in isolation
or construed as an alternative to income from operations, adjusted
EBITA for core commerce, net income, diluted earnings per
share/ADS, cash flows or any other measure of performance or as an
indicator of our operating performance. These non-GAAP financial
measures presented here do not have standardized meanings
prescribed by U.S. GAAP and may not be comparable to similarly
titled measures presented by other companies. Other companies may
calculate similarly titled measures differently, limiting their
usefulness as comparative measures to our data.
Adjusted EBITDA represents net income before (i) interest
and investment income, net, interest expense, other income or loss,
net, income tax expenses and share of results of equity investees,
(ii) certain non-cash expenses, consisting of share-based
compensation expense, amortization, depreciation, operating lease
cost relating to land use rights 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 or loss,
net, income tax expenses and share of results of equity investees,
(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. Marketplace-based core commerce adjusted
EBITA reflects the performance of our most established businesses,
namely, those of our China retail marketplaces and wholesale
marketplaces which primarily adopt a marketplace-based approach. By
excluding certain businesses that are in the earlier stages of
their development and with business approaches that continue to
evolve, marketplace-based core commerce adjusted EBITA enables
investors to clearly evaluate the performance of our most
established businesses on a like-for-like basis.
Non-GAAP net income represents net income before
share-based compensation expense, amortization, impairment of
investments and goodwill, gain or loss on deemed
disposals/disposals/revaluation of investments, gain in relation to
the receipt of the 33% equity interest in Ant Financial,
amortization of excess value receivable arising from the
restructuring of commercial arrangements with Ant Financial and
others, as adjusted for the tax effects on non-GAAP
adjustments.
Non-GAAP diluted earnings per share represents non-GAAP
net income attributable to ordinary shareholders divided by the
weighted average number of shares outstanding during the periods on
a diluted basis. Non-GAAP diluted earnings per ADS
represents non-GAAP diluted earnings per share after adjustment to
the ordinary share-to-ADS ratio.
Free cash flow represents net cash provided by operating
activities as presented in our consolidated cash flow statement
less purchases of property and equipment (excluding acquisition of
land use rights and construction in progress relating to office
campus), licensed copyrights and other intangible assets, as well
as adjustments to exclude from net cash provided by operating
activities the consumer protection fund deposits from merchants on
our China retail marketplaces. We deduct certain items relating to
cash flows from investing activities in order to provide greater
transparency into cash flow from our revenue-generating business
operations. We exclude “acquisition of land use rights and
construction in progress relating to office campus” because the
office campus is used by us for corporate and administrative
purposes and is not directly related to our revenue-generating
business operations. We also exclude consumer protection fund
deposits from merchants on our China retail marketplaces because
these deposits are restricted for the purpose of compensating
consumers for claims against merchants.
The section entitled “Information about Segments” and the table
captioned “Reconciliations of Non-GAAP Measures to the Nearest
Comparable GAAP Measures” in this results announcement have more
details on the non-GAAP financial measures that are most directly
comparable to GAAP financial measures and the related
reconciliations between these financial measures.
ALIBABA GROUP HOLDING LIMITED UNAUDITED CONSOLIDATED
INCOME STATEMENTS
Three months ended September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions, except per share
data)
(in millions, except per share
data)
Revenue
85,148
119,017
16,651
166,068
233,941
32,730
Cost of revenue
(46,786
)
(65,546
)
(9,170
)
(90,506
)
(125,533
)
(17,564
)
Product development expenses
(8,365
)
(10,938
)
(1,530
)
(19,875
)
(21,416
)
(2,996
)
Sales and marketing expenses
(9,106
)
(11,996
)
(1,679
)
(18,027
)
(22,694
)
(3,175
)
General and administrative expenses
(4,779
)
(6,591
)
(922
)
(11,424
)
(12,911
)
(1,806
)
Amortization of intangible assets
(2,611
)
(3,006
)
(420
)
(4,715
)
(6,072
)
(849
)
Impairment of goodwill
—
(576
)
(81
)
—
(576
)
(81
)
Income from operations
13,501
20,364
2,849
21,521
44,739
6,259
Interest and investment income, net
6,635
63,348
8,862
13,881
63,535
8,889
Interest expense
(1,340
)
(1,360
)
(190
)
(2,553
)
(2,706
)
(379
)
Other (loss) income, net
(1,532
)
3,171
444
(1,615
)
5,272
738
Income before income tax and share of
results of equity investees
17,264
85,523
11,965
31,234
110,840
15,507
Income tax expenses
(277
)
(2,815
)
(394
)
(5,942
)
(9,527
)
(1,333
)
Share of results of equity investees
1,254
(11,960
)
(1,673
)
599
(11,443
)
(1,601
)
Net income
18,241
70,748
9,898
25,891
89,870
12,573
Net loss attributable to noncontrolling
interests
1,892
1,843
258
2,962
4,169
584
Net income attributable to Alibaba Group
Holding Limited
20,133
72,591
10,156
28,853
94,039
13,157
Accretion of mezzanine equity
(100
)
(51
)
(7
)
(135
)
(247
)
(35
)
Net income attributable to ordinary
shareholders
20,033
72,540
10,149
28,718
93,792
13,122
Earnings per share attributable to
ordinary shareholders(1)
Basic
0.97
3.49
0.49
1.39
4.51
0.63
Diluted
0.95
3.44
0.48
1.37
4.45
0.62
Earnings per ADS attributable to
ordinary shareholders(1)
Basic
7.75
27.90
3.90
11.12
36.09
5.05
Diluted
7.62
27.51
3.85
10.93
35.58
4.98
Weighted average number of shares used
in calculating earnings per ordinary share (million
shares)(1)
Basic
20,669
20,800
20,658
20,788
Diluted
21,023
21,093
21,018
21,084
__________________
(1)
Each ADS represents eight ordinary shares.
See the section entitled “Share Subdivision and ADS Ratio Change”
for more information.
ALIBABA GROUP HOLDING LIMITED REVENUE
The following table sets forth our revenue by segments for the
periods indicated:
Three months ended September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions)
(in millions)
Core commerce(1)
72,475
101,220
14,161
141,663
200,764
28,088
Cloud computing(2)
5,667
9,291
1,300
10,365
17,078
2,389
Digital media and entertainment(3)
5,940
7,296
1,021
11,915
13,608
1,904
Innovation initiatives and others(4)
1,066
1,210
169
2,125
2,491
349
Total
85,148
119,017
16,651
166,068
233,941
32,730
__________________
(1)
Revenue from core commerce is primarily
generated from our China retail marketplaces, Freshippo, 1688.com,
Lazada.com, AliExpress, Alibaba.com, Cainiao logistics services and
local consumer services.
(2)
Revenue from cloud computing is primarily
generated from the provision of services, such as elastic
computing, database, storage, network virtualization services,
large scale computing, security, management and application
services, big data analytics, a machine learning platform and IoT
services.
(3)
Revenue from digital media and
entertainment is primarily generated from Youku 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 September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions)
(in millions)
Core commerce
24,290
32,069
4,487
47,312
67,118
9,390
Cloud computing
(1,165
)
(1,928
)
(270
)
(3,239
)
(3,437
)
(481
)
Digital media and entertainment
(4,805
)
(3,327
)
(466
)
(9,095
)
(6,486
)
(907
)
Innovation initiatives and others
(2,201
)
(3,073
)
(430
)
(5,976
)
(6,073
)
(850
)
Unallocated
(2,618
)
(3,377
)
(472
)
(7,481
)
(6,383
)
(893
)
Total
13,501
20,364
2,849
21,521
44,739
6,259
The following table sets forth our adjusted EBITA by segments
for the periods indicated:
Three months ended September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions)
(in millions)
Core commerce
29,807
38,574
5,397
62,604
79,599
11,136
Cloud computing
(232
)
(521
)
(73
)
(720
)
(879
)
(123
)
Digital media and entertainment
(3,802
)
(2,207
)
(309
)
(6,934
)
(4,440
)
(621
)
Innovation initiatives and others
(1,241
)
(1,917
)
(268
)
(2,443
)
(3,882
)
(543
)
Unallocated
(1,377
)
(1,838
)
(257
)
(2,850
)
(3,751
)
(525
)
Total
23,155
32,091
4,490
49,657
66,647
9,324
ALIBABA GROUP HOLDING LIMITED INFORMATION ABOUT
SEGMENTS
The table below sets forth selected financial information of our
operating segments for six months ended September 30, 2019:
Six months ended September 30,
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
200,764
17,078
13,608
2,491
—
233,941
32,730
Income (loss) from operations
67,118
(3,437
)
(6,486
)
(6,073
)
(6,383
)
44,739
6,259
Add: Share-based compensation expense
7,211
2,547
1,386
2,151
1,965
15,260
2,135
Add: Amortization of intangible assets
5,270
11
660
40
91
6,072
849
Add: Impairment of goodwill
—
—
—
—
576
576
81
Adjusted EBITA
79,599
(2)
(879
)
(4,440
)
(3,882
)
(3,751
)
66,647
9,324
Adjusted EBITA margin
40
%
(5
)%
(33
)%
(156
)%
28
%
Six months ended September 30,
2018
Core commerce
Cloud computing
Digital media and
entertainment
Innovationinitiativesand others
Unallocated(1)
Consolidated
RMB
RMB
RMB
RMB
RMB
RMB
(in millions, except
percentages)
Revenue
141,663
10,365
11,915
2,125
—
166,068
Income (loss) from operations
47,312
(3,239
)
(9,095
)
(5,976
)
(7,481
)
21,521
Add: Share-based compensation expense
11,387
2,509
1,528
3,516
4,481
23,421
Add: Amortization of intangible assets
3,905
10
633
17
150
4,715
Adjusted EBITA
62,604
(720
)
(6,934
)
(2,443
)
(2,850
)
49,657
Adjusted EBITA margin
44
%
(7
)%
(58
)%
(115
)%
30
%
__________________
(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 27% year-over-year to RMB92,410 million (US$12,929
million). A reconciliation of adjusted EBITA for core commerce to
marketplace-based core commerce adjusted EBITA is included at the
end of this results announcement.
ALIBABA GROUP HOLDING LIMITED UNAUDITED CONSOLIDATED
BALANCE SHEETS
As of March 31,
As of September 30,
2019
2019
RMB
RMB
US$
(in millions)
Assets
Current assets:
Cash and cash equivalents
189,976
234,177
32,763
Short-term investments
3,262
1,074
150
Restricted cash and escrow receivables
8,518
14,095
1,972
Investment securities
9,927
5,759
806
Prepayments, receivables and other
assets
58,590
80,582
11,273
Total current assets
270,273
335,687
46,964
Investment securities
157,090
167,690
23,461
Prepayments, receivables and other
assets(1)
28,018
49,299
6,897
Investment in equity investees
84,454
163,261
22,841
Property and equipment, net
92,030
100,907
14,118
Intangible assets, net
68,276
66,100
9,248
Goodwill
264,935
276,633
38,702
Total assets
965,076
1,159,577
162,231
Liabilities, Mezzanine Equity and
Shareholders’ Equity
Current liabilities:
Current bank borrowings
7,356
8,136
1,138
Current unsecured senior notes
15,110
16,019
2,241
Income tax payable
17,685
17,152
2,400
Escrow money payable
8,250
7,830
1,095
Accrued expenses, accounts payable and
other liabilities(1)
117,711
148,104
20,721
Merchant deposits
10,762
11,286
1,579
Deferred revenue and customer advances
30,795
35,422
4,956
Total current liabilities
207,669
243,949
34,130
ALIBABA GROUP HOLDING LIMITED UNAUDITED CONSOLIDATED
BALANCE SHEETS (CONTINUED)
As of March 31,
As of September 30,
2019
2019
RMB
RMB
US$
(in millions)
Deferred revenue
1,467
1,782
249
Deferred tax liabilities
22,517
41,892
5,861
Non-current bank borrowings
35,427
40,560
5,675
Non-current unsecured senior notes
76,407
80,962
11,327
Other liabilities(1)
6,187
22,695
3,175
Total liabilities
349,674
431,840
60,417
Commitments and contingencies
—
—
—
Mezzanine equity
6,819
7,506
1,050
Shareholders’ equity:
Ordinary shares
1
1
—
Additional paid-in capital
231,783
246,073
34,427
Treasury shares at cost
—
—
—
Restructuring reserve
(97
)
—
—
Subscription receivables
(49
)
(51
)
(7
)
Statutory reserves
5,068
5,581
781
Accumulated other comprehensive loss
(2,335
)
(217
)
(30
)
Retained earnings
257,886
351,412
49,164
Total shareholders’ equity
492,257
602,799
84,335
Noncontrolling interests
116,326
117,432
16,429
Total equity
608,583
720,231
100,764
Total liabilities, mezzanine equity and
equity
965,076
1,159,577
162,231
__________________
(1)
We adopted ASU 2016-02, “Leases (Topic
842)” beginning in the first quarter of fiscal year 2020 using the
modified retrospective method and no adjustments are made to the
comparative periods. Adoption of the standard resulted in the
recognition of operating lease right‑of‑use assets of approximately
RMB24.9 billion and operating lease liabilities of approximately
RMB19.4 billion on the consolidated balance sheet as of April 1,
2019.
Operating lease right-of-use assets are
included in non-current prepayments, receivables and other assets,
and operating lease liabilities are included in current accrued
expenses, accounts payable and other liabilities and other
non-current liabilities on the consolidated balance sheets.
ALIBABA GROUP HOLDING LIMITED UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions)
(in millions)
Net cash provided by operating
activities
31,407
47,326
6,621
67,524
81,938
11,464
Net cash used in investing activities
(31,584
)
(21,353
)
(2,987
)
(103,254
)
(42,489
)
(5,944
)
Net cash (used in) provided by financing
activities
(3,477
)
2,106
295
804
6,599
923
Effect of exchange rate changes on cash
and cash equivalents, restricted cash and escrow receivables
1,670
2,353
329
4,453
3,730
522
(Decrease) Increase in cash and cash
equivalents, restricted cash and escrow receivables
(1,984
)
30,432
4,258
(30,473
)
49,778
6,965
Cash and cash equivalents, restricted cash
and escrow receivables at beginning of period
174,237
217,840
30,477
202,726
198,494
27,770
Cash and cash equivalents, restricted cash
and escrow receivables at end of period
172,253
248,272
34,735
172,253
248,272
34,735
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 September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions)
(in millions)
Net income
18,241
70,748
9,898
25,891
89,870
12,573
Less: Interest and investment income,
net
(6,635
)
(63,348
)
(8,862
)
(13,881
)
(63,535
)
(8,889
)
Add: Interest expense
1,340
1,360
190
2,553
2,706
379
Less: Other (loss) income, net
1,532
(3,171
)
(444
)
1,615
(5,272
)
(738
)
Add: Income tax expenses
277
2,815
394
5,942
9,527
1,333
Add: Share of results of equity
investees
(1,254
)
11,960
1,673
(599
)
11,443
1,601
Income from operations
13,501
20,364
2,849
21,521
44,739
6,259
Add: Share-based compensation expense
7,043
8,145
1,140
23,421
15,260
2,135
Add: Amortization of intangible assets
2,611
3,006
420
4,715
6,072
849
Add: Impairment of goodwill
—
576
81
—
576
81
Adjusted EBITA
23,155
32,091
4,490
49,657
66,647
9,324
Add: Depreciation and amortization of
property and equipment, and operating lease cost relating to land
use rights
3,555
5,010
701
6,412
9,692
1,356
Adjusted EBITDA
26,710
37,101
5,191
56,069
76,339
10,680
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 September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions)
(in millions)
Adjusted EBITA for core
commerce
29,807
38,574
5,397
62,604
79,599
11,136
Less: Effects of local consumer services,
Lazada, New Retail and direct import and Cainiao Network
5,835
7,036
984
9,994
12,811
1,793
Marketplace-based core commerce
adjusted EBITA
35,642
45,610
6,381
72,598
92,410
12,929
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 September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions)
(in millions)
Net income
18,241
70,748
9,898
25,891
89,870
12,573
Add: Share-based compensation expense
7,043
8,145
1,140
23,421
15,260
2,135
Add: Amortization of intangible assets
2,611
3,006
420
4,715
6,072
849
Add: Impairment of investments and
goodwill
358
19,855
2,778
358
20,105
2,813
Less: Gain (Loss) on deemed
disposals/disposals/ revaluation of investments and others
(5,297
)
291
41
(10,705
)
1,917
268
Less: Gain in relation to the receipt of
the 33% equity interest in Ant Financial
—
(69,225
)
(9,685
)
—
(69,225
)
(9,685
)
Add: Amortization of excess value
receivable arising from the restructuring of commercial
arrangements with Ant Financial
66
31
4
132
97
14
Adjusted for tax effects on non-GAAP
adjustments(1)
431
(101
)
(14
)
(258
)
(397
)
(55
)
Non-GAAP net income
23,453
32,750
4,582
43,554
63,699
8,912
__________________
(1)
Tax effects on non-GAAP adjustments
primarily comprised of tax effects relating to the amortization of
intangible assets and certain gains and losses from
investments.
ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF
NON-GAAP MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
(CONTINUED)
The table below sets forth a
reconciliation of our diluted earnings per share/ADS to non-GAAP
diluted earnings per share/ADS for the periods indicated:
Three months ended September
30,
Six months ended September
30,
2018
2019
2018
2019
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
20,033
72,540
10,149
28,718
93,792
13,122
Dilution effect on earnings arising from
option plans operated by equity investees and subsidiaries
(12
)
(4
)
(1
)
(15
)
(15
)
(2
)
Net income attributable to ordinary
shareholders – diluted
20,021
72,536
10,148
28,703
93,777
13,120
Add: Non-GAAP adjustments to net
income(1)
5,212
(37,998
)
(5,316
)
17,663
(26,171
)
(3,661
)
Non-GAAP net income attributable
to ordinary shareholders for computing non-GAAP diluted earnings
per share/ADS
25,233
34,538
4,832
46,366
67,606
9,459
Weighted average number of shares on a
diluted basis (million shares)(5)
21,023
21,093
21,018
21,084
Diluted earnings per
share(2)(5)
0.95
3.44
0.48
1.37
4.45
0.62
Add: Non-GAAP adjustments to net income
per share(3)(5)
0.25
(1.80
)
(0.25
)
0.84
(1.24
)
(0.17
)
Non-GAAP diluted earnings per
share(4)(5)
1.20
1.64
0.23
2.21
3.21
0.45
Diluted earnings per ADS(2)(5)
7.62
27.51
3.85
10.93
35.58
4.98
Add: Non-GAAP adjustments to net income
per ADS(3)(5)
1.98
(14.41
)
(2.02
)
6.72
(9.93
)
(1.39
)
Non-GAAP diluted earnings per
ADS(4)(5)
9.60
13.10
1.83
17.65
25.65
3.59
__________________
(1)
See the table above for the reconciliation
of net income to non-GAAP net income for more information of these
non-GAAP adjustments.
(2)
Diluted earnings per share is derived from
net income attributable to ordinary shareholders for computing
diluted earnings per share divided by weighted average number of
shares on a diluted basis. Diluted earnings per ADS is derived from
the diluted earnings per share after adjustment to the ordinary
share-to-ADS ratio.
(3)
Non-GAAP adjustments to net income per
share is derived from non-GAAP adjustments to net income divided by
weighted average number of shares on a diluted basis. Non-GAAP
adjustments to net income per ADS is derived from the non-GAAP
adjustments to net income per share after adjustment to the
ordinary share-to-ADS ratio.
(4)
Non-GAAP diluted earnings per share is
derived from non-GAAP net income attributable to ordinary
shareholders for computing non-GAAP diluted earnings per share
divided by weighted average number of shares on a diluted basis.
Non-GAAP diluted earnings per ADS is derived from the non-GAAP
diluted earnings per share after adjustment to the ordinary
share-to-ADS ratio.
(5)
Each ADS represents eight ordinary shares.
See the section entitled “Share Subdivision and ADS Ratio Change”
for more information.
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 September
30,
Six months ended September
30,
2018
2019
2018
2019
RMB
RMB
US$
RMB
RMB
US$
(in millions)
(in millions)
Net cash provided by operating
activities
31,407
47,326
6,621
67,524
81,938
11,464
Less: Purchase of property and equipment
(excluding land use rights and construction in progress relating to
office campus)
(11,632
)
(9,176
)
(1,284
)
(16,637
)
(15,032
)
(2,104
)
Less: Acquisition of licensed copyrights
and other intangible assets
(3,742
)
(2,451
)
(343
)
(8,496
)
(4,846
)
(678
)
Less: Changes in the consumer protection
fund deposits
—
(5,211
)
(729
)
—
(5,211
)
(729
)
Free cash flow
16,033
30,488
4,265
42,391
56,849
7,953
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
Dec 31, 2017
Mar 31, 2018
Jun 30, 2018
Sep 30, 2018
Dec 31, 2018
Mar 31, 2019
Jun 30, 2019
Sept 30, 2019
(in millions)
Annual active consumers
515
552
576
601
636
654
674
693
Mobile
The table below sets forth the mobile MAUs on our China retail
marketplaces for the periods indicated:
The month ended
Dec 31, 2017
Mar 31, 2018
Jun 30, 2018
Sep 30, 2018
Dec 31, 2018
Mar 31, 2019
Jun 30, 2019
Sept 30, 2019
(in millions)
Mobile MAUs
580
617
634
666
699
721
755
785
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191101005278/en/
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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