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Alibaba Revenue Surges 54% 

January 24, 2017

Alibaba reported financial results for the quarter ended December 31, 2016.

Sales were up 54 percent to 53.2 billion yuan ($7.8 billion) in the quarter, with investors only looking for 50.1 billion-yuan. Adjusted earnings-per-share were 9.02 yuan, better than 7.70 yuan which was expected. Net income jumped 38 percent to 17.2 billion yuan, which was more than the 13.6 billion-yuan which was expected.

"Our robust December quarter demonstrates the strength of the Chinese consumer and Alibaba’s ability to create value across our vast ecosystem,” said Daniel Zhang, Chief Executive Officer of Alibaba Group. “The 11.11 Shopping Festival featured Alibaba at its best, integrating commerce, entertainment and social engagement, all happening globally at record scale. We are driving the age of ‘New Retail,’ which leverages big data and innovation to provide a seamless online and offline experience for nearly half a billion mobile monthly active users. This retail transformation will make it even easier and more efficient for brands and retailers to engage with these consumers anywhere, anytime.”

 

“We reported another excellent quarter, with robust revenue growth of 54%. With three quarters of the year coming in ahead of expectations, we are adjusting up our 2017 fiscal year revenue guidance from 48% to 53% year-over-year growth,” said Maggie Wu, Chief Financial Officer of Alibaba Group. “This quarter we generated US$4.9 billion in free cash flow on a non-GAAP basis1, enabling us to continue investing in growth areas globally, including cloud computing, digital media and entertainment and innovation initiatives, as well as core commerce.”

BUSINESS HIGHLIGHTS

In the quarter ended December 31, 2016:

  • Revenue was RMB53,248 million (US$7,669 million), an increase of 54% year-over-year.
    • Revenue from core commerce increased 45% year-over-year to RMB46,576 million (US$6,708 million).
    • Revenue from cloud computing increased 115% year-over-year to RMB1,764 million (US$254 million).
    • Revenue from digital media and entertainment increased 273% year-over-year to RMB4,063 million (US$585 million).
    • Revenue from innovation initiatives and others increased 61% year-over-year to RMB845 million (US$122 million).
  • Mobile MAUs on our China retail marketplaces reached 493 million in December, an increase of 43 million over September, while annual active buyers on our China retail marketplaces reached 443 million, an increase of 4 million from the 12-month period ended in September.
  • The number of paying customers of our cloud computing business grew to 765,000 from 651,000 in the previous quarter. Operating loss from cloud computing was RMB339 million (US$49 million) and adjusted EBITA loss was RMB92 million (US$13 million).
  • Net income was RMB17,157 million (US$2,471 million), income from operations was RMB20,664 million (US$2,976 million) and adjusted EBITDA was RMB27,021 million (US$3,892 million). Operating margin was 39%, adjusted EBITDA margin was 51% and adjusted EBITA margin for core commerce was 64%.
  • Diluted EPS was RMB6.94 (US$1.00) and non-GAAP diluted EPS was RMB9.02 (US$1.30).
  • Net cash provided by operating activities was RMB37,416 million (US$5,389 million) and non-GAAP free cash flow was RMB34,122 million (US$4,915 million).

1

For the quarter ended December 31, 2016, net cash provided by operating activities was RMB37,416 million (US$5,389 million) and non-GAAP free cash flow was RMB34,122 million (US$4,915 million).
   

BUSINESS AND STRATEGIC UPDATES

Core Commerce

Taobao – personalized data powering higher consumer engagement. Taobao App’s highly relevant and engaging content continues to drive mobile user growth, with our China retail marketplaces adding 43 million MAUs from September to 493 million MAUs in December. Consumers are engaging with our Taobao platform to experience social commerce and obtain consumer information, reflecting user behavior beyond conducting transactions and demonstrating the substantial marketing value of the platform to brands and merchants. By leveraging data to deliver a personalized experience, we continue to drive increasing traffic, strong user engagement and higher consumer mind share.

Tmall – another record breaking 11.11. The 2016 11.11 Global Shopping Festival was another record breaking event. The success of the festival demonstrated the scale, capabilities and strength of the infrastructure we have been building for future commerce. We recorded RMB120.7 billion (US$17.4 billion) in GMV settled through Alipay on our marketplaces, of which 82% was generated from mobile.  Our technology infrastructure processed around 175,000 peak orders per second. Cainiao Network helped merchants and third-party logistics companies process over 657 million delivery orders with a higher level of consumer satisfaction than prior years.

International expansion – laying the foundation for long-term growth. Our cross-border and international consumer businesses saw robust growth during the quarter. These businesses comprise Tmall Global for cross-border imports, AliExpress for cross-border exports, and Lazada for the Southeast Asia market. We continue to see opportunities in overseas markets where we bring a unique value proposition to merchants and consumers. For instance, Tmall Global provides global brands, retailers, small businesses and farmers from economies around the world access to over 440 million Chinese consumers on our platform. Further, we continue to invest in the commerce infrastructure in emerging markets, such as Southeast Asia, to expand merchant and consumer opportunities and capture the long-term growth potential of cross-border and local trade.

Achievements in anti-counterfeiting. More than 100,000 brands do business on Alibaba’s marketplaces – a clear demonstration of the trust that they place in us. Over the past year, our anti-counterfeiting initiatives have produced effective results and more brands have decided to proactively work with us in joint anti-counterfeiting initiatives. Recently we formed a coalition with about twenty major brands to leverage our big data capabilities to crack down on counterfeiting. These brands include Louis Vuitton, Samsung, Swarovski, Mars, Inc. and Ford Motor Company.

Cloud Computing

Paying customers for cloud computing grew to 765,000, an increase of about 114,000 from last quarter, driving revenue to RMB1,764 million (US$254 million) during the quarter, reflecting a 115% year-over-year growth. Alibaba Cloud’s top priority remains expanding market leadership. We will continue to invest in customers through more cost effective solutions for standard products as well as developing and deploying more sophisticated value-added products and services.

Alibaba Cloud expanded its global footprint with new data center launches in Japan, Germany, the Middle East and Australia during the quarter. Its international expansion will provide customers worldwide with greater access to its diverse offerings, including elastic computing, data storage and cloud security services.

Digital Media and Entertainment

In November, we consolidated the Digital Media and Entertainment businesses under a single management team to realize greater synergies within the segment and with other Alibaba businesses. For instance, Youku Tudou participated in the 11.11 Global Shopping Festival for the first time and showcased live streaming of the Countdown Gala Celebration to millions of users on the Youku Tudou App.

We maintained our competitive position in digital entertainment in China through a combination of licensed premium content as well as self-produced and joint-produced programming, achieving synergies across our entertainment platforms on both mobile and living room screens.

New Retail Strategy and Investments

“New Retail” leverages our substantial consumer reach and our capabilities in big data technology to transform traditional retail by addressing the increasingly sophisticated needs of consumers and improving efficiency across the entire value chain of brands and retailers. Our New Retail strategy will enable us to tap into the entire US$4.8 trillion retail sector in China by eliminating the distinction between online and offline commerce, as Chinese consumers today engage in commerce anywhere, any time with the help of mobile phones. To this end, we are partnering with brick-and-mortar retailers in different verticals through equity investments and deeper operational integration, which will allow us to deploy our proprietary omni-channel solutions to create a seamless shopping experience for consumers.

Sanjiang Shopping Club – In November 2016, we agreed to invest RMB2.1 billion (US$302 million) for a 35% equity stake (including shares and convertible bonds) in Sanjiang Shopping Club, one of the leading neighborhood grocery chains in Zhejiang Province. Enabled by Alibaba’s technology solutions, Sanjiang plans to pilot a new shopping format at its local grocery stores to enhance the shopping experience for fresh and perishable products.

Intime Retail Group – On January 10, 2017, we announced an offer to acquire a controlling stake in Intime Retail Group, a leading department store operator in China with 29 department stores and 17 shopping malls. We expect that the maximum amount of cash required for the transaction will be approximately HK$19.8 billion (US$2.6 billion).

Olympic Partnership

On January 19, 2017, we and the International Olympic Committee launched a historic long-term partnership through 2028. Joining The Olympic Partner (TOP) worldwide sponsorship program, Alibaba has become the official “Cloud Services” and “E-Commerce Platform Services” Partner.

Updates on Equity Investees and Others

Cainiao Network – data enabled logistics. Cainiao Network’s data-driven approach enables it to power its delivery network with improving scale and efficiency. During the December quarter, Cainiao Network’s platform enabled the delivery of an average of 57 million packages per day.

Koubei – Local Services. Koubei, our local services joint venture with Ant Financial, generated RMB73.1 billion (US$10.5 billion) in payment volume transacted through Alipay during the December quarter, representing a 52% increase over the prior quarter. In January 2017, Koubei completed a US$1.1 billion equity financing led by Silver Lake, CDH Investments, Yunfeng Capital and Primavera Capital. This transaction provides Koubei with a strong capital base to execute on its aggressive growth strategy.

Positive Social Impact. Through volunteer work by Alibaba employees, we recently created the “Reunion” platform to help locate missing children across China. The Reunion platform is an ecosystem of connected Alibaba and partner mobile apps that provides the infrastructure for law enforcement authorities to receive crowd-sourced information from the public in order to more effectively conduct searches for missing children. Participating mobile apps include our Taobao App and AutoNavi map app as well as Weibo. From the implementation of the platform in mid-2016 to the end of the year, law enforcement authorities have successfully located 611 missing children based on issued 648 alerts broadcasted to the ecosystem of mobile users (a 94% success rate).

Cash Flow from Operating Activities and Free Cash Flow

In the December quarter, net cash provided by operating activities was RMB37,416 million (US$5,389 million). We generated RMB34,122 million (US$4,915 million) in non-GAAP free cash flow, representing 44% year-over-year growth.

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