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Alibaba Group Announces December Quarter 2020 Results

HANGZHOU, China--(BUSINESS WIRE)--Alibaba Group Holding Limited (NYSE: BABA and HKEX: 9988, “Alibaba” or “Alibaba Group”) today announced its financial results for the quarter ended December 31, 2020.

“China was the only major economy to achieve positive GDP growth last year. Thanks to the rapid recovery of China’s economy, Alibaba had another very healthy quarter,” said Daniel Zhang, Chairman and Chief Executive Officer of Alibaba Group. “We achieved another successful 11.11 Global Shopping Festival by stimulating consumption, satisfying consumer demands and supporting the business recovery of merchants in response to the impact of the pandemic. Our cloud computing business continues to expand market leadership and show strong growth, reflecting the massive potential of China’s nascent cloud computing market as well as our years of investment in technology. Looking ahead, we are confident that we will continue to create value for our customers, lead with innovation and make our contributions to society.”

“We delivered another solid quarter, with revenue growth of 37% year-over-year and adjusted EBITDA up 22% year-over-year, while our strong free cash flow enabled us to further invest in strategic areas,” said Maggie Wu, Chief Financial Officer of Alibaba Group. “We are pleased that our Alibaba Cloud business achieved positive adjusted EBITA during the quarter and Cainiao Network was operating cash flow positive. These progresses reflect our long-term approach to organically incubate and expand businesses from launch to profitability.”

BUSINESS HIGHLIGHTS

In the quarter ended December 31, 2020:

  • Revenue was RMB221,084 million (US$33,883 million), an increase of 37% year-over-year.
  • Annual active consumers on our China retail marketplaces reached 779 million for the twelve months period ended December 31, 2020, an increase of 22 million from the twelve months period ended September 30, 2020.
  • Mobile MAUs on our China retail marketplaces reached 902 million in December 2020, an increase of 21 million over September 2020.
  • Income from operations was RMB49,002 million (US$7,510 million), an increase of 24% year-over-year. Adjusted EBITDA, a non-GAAP measurement, increased 22% year-over-year to RMB68,380 million (US$10,480 million). Adjusted EBITA, a non-GAAP measurement, increased 21% year-over-year to RMB61,253 million (US$9,387 million).
  • Net income attributable to ordinary shareholders was RMB79,427 million (US$12,173 million), and net income was RMB77,977 million (US$11,950 million). Non-GAAP net income was RMB59,207 million (US$9,074 million), an increase of 27% year-over-year.
  • Diluted earnings per ADS was RMB28.85 (US$4.42) and non-GAAP diluted earnings per ADS was RMB22.03 (US$3.38), an increase of 21% year-over-year. Diluted earnings per share was RMB3.61 (US$0.55 or HK$4.29) and non-GAAP diluted earnings per share was RMB2.75 (US$0.42 or HK$3.27), an increase of 21% year-over-year.
  • Net cash provided by operating activities was RMB103,208 million (US$15,817 million) and non-GAAP free cash flow was RMB96,210 million (US$14,745 million).

Reconciliations of GAAP measures to non-GAAP measures presented above are included at the end of this results announcement.

BUSINESS AND STRATEGIC UPDATES

Core commerce

China Retail Marketplaces – comprehensive product supply and engaging user experience drive consumer growth and higher purchase frequency

Consumers

In December 2020, our China retail marketplaces had 902 million mobile MAUs. Annual active consumers on our China retail marketplaces was 779 million for the twelve months ended December 31, 2020, representing a quarterly net increase of 22 million. We continue to grow consumer mindshare and wallet share among our users, as reflected in higher purchase frequency from all city tiers.

We continued to increase penetration in less developed areas, reflecting our success in broadening product offering to meet diverse demand. One of the key drivers of our acquisition of new users and consumers in less developed areas is Taobao Deals (???). During the quarter, Taobao Deals achieved rapid user growth by continuing to expand its value-for-money product supply and focusing on user acquisition initiatives. Annual active consumers of Taobao Deals reached over 100 million for the twelve months period ended December 31, 2020 and mobile MAUs of Taobao Deals also reached over 100 million in December 2020.

Product Supply

Tmall online physical goods GMV, excluding unpaid orders, grew 19% year-over-year during the December 2020 quarter, supported primarily by rapid growth of the fast-moving consumer goods (FMCG) and home furnishing categories, while growth of the consumer electronics category accelerated year-over-year. The year-over-year growth rate of Taobao online physical goods GMV, excluding unpaid orders, was robust for the December 2020 quarter, primarily driven by solid growth of the apparel and accessories, home furnishing and consumer electronics categories.

We celebrated the twelfth annual 11.11 Global Shopping Festival in the quarter, featuring a number of key changes in order to better serve brands and enhance consumer experience. We extended what originally was a one-day festival occurring on November 11 to 11 days, running from November 1 through November 11, 2020. This change created greater opportunities for merchants and brands to increase sales and build engagement and relationships with their customers. The extended festival also enhanced the overall shopping experience of consumers by reducing pressure on logistics demand and ensuring timely order delivery. The new approach yielded strong results, attracting a total of over 250,000 brands and 5 million merchants and generating RMB498.2 billion (US$74.1 billion) in GMV, excluding unpaid orders, during the 11-day campaign, an increase of 26% compared to the same timeframe in 2019. Over 470 brands achieved more than RMB100 million in sales, showcasing the virtuous cycle effects of digital transformation across our ecosystem. The shopping festival was also an opportunity for brands to launch new products and build brand awareness. During the festival this year, there were approximately 30 million new product launches and GMV, excluding unpaid orders, for new products grew strongly by 35% year-over-year.

Tmall Global is the premier platform through which international brands and merchants enter the China market online and build brand awareness. The number of brands and merchants on the Tmall Global platform as of December 31, 2020 grew over 60% year-over-year. In order to better connect international brands with Chinese consumers, Tmall Global continued to innovate in its cross-border logistics solutions. Brands that do not have a physical presence in China can now store inventory in our warehouses located in their home markets, and Tmall Global facilitates export to China when orders are placed. This service leverages the capabilities and economies of scale of Alibaba’s logistics infrastructure to enable brands to quickly enter the China market while reducing sales uncertainty and controlling costs. Purchases of products warehoused and shipped from overseas by Tmall Global grew rapidly, achieving triple-digit year-over-year growth in GMV, excluding unpaid orders, during the December quarter.

Engagement

During the December quarter, we introduced the Follow (??) and Entertain (??) features on the front-page of the Taobao app, which further improved user engagement with brands, merchants, key opinion leaders (KOLs), vloggers and content creators. On the Follow landing page, consumers can view new products and promotions offered by the stores they follow or in which they have memberships. This feature is an effective method to enhance consumer loyalty with quality merchants and brands. By browsing the Entertain channel, consumers can learn about the latest consumption and lifestyle trends as well as follow their favorite KOLs, vloggers and content creators. During the quarter, page views enabled through Taobao front page recommendations grew strongly by over 90% year-over-year.

Taobao Live is an indispensable branding, marketing and distribution tool that allows consumers to directly interact with brands, merchants and KOLs through livestreaming sessions. Our own businesses, such as Juhuasuan, Ele.me and Fliggy, are also increasingly leveraging Taobao Live to attract and engage with consumers. Taobao Live generated over RMB400 billion in GMV for the twelve months ended December 31, 2020.

New Retail – gaining market share in the grocery category using multi-banner and multi-format strategy

In October 2020, we completed our acquisition of a controlling stake in Sun Art Retail Group Limited (“Sun Art”), a leading hypermarket operator in China, and started consolidating Sun Art’s results in our financial statements. The increased investment in Sun Art will allow us to digitalize its offline traffic, synchronize online and offline channel inventory, broaden supply chain network and increase online purchases. In the quarter ended December 31, 2020, online purchases, a majority of which was driven by Alibaba’s digital technology, represented 24% of Sun Art’s sales of goods.

Our self-operated grocery retail chain Freshippo (known as “Hema” in Chinese) achieved healthy double-digit same-store sales growth during the quarter as we continued to optimize its product supply and improve customer experience. As of December 31, 2020, we self-operated 246 Freshippo stores in China. Freshippo will continue to adopt a multi-format and multi-banner expansion strategy by developing new shopping formats and scenarios for consumption of food and beverage and general merchandise. During the quarter, Freshippo opened its first “X Membership” warehouse store in Shanghai, which features high-quality products at competitive prices that can be purchased only by store members.

Local Consumer Services – fast and high-quality growth of merchants and consumers

Demand for digitalization in the restaurant and service industry remains strong after the impact of the COVID-19 pandemic in China. Ele.me has continued to capture this market opportunity, attracting high-quality merchants by providing digital technology solutions and other value-added services. The number of registered merchants grew over 30% year-over-year as of December 31, 2020.

Ele.me’s average daily number of paying members in the December quarter grew about 30% year-over-year given the successful upgrade of our membership program and continued onboarding of high-quality merchants. As part of our New Retail strategy, Ele.me continues to expand its on-demand delivery services to cover a wider range of products in categories such as fresh produce and grocery. As of December 31, 2020, the number of non-restaurant registered merchants enabled by Ele.me increased by over 80% year-over-year.

Cainiao Network – improving efficiency across the Alibaba ecosystem and the logistics industry in China and internationally

In the December quarter, Cainiao Network revenue grew 51% year-over-year to RMB11,360 million (US$1,741 million), primarily due to the increase in volume of orders fulfilled from our fast growing cross-border and international commerce retail businesses. Cainiao had positive operating cash flow during the quarter.

Cainiao Network continued to expand both its domestic services and global smart logistics infrastructure by deepening integration with logistics partners as well as offering more products and services. In China, Cainiao and its partners processed over 2.3 billion orders during the 11.11 Global Shopping Festival while continuing to improve delivery time to enhance consumer experience. Internationally, Cainiao and its partners continued to invest in smart logistics infrastructure to serve our global merchants and to help alleviate logistics capacity constraints caused by the COVID-19 pandemic. In December 2020, Cainiao deployed more than 200 international chartered cargo flights for our AliExpress business, which resulted in improved fulfilment efficiency for AliExpress orders and a reduction of average delivery time by 3.5 days for order deliveries from China to international markets.

International – consistent strong growth in Southeast Asia and growth recovery of AliExpress

Lazada – Our Southeast Asian e-commerce platform Lazada continued to achieve robust growth in both buyers and sellers, benefiting from acceleration of digitalization across industries in Southeast Asia. Lazada recorded another quarter of triple-digit year-over-year order growth despite new waves of the COVID-19 pandemic in many markets where it operates.

AliExpress – Despite logistics disruptions caused by the COVID-19 pandemic in many markets where it operates, AliExpress, in partnership with Cainiao, continued to invest and upgrade its global logistics infrastructure to enhance its cross-border delivery capabilities and efficiency. These investments have supported an ongoing growth recovery since the trough in the March 2020 quarter. Excluding the Russia joint venture business, growth in GMV, excluding unpaid orders, has recovered to a pre-COVID pandemic level in the December quarter.

Cloud Computing

Alibaba Cloud empowers the digital transformation of enterprises by providing comprehensive technology solutions and services in the cloud for a wide range of industries. In the December quarter, cloud computing revenue grew 50% year-over-year to RMB16,115 million (US$2,470 million), primarily driven by robust growth in revenue from customers in the Internet and retail industries and the public sector. For the first time, Alibaba Cloud achieved positive adjusted EBITA during the quarter due to the realization of economies of scale.

During the 11.11 Global Shopping Festival, Alibaba Cloud provided a highly scalable, reliable and secure public cloud infrastructure, which at its peak processed 583,000 orders per second. Since we migrated our e-commerce businesses onto the public cloud a year ago, these businesses are now able to seamlessly create, upgrade and deploy on a cloud native approach; and this capability was especially important during the festival, helping us to improve operating efficiency and ensure business continuity.

Alibaba Cloud continues to invest in research and development of leading cloud technologies to help our customers undertake digital transformation and enable the growth of their businesses. Our proprietary technologies have consistently won recognition from leading research and advisory organizations such as Gartner and Forrester. For example, according to Gartner’s November 2020 report, among the large-scale global cloud providers, Alibaba Cloud is the only Chinese company with the Leader ranking for database management system under Gartner’s Magic Quadrant measurement.

Digital Media and Entertainment

Youku maintained its strong focus on providing a superior user experience and blockbuster content in a wide range of genres. During the quarter, Youku’s average daily subscriber base increased around 30% year-over-year, driven by the appeal of its original content and continued contribution from the 88VIP membership program.

Alibaba Pictures continued its solid track record in content investment and distribution. For example, Alibaba Pictures invested in and distributed the top three grossing films during the three-day New Year holiday in China, which accounted for over 80% of China box office sales during the period according to Beacon Box Office data. Alibaba Pictures’ popular original dramas, such as Professional Single, also contributed to Youku’s strong subscription growth during the quarter. In addition, Alibaba Pictures enhanced the production capabilities of popular original dramas that are exclusively featured on Youku and increased IP commercialization by content owners on our online marketplaces.

We continued to improve the operational efficiency of our digital media and entertainment businesses through disciplined investment in content and production capability. During the quarter, adjusted EBITA loss for the digital media and entertainment segment narrowed year-over-year.

Cash Flow from Operating Activities and Free Cash Flow

In the December 2020 quarter, net cash provided by operating activities was RMB103,208 million (US$15,817 million), an increase of 7% compared to RMB96,505 million in the same quarter of 2019. Free cash flow, a non-GAAP measurement of liquidity, increased by 23% to RMB96,210 million (US$14,745 million), from RMB78,279 million in the same quarter of 2019, mainly due to our robust profit growth. A reconciliation of net cash provided by operating activities to free cash flow is included at the end of this results announcement.

Share Repurchase

On December 28, 2020, we announced that our board of directors authorized an upsize of our share repurchase program from US$6 billion to US$10 billion, for a two-year period through the end of 2022. During the quarter ended December 31, 2020, we repurchased approximately 540,000 of our ADSs (or approximately 4.3 million of our ordinary shares) for approximately US$118 million under the share repurchase program. As of December 31, 2020, we had approximately 21.7 billion ordinary shares (equivalent to approximately 2.71 billion ADSs) issued and outstanding.

Anti-monopoly Investigation

On December 24, 2020, Alibaba Group received a notice of an investigation from the State Administration for Market Regulation (“SAMR”) that it had commenced an investigation pursuant to the PRC Anti-monopoly Law. The investigation is ongoing and we are fully cooperating with the SAMR. We have established a special taskforce with leaders from our relevant business units to conduct internal reviews. We will continue to actively communicate with the SAMR on compliance with regulatory requirements. We will further update the market when the investigation is concluded.

Update on Ant Group

On November 3, 2020, Ant Group announced the suspension of its proposed dual listings and initial public offering on the Shanghai Stock Exchange STAR board and the Hong Kong Stock Exchange. Due to recent significant changes in the Fintech regulatory environment in China, Ant Group is in the process of developing its rectification plan, which will need to go through the relevant regulatory procedures. Therefore, Ant Group’s business prospects and IPO plans are subject to substantial uncertainties. Currently, we are unable to make a complete and fair assessment of the impact that these changes and uncertainties will have on Alibaba Group. We will update the market once Ant Group has completed the relevant regulatory procedures for its rectification plan.

KEY OPERATIONAL METRICS*

 

December 31,

 

September 30,

 

December 31,

 

Net adds

2019

 

2020

 

2020

 

YoY

 

QoQ

China Commerce Retail:

 

 

 

 

 

Annual active consumers(1) (in millions)

711

757

779

68

22

Mobile monthly active users (MAUs)(2) (in millions)

824

881

902

78

21

_____________________

*

For definitions of terms used but not defined in this results announcement, please refer to our annual report for the fiscal year ended March 31, 2020.

(1)

For the twelve months ended on the respective dates.

(2)

For the month ended on the respective dates.

DECEMBER QUARTER SUMMARY FINANCIAL RESULTS

 

Three months ended December 31,

 

 

 

2019

 

2020

 

 

 

RMB

 

RMB

 

US$(1)

 

YoY %

Change

 

(in millions, except percentages and per share amounts)

 

 

 

 

 

Revenue

161,456

 

221,084

 

33,883

37

%

 

 

 

 

 

Income from operations

39,560

 

49,002

 

7,510

24

%

Operating margin

25

%

22

%

 

 

Adjusted EBITDA(2)

55,880

 

68,380

 

10,480

22

%

Adjusted EBITDA margin(2)

35

%

31

%

 

 

Adjusted EBITA(2)

50,662

 

61,253

 

9,387

21

%

Adjusted EBITA margin(2)

31

%

28

%

 

 

 

 

 

 

 

Net income

50,132

 

77,977

 

11,950

56

%(3)

Net income attributable to ordinary shareholders

52,309

 

79,427

 

12,173

52

%(3)

Non-GAAP net income(2)

46,493

 

59,207

 

9,074

27

%

 

 

 

 

 

Diluted earnings per share(4)

2.44

 

3.61

 

0.55

48

%(3)

Diluted earnings per ADS(4)

19.55

 

28.85

 

4.42

48

%(3)

Non-GAAP Diluted earnings per share(2) (4)

2.27

 

2.75

 

0.42

21

%

Non-GAAP Diluted earnings per ADS(2) (4)

18.19

 

22.03

 

3.38

21

%

_____________________

(1)

This results announcement contains translations of certain Renminbi (“RMB”) amounts into U.S. dollars (“US$”) and Hong Kong dollars (“HK$”) for the convenience of the reader. Unless otherwise stated, all translations of RMB into US$ were made at RMB6.5250 to US$1.00, the exchange rate on December 31, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board, and all translations of RMB into HK$ were made at RMB0.84164 to HK$1.00, the middle rate on December 31, 2020 as published by the People’s Bank of China. The percentages stated in this announcement are calculated based on the RMB amounts and there may be minor differences due to rounding.

(2)

See the sections entitled “Information about Segments,” “Non-GAAP Financial Measures” and “Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures” for more information about the non-GAAP measures referred to within this results announcement.

(3)

The year-over-year increase was mainly due to an increase in the net gain arising from increases in the market prices of our equity investments in publicly-traded companies in the quarter ended December 31, 2020.

(4)

Each ADS represents eight ordinary shares.

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, 2020

 

 

Core

commerce

 

Cloud

computing

Digital media

and

entertainment(1)

Innovation

initiatives

and others(1)

 

 

Unallocated(2)

 

 

Consolidated

 

RMB

RMB

RMB

RMB

RMB

RMB

US$

 

(in millions, except percentages)

Revenue

195,541

 

16,115

 

8,079

 

1,349

 

 

221,084

 

33,883

 

 

 

 

 

 

 

 

 

Income (Loss) from operations

59,513

 

(2,044

)

(2,387

)

(3,454

)

(2,626

)

49,002

 

7,510

 

Add: Share-based compensation expense

4,269

 

2,063

 

770

 

1,439

 

538

 

9,079

 

1,391

 

Add: Amortization of intangible assets

2,855

 

5

 

228

 

23

 

61

 

3,172

 

486

 

 

 

 

 

 

 

 

 

Adjusted EBITA

66,637

(3)

24

 

(1,389

)

(1,992

)

(2,027

)

61,253

 

9,387

 

Adjusted EBITA margin

34

%

0

%

(17

)%

(148

)%

28

%

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2019

 

 

Core

commerce

 

Cloud

computing

Digital media

and

entertainment(1)

Innovation

initiatives

and others(1)

 

 

Unallocated(2)

 

 

Consolidated

 

RMB

RMB

RMB

RMB

RMB

RMB

 

(in millions, except percentages)

Revenue

141,475

 

10,721

 

8,028

 

1,232

 

 

161,456

 

 

 

 

 

 

 

 

 

Income (Loss) from operations

51,347

 

(1,822

)

(4,094

)

(2,722

)

(3,149

)

39,560

 

 

Add: Share-based compensation expense

3,863

 

1,460

 

364

 

931

 

1,212

 

7,830

 

 

Add: Amortization of intangible assets

2,865

 

6

 

330

 

23

 

48

 

3,272

 

 

 

 

 

 

 

 

 

Adjusted EBITA

58,075

 

(356

)

(3,400

)

(1,768

)

(1,889

)

50,662

 

 

Adjusted EBITA margin

41

%

(3

)%

(42

)%

(144

)%

31

%

_____________________

(1)

Beginning on April 1, 2020, we reclassified the results of our self-developed online games business, which was previously reported under the innovation initiatives and others segment, to the digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.

(2)

Unallocated expenses primarily relate to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.

(3)

Marketplace-based core commerce adjusted EBITA for the quarter ended December 31, 2020 was RMB73,327 million (US$11,238 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.

Contacts

Investor Relations Contact:
Rob Lin

[email protected]

Media Contacts:
Brion Tingler

[email protected]

Cathy Yan

[email protected]

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