Search
Sunday 31 January 2016
  • :
  • :

Share of Technology Company Alibaba Group Holding Ltd (NYSE:BABA) States December Quarter 2015 Results

Share of Technology Company Alibaba Group Holding Ltd (NYSE:BABA) States December Quarter 2015 Results

Alibaba Group Holding Ltd (BABA: NYSE)’s mission is to make it easy to do business anywhere. The organization is the biggest online and mobile commerce organization in the world in terms of gross merchandise volume.  The organization stated its financial results for the quarter ended December 31, 2015.

Alibaba Group had an outstanding quarter, reaching a milestone of over 400 million annual active buyers and ongoing our unrivaled leadership in mobile. Our proven ability to deliver an unparalleled consumer experience and to assist merchants attract, engage and retain buyers will drive future growth in our core business,” said Daniel Zhang, Chief Executive Officer of Alibaba Group. “We remain focused on our top planned priorities, counting global imports, rural expansion, increasing our footprint in first-tier Chinese cities and building a world-class cloud computing business.”

“We had excellent results this quarter. We achieved impressive revenue growth as we are increasingly monetizing the user activity on our marketplaces, particularly on mobile devices. In this quarter, revenue grew 32% year-over-year and China retail marketplace revenue grew 35% year-over-year,” said Maggie Wu, Chief Financial Officer of Alibaba Group. “Meanwhile, we generated strong free cash flow of US$3.7 billion this quarter. The fundamental strength of our core business gives us the confidence to invest in our planned priorities.”

Broader value proposition of China retail marketplaces – Our user base in terms of annual active buyers and mobile MAUs showed robust increase in the quarter. By the end of the December quarter, our annual active buyers grew to 407 million and December mobile MAUs grew to 393 million. This increase in users and our continued focus on merchant quality supported high-quality GMV growth of 23% year-over-year to RMB964 billion (US$149 billion) for the quarter, representing an absolute year-over-year improvement of RMB177 billion (US$27 billion).

Newly, consumers come to Taobao Marketplace and Tmall to browse for ideas, look for new trends, receive merchant and product updates, compare products, share shopping experiences and be entertained. Consumer actions on our platforms, such as browsing, reading product news feeds, searching, clicking, bookmarking and basketing, generate valuable data about user intentions. The value of such actions may not be captured by GMV, but the insights offered by these actions assist merchants build their brands, acquire and engage customers and promote sales. Brands and merchants do not merely acquire buyers for a one-time sale on our platform. They build relationships with consumers that deliver lifetime value in the form of repeat purchases and brand loyalty. This lifetime value creation extends beyond the online channel, as brands are also increasingly seeing positive and lasting effects on their entire business. Accordingly, brands are starting to embrace an integrated online and offline strategy, a trend we believe will be a key driver of our online marketing services revenue growth.

Monetization – User growth and rising user engagement on our China retail platforms have become important drivers of our long-term revenue increase as our marketplaces deliver a broader value proposition to sellers in addition to sales generation. As a result, the blended monetization rate of our China retail marketplaces reached 2.98% in the quarter ended December 31, 2015, meaningfully higher than 2.70% in the December 2014 quarter. We have witnessed a positive trend of both revenue per annual active buyer and mobile revenue per mobile user, as illustrated in the table at the end of this declaration and these charts.

We believe improving monetization in the future will be driven by the rising value we create for customers on our platform. A increasing percentage of our China commerce retail revenue will likely come from the monetization of user engagement that assists brands and merchants build long-term relationships with consumers. Accordingly, we expect revenue to grow faster than GMV for the foreseeable future.

Singles Day – The Singles Day shopping festival, which originated on Tmall in 2009, has become the largest shopping day in the world. On November 11, 2015, we attracted over 115 million buyers to our marketplaces and enabled RMB91.2 billion (US$14 billion) in GMV settled through Alipay on our platforms. Our success on Singles Day was a testament to the scalability of our ecosystem. Our platforms processed 467 million delivery orders during a 24-hour period. Our cloud computing technology infrastructure enabled about 140,000 peak transactions processed per second. The ability to manage a surge of more than ten times our normal daily volume demonstrates how Alibaba is redefining the infrastructure for commerce.

Singles Day also meant the realization of our vision to enable shopping anytime, anywhere through mobile. On that day, 95 million mobile users made purchases on Tmall and Taobao Marketplace, demonstrating our unrivaled leadership position in mobile commerce.

Market share gains – We have taken aggressive steps to capture market share in key cities and key categories. In the December quarter, we witnessed strong year-on-year GMV growth in the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen. We established mind-share gains in the first-tier cities through, among other things, Tmall Supermarket, where consumers make high-frequency purchases in groceries and everyday items, supported by delivery services by our logistics partners who offer same day delivery in seven cities and next-day delivery in 88 cities.

In consumer electronics, we leveraged Singles Day to strengthen our value proposition and branding, as 22 million consumers made purchases on Tmall’s electronics channel and we witnessed record-breaking sales of over three million cell phones that day. In big home appliances, we worked with Cainiao and its logistics partners to enhance customer experience by focusing on fast, high-quality delivery and installation services. As a result, Tmall’s large home appliances category has sustained growth that significantly outpaced overall market growth over the past several quarters. The Tmall consumer electronics channel also made exceptional progress in working with merchants that develop innovative “intelligent” devices, enabling the sale of four million smart-home devices during the December quarter. We believe these initiatives have improved Tmall’s position as a leading platform for consumer electronics and established share gains in this competitive category.

Rural Taobao – As of the end of the December quarter, we had a presence in over 12,000 rural villages, where we provide purchasing and delivery services. In 2016 we introduced for the first time the Alibaba Chinese New Year Shopping Festival. Agricultural products from rural China will be showcased and made available to urban consumers via Rural Taobao, encouraging Chinese consumers to buy domestically produced fresh foods and other agricultural products. Presently, Rural Taobao has a presence in nearly all provinces in China.

Cloud computing – In the December quarter, revenue from our cloud computing and Internet infrastructure business continued to grow rapidly to RMB819 million (US$126 million), representing a year-over-year improvement of 126%. Our cloud computing division, AliCloud, has made noteworthy progress in the development of customers, products, technology and an ecosystem of more than 20,000 developers.

International operations – Our globalization strategy is focused on cross-border commerce that allows international brands and retailers to sell online to Chinese consumers. We are assisting international brands, retailers and small businesses recognize the power of the Alibaba platform as a gateway to China consumers. On Singles Day, 30 million active buyers purchased products from over 16,000 international brands. Tmall Global, our channel dedicated to global imports, witnessed 179% year-over-year growth in the December quarter, with more than 200 international brands, counting Coca-Cola, Starbucks, Lululemon and Clarisonic, opening flagship stores on Tmall.

Logistics – We continue to fortify our market leadership in both main cities and rural areas in China. Through our logistics information systems associate Cainiao and its partners, customers enjoy same-day delivery in Beijing, Shanghai, Chengdu, Guangzhou, Hangzhou, Suzhou and Wuhan, and next day delivery was offered in 88 cities in the December quarter, an improvement from 41 cities in the June quarter. Through efficiency gains in dispatch of parcels, inventory planning and data analytics, faster delivery time in 2015 contrast to the previous year has improved customer satisfaction.

Our category specific logistics strategy is bearing fruit, with specialty services that differentiate our shopping experience from that of our competitors. Through Cainiao, we cooperated with RRS, our joint venture with Haier, to improvement warehouse capacity dedicated to big appliances, allowing for more efficient inventory placement strategies for merchants. Integration of Suning’s logistics systems with Cainiao is complete, allowing for inclined parcel tracking and improving customer experience. Suning cooperates with Cainiao to fulfill bulky items for Tmall Supermarket and offers installation and after-sales services through its retail outlets and service locations. In the December quarter, our last-mile delivery partner YTO Express and Best Logistics launched a service that guarantees the delivery time to customers, working closely with Cainiao to define the service standard and integrate data flow to enable delivery efficiency.

DingTalk – We have developed an innovative and fast increasing entrant to the networked communication space, focused on the enterprise sector. We designed DingTalk to improve communication and joint venture among team members and enterprises of various sizes. With the built-in enterprise directory, users can easily initiate chats or conference calls with team members, in addition to secured group chats. DingTalk unifies the tasks of critical communication and joint venture in the work place. As of December 31, 2015, there were over one million enterprises and organizations using DingTalk.

Free Cash Flow – We continue to generate noteworthy free cash flow. Our cash flow allows us planned and operational flexibility to invest in technology and acquire the resources to accomplish our planned objectives. In the December quarter, we generated RMB23,719 million (US$3,662 million) in free cash flow.

Annual active buyers – Our China retail marketplaces had 407 million annual active buyers in the twelve months ended December 31, 2015, contrast to 386 million in the twelve months ended September 30, 2015, representing a net addition of 21 million annual active buyers, and contrast to 334 million in the twelve months ended December 31, 2014, representing an improvement of 22% contrast to the same period in 2014. The growth in annual active buyers was driven by an improvement in users accessing our platforms through mobile devices, which in turn was a result of our ongoing efforts to attract users with strong commercial intent to our mobile e-commerce apps, especially our Mobile Taobao App, and convert them into active buyers with our effective mobile interface. Our active buyers raised throughout China, with continued strong increase in both first-tier and lower tier cities. In addition, both the average number of orders per active buyer and the average number of categories purchased per active buyer raised in the twelve months ended December 31, 2015 contrast to the same period in 2014.

Mobile MAUs – Mobile MAUs on our China retail marketplaces grew to 393 million in the month ended December 31, 2015, contrast to 346 million in the month ended September 30, 2015, representing a net addition of 47 million MAUs over the quarter and a 48% improvement from 265 million in the month ended December 31, 2014. The increase in mobile MAUs in this quarter was primarily due to inclined promotion of our mobile apps.

GMV – GMV transacted on our China retail marketplaces in the quarter ended December 31, 2015 was RMB964 billion (US$149 billion), an improvement of 23% contrast to RMB787 billion in the same quarter of 2014, representing an absolute year-over-year improvement of RMB177 billion (US$27 billion). GMV transacted on Taobao Marketplace in the quarter ended December 31, 2015 was RMB563 billion (US$87 billion), an improvement of 14% contrast to the same quarter of 2014. GMV transacted on Tmall in the quarter ended December 31, 2015 was RMB401 billion (US$62 billion), an improvement of 37% contrast to the same quarter of 2014. The increase of total GMV transacted on our China retail marketplaces was primarily driven by an improvement in the number of active buyers.

Mobile GMV transacted on our China retail marketplaces in the quarter ended December 31, 2015 was RMB651 billion (US$101 billion), an improvement of 99% contrast to the same quarter of 2014. Mobile GMV accounted for 68% of total GMV transacted on our China retail marketplaces in this quarter, contrast to 62% in the quarter ended September 30, 2015 and 42% in the quarter ended December 31, 2014. The increase was driven primarily by an improvement in consumers accessing our platforms through mobile devices and also by an improvement in the level of their spending.

Revenue – Revenue for the quarter ended December 31, 2015 was RMB34,543 million (US$5,333 million), an improvement of 32% contrast to RMB26,179 million in the same quarter of 2014. The improvement was mainly driven by the continued rapid growth of our China commerce retail business.

  • China commerce retail business – Revenue from our China commerce retail business in the quarter ended December 31, 2015 was RMB28,714 million (US$4,433 million), or 83% of total revenue, an improvement of 35% contrast to RMB21,275 million in the same quarter of 2014. Revenue from our China commerce retail business raised at a higher rate than GMV growth on our China retail marketplaces because of the robust growth in online marketing services revenue. The growth was primarily driven by our focus on high-quality merchants and on delivering a broader value proposition to our merchants. This resulted in higher marketing spend by our merchants as we optimized online marketing efficiency and added new online marketing inventory on both mobile and PC interfaces. Commission revenue as a percentage of China commerce retail revenue was 32% in the quarter ended December 31, 2015.
  • Mobile revenue from the China commerce retail business in the quarter ended December 31, 2015 was RMB18,746 million (US$2,894 million), or 65% of our China commerce retail revenue, an improvement of 192% contrast to RMB6,420 million, or 30% of the China commerce retail revenue, in the same quarter of 2014. This year-over-year improvement in mobile revenue in both absolute terms and as a percentage of total revenue from the China commerce retail business was due to an improvement in GMV generated on mobile devices and better monetization of mobile transactions and usage.
  • Our monetization rate was 2.98% in the quarter ended December 31, 2015, contrast to 2.70% in the same quarter of 2014. The mobile monetization rate in the quarter ended December 31, 2015 was 2.88%, contrast to 1.96% in the same quarter of 2014.
  • China commerce wholesale business – Revenue from our China commerce wholesale business in the quarter ended December 31, 2015 was RMB1,162 million (US$179 million), an improvement of 35% contrast to RMB860 million in the same quarter of 2014. The improvement was due to an improvement in average revenue from paying members and an improvement in paying members.
  • International commerce retail business – Revenue from our international commerce retail business in the quarter ended December 31, 2015 was RMB632 million (US$97 million), an improvement of 14% contrast to RMB554 million in the same quarter of 2014. The improvement was primarily due to an improvement in GMV transacted on AliExpress.
  • International commerce wholesale business – Revenue from our international commerce wholesale business in the quarter ended December 31, 2015 was RMB1,430 million (US$221 million), an improvement of 18% contrast to RMB1,209 million in the same quarter of 2014. The improvement was due to growth in revenue generated by the import/export related services offered by OneTouch.
  • Cloud computing and Internet infrastructure business – Revenue from our cloud computing and Internet infrastructure business in the quarter ended December 31, 2015 was RMB819 million (US$126 million), an improvement of 126% contrast to RMB362 million in the same quarter of 2014, driven by the continued rapid growth of our cloud computing business. The growth was primarily due to an improvement in the number of paying customers and also to an improvement in their usage of our cloud computing services counting more complex offerings, such as our content delivery network and database services.
  • Others – Other revenue in the quarter ended December 31, 2015 was RMB1,786 million (US$277 million), contrast to RMB1,919 million in the same quarter of 2014. This result was primarily due to the decrease in revenue from the SME loan business that we transferred to Ant Financial in February 2015, partially offset by the improvement in mobile Internet services revenue offered by our UCWeb and AutoNavi businesses. Not Taking Into Account revenue from the SME loan business from both periods, other revenue would have raised 62% to RMB1,570 million in the quarter ended December 31, 2015 from RMB970 million in the same quarter of 2014.
  • Cost of revenue – Cost of revenue in the quarter ended December 31, 2015 was RMB10,951 million (US$1,691 million), or 32% of revenue, contrast to RMB7,520 million, or 29% of revenue, in the same quarter of 2014. Without the effect of share-based compensation expense, cost of revenue as a percentage of revenue raised in the quarter ended December 31, 2015. This improvement was due primarily to an improvement in costs associated with our new businesses initiatives (mainly our mobile operating system, over-the-top TV services and entertainment) and also to an improvement in traffic acquisition cost as a result of the expansion of our third-party associate marketing program operated by Alimama.
  • Product development expenses – Product development expenses in the quarter ended December 31, 2015 were RMB3,749 million (US$579 million), or 11% of revenue, contrast to RMB3,083 million, or 12% of revenue, in the same quarter of 2014. Without the effect of share-based compensation expense, product development expenses as a percentage of revenue would have reduced in the quarter ended December 31, 2015, which reflected our operating leverage.
  • Sales and marketing expenses – Sales and marketing expenses in the quarter ended December 31, 2015 were RMB3,641 million (US$562 million), or 11% of revenue, contrast to RMB3,021 million, or 12% of revenue, in the same quarter of 2014. Without the effect of share-based compensation expense, sales and marketing expenses as a percentage of revenue would have reduced in the quarter ended December 31, 2015, which reflected our operating leverage.
  • General and administrative expenses – General and administrative expenses in the quarter ended December 31, 2015 were RMB2,500 million (US$386 million), or 7% of revenue, contrast to RMB2,419 million, or 9% of revenue, in the same quarter of 2014. Without the effect of share-based compensation expense, general and administrative expenses as a percentage of revenue in the quarter ended December 31, 2015 would have remained stable contrast to the same quarter of 2014.
  • Share-based compensation expense – Share-based compensation expense comprised in cost and expense items above in the quarter ended December 31, 2015 was RMB4,370 million (US$675 million), or 13% of revenue, contrast to RMB4,313 million, or 16% of revenue, in the same quarter of 2014.

Income from operations – Income from operations in the quarter ended December 31, 2015 was RMB12,434 million (US$1,919 million), or 36% of revenue, an improvement of 33% contrast to RMB9,347 million, or 36% of revenue, in the same quarter of 2014.

Non-GAAP EBITDA and Non-GAAP EBITDA margin – Non-GAAP EBITDA raised by 27% to RMB19,111 million (US$2,950 million) in the quarter ended December 31, 2015, contrast to RMB15,103 million in the same quarter of 2014. Non-GAAP EBITDA margin reduced to 55% in the quarter ended December 31, 2015 from 58% in the same quarter of 2014. We will continue to invest a portion of our free cash flow in new businesses and attained businesses, and the growth of our new investment spending may be higher than our overall revenue growth. A reconciliation of income from operations to non-GAAP EBITDA is comprised at the end of this results declaration.

Interest and investment income, net – Interest and investment income, net in the quarter ended December 31, 2015 was RMB2,944 million (US$455 million), a noteworthy improvement from RMB313 million in the same quarter of 2014. The improvement was primarily due to a gain arising from the sale of our movie-related businesses to Alibaba Pictures, in addition to gains from disposals of certain investments, partially offset by impairment of certain investments recognized during the quarter.

Interest expense – Interest expense in the quarter ended December 31, 2015 was RMB475 million (US$73 million), a decrease of 65% contrast to RMB1,344 million in the same quarter of 2014. Interest expense in the quarter ended December 31, 2014 comprised an RMB830 million one-time charge for financing-related fees as a result of the early repayment of our US$8 billion bank borrowings with proceeds from our issuance of US$8 billion senior unsecured notes. Without this one-time charge, interest expense in the quarter ended December 31, 2014 would have been RMB514 million.

Other income, net – Other income, net in the quarter ended December 31, 2015 was RMB1,607 million (US$248 million), an improvement of 78% contrast to RMB901 million in the same quarter of 2014. The improvement was primarily due to an improvement in exchange gains and an improvement in royalty fees and software technology services fees received from Ant Financial, which were RMB502 million (US$77 million) in the quarter ended December 31, 2015, contrast to RMB411 million in the same quarter of 2014.

Income tax expenses – Income tax expenses in the quarter ended December 31, 2015 were RMB3,559 million (US$549 million), an improvement of 47% contrast to RMB2,429 million in the same quarter of 2014. Our effective tax rate reduced to 22% in the quarter ended December 31, 2015 from 26% in the same quarter of 2014. Not Taking Into Account share-based compensation expense, impairment of goodwill, intangible assets and investments, in addition to other unrealized investment gain/loss, our effective tax rate would have been 16% in the quarter ended December 31, 2015, contrast to 17% in the same quarter of 2014.

Net income and Non-GAAP net income – As a result of the foregoing, our net income in the quarter ended December 31, 2015 was RMB12,456 million (US$1,923 million), an improvement of 108% contrast to RMB5,983 million in the same quarter of 2014. Non-GAAP net income in the quarter ended December 31, 2015 was RMB16,358 million (US$2,525 million), an improvement of 25% contrast to RMB13,115 million in the same quarter of 2014. A reconciliation of net income to non-GAAP net income is comprised at the end of this results declaration.

Net income attributable to ordinary shareholders – Net income attributable to ordinary shareholders in the quarter ended December 31, 2015 was RMB12,498 million (US$1,929 million), an improvement of 111% contrast to RMB5,936 million in the same quarter of 2014.

Diluted EPS and non-GAAP diluted EPS – Diluted EPS in the quarter ended December 31, 2015 was RMB4.90 (US$0.76) on a weighted average of 2,550 million diluted shares outstanding during the quarter, an improvement of 114% contrast to RMB2.29 on a weighted average of 2,588 million diluted shares outstanding during the same quarter of 2014. Non-GAAP diluted EPS in the quarter ended December 31, 2015 was RMB6.43 (US$0.99), an improvement of 27% contrast to RMB5.05 in the same quarter of 2014. A reconciliation of diluted EPS to non-GAAP diluted EPS is comprised at the end of this results declaration.

Cash, cash equivalent and short-term investments – As of December 31, 2015, cash, cash equivalents and short-term investments were RMB118,323 million (US$18,266 million), contrast to RMB105,691 million as of September 30, 2015.

Cash flow from operating activities and free cash flow – Net cash offered by operating activities in the quarter ended December 31, 2015 was RMB26,230 million (US$4,049 million), an improvement of 35% contrast to RMB19,408 million in the same quarter of 2014. Free cash flow, a non-GAAP measurement of liquidity, in the quarter ended December 31, 2015 was RMB23,719 million (US$3,662 million), contrast to RMB22,924 million in the same quarter of 2014. A reconciliation of net cash offered by operating activities to free cash flow is comprised at the end of this results declaration.

Net cash used in investing activities – During the quarter ended December 31, 2015, net cash used in investing activities of RMB14,271 million (US$2,203 million) mainly comprised investment and acquisition activities of RMB14,074 million (US$2,173 million) primarily in media, emerging technologies, ecommerce, travel and local services, in addition to capital expenditures of RMB4,896 million (US$756 million), which comprised cash outflow for acquisition of land use /files/includes/todays-hot-stories-pfizer-nysepfe-emc-corporation-nyseemc-att-nyset-spirit-realty-capital-nysesrc-154687-right.jss and construction in progress of RMB2,531 million (US$391 million).