Press release

Alibaba Group Announces March Quarter and Full Fiscal Year 2019 Results

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Alibaba Group Holding Limited (NYSE: BABA) today announced its financial
results for the quarter and fiscal year ended March 31, 2019.

“More and more, Alibaba is becoming synonymous with everyday consumption
in China, growing our base to 654 million annual active consumers and
extending our penetration in less-developed cities,” said Daniel Zhang,
Chief Executive Officer of Alibaba Group. “Our cloud and data technology
and tremendous traction in New Retail have enabled us to continuously
transform the way businesses operate in China and other emerging
markets, which will contribute to our long-term growth.”

“We delivered another strong quarter and excellent fiscal year, led by
fiscal year revenue growth of 51% as well as robust user growth and
engagement across our ecosystem. Excluding the effects of consolidating
acquired businesses, revenue would have increased by 39%
year-over-year,” said Maggie Wu, Chief Financial Officer of Alibaba
Group. “Over the years, our steady profit growth and cash flow have
enabled us to strengthen our core business, invest in new businesses and
create unique value for our customers. These investments have expanded
our total addressable market and positioned us well for long-term
growth. Looking ahead to fiscal 2020, we expect revenue to be over
RMB500 billion, reflecting our confidence and positive momentum going
forward.”

BUSINESS HIGHLIGHTS

In the quarter ended March 31, 2019:

  • Revenue was RMB93,498 million (US$13,932 million), an increase
    of 51% year-over-year.
  • Annual active consumers on our China retail marketplaces
    reached 654 million, an increase of 18 million from the 12-month
    period ended December 31, 2018.
  • Mobile MAUs on our China retail marketplaces reached 721
    million in March 2019, an increase of 22 million over December 2018.
  • Income from operations was RMB8,765 million (US$1,306 million),
    a decrease of 5% year-over-year mainly due to our US$250 million
    settlement of a U.S. federal class action lawsuit. Adjusted EBITDA
    increased 29% year-over-year to RMB25,166 million (US$3,750 million).
  • Adjusted EBITA for core commerce was RMB27,484 million
    (US$4,095 million), an increase of 24% year-over-year. Our marketplace-based
    core commerce adjusted EBITA
    (see definition at the end of this
    results announcement), a non-GAAP measurement, increased 38%
    year-over-year to RMB34,688 million (US$5,169 million).
  • Net income attributable to ordinary shareholders was RMB25,830
    million (US$3,849 million), and net income was RMB23,379
    million (US$3,484 million). Non-GAAP net income was RMB20,056
    million (US$2,988 million), an increase of 42% year-over-year.
  • Diluted EPS was RMB9.84 (US$1.47) and non-GAAP diluted EPS
    was RMB8.57 (US$1.28), an increase of 50% year-over-year.
  • Net cash provided by operating activities was RMB18,553 million
    (US$2,764 million) and non-GAAP free cash flow was RMB10,714
    million (US$1,596 million).

In the fiscal year ended March 31, 2019:

  • Revenue was RMB376,844 million (US$56,152 million), an increase
    of 51% year-over-year. Excluding the effects of consolidating acquired
    businesses, revenue would have increased by 39% year-over-year.
  • Annual active consumers on our China retail marketplaces
    reached 654 million, an increase of 102 million from the 12-month
    period ended March 31, 2018.
  • Mobile MAUs on our China retail marketplaces reached 721
    million in March 2019, an increase of 104 million over March 2018.
  • GMV transacted on our China retail marketplaces was RMB5,727
    billion (US$853 billion) for fiscal year 2019, representing a
    year-over-year growth rate of 19%. Excluding unpaid orders, total physical
    goods GMV
    from our China retail marketplaces grew 25%
    year-over-year, Tmall physical goods GMV increased 31%
    year-over-year and Taobao physical goods GMV increased 19%
    year-over-year.
  • Income from operations was RMB57,084 million (US$8,506 million)
    and adjusted EBITDA increased 15% year-over-year to RMB121,943
    million (US$18,170 million);
  • Adjusted EBITA for core commerce was RMB136,167 million
    (US$20,290 million), an increase of 19% year-over-year. Our marketplace-based
    core commerce adjusted EBITA
    , a non-GAAP measurement, increased
    31% year-over-year to RMB161,589 million (US$24,078 million).
  • Net income attributable to ordinary shareholders was RMB87,600
    million (US$13,053 million) and net income was RMB80,234
    million (US$11,955 million). Non-GAAP net income was RMB93,407
    million (US$13,918 million), an increase of 12% year-over-year.
  • Diluted EPS was RMB33.38 (US$4.97) and non-GAAP diluted EPS
    was RMB38.40 (US$5.72), an increase of 17% year-over-year.
  • Net cash provided by operating activities was RMB150,975
    million (US$22,496 million) and non-GAAP free cash flow was
    RMB104,478 million (US$15,568 million).

BUSINESS AND STRATEGIC UPDATES

Core Commerce

Our Core Commerce segment delivered robust revenue growth of 51%
year-over-year in fiscal year 2019. The strong performance of the Core
Commerce segment was primarily driven by:

  • effective user acquisition and penetration into less developed cities;
  • solid revenue growth of China retail marketplaces reflecting higher
    user engagement driving improving click-through rate and better
    purchase conversion; and
  • expansion of our total addressable market by investing in local
    consumer services and New Retail businesses that captured additional
    consumer wallet share and improved user loyalty.

China Retail – Solid increase in annual active users catalyzes GMV
growth; improved merchant sentiment in allocating marketing spend.

In March 2019, our China retail marketplaces had 721 million mobile
MAUs, representing an annual and quarterly net increase of 104 million
and 22 million, respectively. Annual active consumers on our China
retail marketplaces was 654 million for the 12 months ended March 31,
2019, representing an annual and quarterly net increase of 102 million
and 18 million, respectively. This robust growth reflects successful
user acquisition programs, such as referrals through the Alipay app, and
has been a leading indicator of increased consumption activities on our
platforms. In fiscal year 2019, more than 70% of the increase in annual
active consumers was from less developed cities.

During fiscal year 2019, our China retail marketplaces recorded total
GMV of RMB5,727 billion (US$853 billion), up 19% year-over-year,
primarily driven by an increase in the number of annual active
consumers, putting us on track to achieve our US$1 trillion total GMV
target by fiscal year end 2020. Total physical goods GMV from our China
retail marketplaces, excluding unpaid orders, exhibited strong growth of
25% year-over-year in fiscal year 2019. Tmall physical goods GMV,
excluding unpaid orders, grew 31% year-over-year, which continued to
exceed the sector average. Taobao physical goods GMV, excluding unpaid
orders, delivered healthy and accelerated growth of 19% in fiscal year
2019.

The number of paying merchants that generate customer management revenue
increased during the quarter, which we believe reflects improved
merchant confidence in allocating marketing spend. We are making
progress on the monetization of recommendation feeds and enhancing
recommendation algorithms. During the quarter, we allocated more traffic
for testing of recommendation monetization, which generated incremental
customer management revenue in a quarter with seasonally lower revenue.

Taobao – fast growing consumer community and new shopping experience. Taobao
is a fast growing consumer community that continues to redefine the
shopping experience through content innovation and intelligent
personalized recommendations. We are improving the user experience and
adding greater value to merchants with our proprietary consumption
knowledge graph.

In fiscal year 2019, we successfully launched a new Taobao app
interface, which delivers a customized shopping experience by segmenting
users based on behavior data and providing them with more
recommendations to enhance product and content discovery. The new
interface also includes Taobao’s innovative content, such as curated
posts, short-form videos and live-broadcast events. These initiatives
drove strong growth in user engagement, purchase conversion and annual
active consumers.

Tmall – the leading consumer engagement and distribution platform for
brands in China.
Tmall continues to gain wallet share and grow
faster than the sector average. The growth of physical goods GMV,
excluding unpaid orders, accelerated to 33% year-over-year in the
quarter ended March 31, 2019, compared to the year-on-year growth rate
of 29% in the previous quarter. This robust growth was driven primarily
by strong performance of fast-moving consumer goods (FMCG), apparel,
electronics and home furnishing categories during the March quarter.

In fiscal year 2019, Tmall extended its leadership position as the
consumer engagement and distribution platform of choice for brands in
China. We have had great success in identifying new consumption trends
in China that drove robust sub-category growth within consumer
electronics and personal care product categories. To help brands build
awareness of new products with our large base of annual active
consumers, we developed a suite of product-launch marketing solutions,
including tools that assist brands to measure the effectiveness of new
product-launch campaigns along the full consumer journey, from discovery
to purchase.

As an example of Tmall’s powerful capabilities to enable brands to build
their business in China, Alexander McQueen and Mulberry launched
flagship stores on Tmall and joined the premium Luxury Pavilion channel
during this quarter. As of March 31, 2019, our Tmall Luxury Pavilion had
more than 100 luxury brands, all of which have also opened Tmall
flagship stores.

New Retail – digital transformation of brick-and-mortar retailing. Through
our New Retail strategy, we are at the forefront of transforming the
retail industry by digitizing all aspects of store-based operations. We
enable traditional retailers to deliver an unrivalled consumer
experience and achieve operating efficiency through our consumer insight
technology, on-demand delivery, inventory tracking, supply chain
management and mobile payments.

In fiscal year 2019, Alibaba Group and Starbucks Coffee Company jointly
announced a comprehensive strategic New Retail partnership to enable a
seamless Starbucks Experience and enhance the way customers enjoy
their food and beverages. By the end of April 2019, we had enabled
on-demand delivery of Starbucks offerings in more than 2,100 stores
across 35 cities throughout China. We have also helped accelerate
membership acquisition for its new Starbucks Reward program through the
Alipay and Taobao apps.

At the end of March 2019, we had digitized about 470 Sun Art stores with
our New Retail know-how and proprietary technology. The transformation
enables these stores to accelerate the integration of their various
retail systems, while allowing consumers to place orders through the
Taobao app and secure delivery through our on-demand delivery platform
operated by Ele.me.

Our self-owned-and-operated grocery retail chain Freshippo (known as
“Hema” in Chinese) continues to achieve robust same-store sales growth,
expand its footprint, optimize its stores and introduce new initiatives
to improve customer experience. As of March 31, 2019, we had 135
self-operated Freshippo stores in China, primarily located in tier one
and tier two cities.

Local consumer services – ecosystem synergy and focus on market share
gains in less developed cities.

In fiscal year 2019, we acquired the on-demand food delivery platform
Ele.me and integrated it with restaurant and local service guide
platform Koubei to create a business which revenues are reported under
“local consumer services” within the core commerce segment. Our strategy
for the local consumer services business is to leverage the 654 million
annual active consumers on our China retail marketplaces and our data
technology to expand our offerings from shopping to services, further
tapping into new addressable markets for consumption in China.

We are focused on gaining market share by integrating the local consumer
services business with the Alibaba ecosystem and penetrating into less
developed cities. For example, the local consumer services business has
acquired users and increased orders by leveraging the Alipay and Taobao
apps, which have more than 600 million MAUs each and have gained a
significant number of users in less developed cities in recent quarters.
Approximately 30% of Ele.me platform’s total orders are generated
through these two mobile apps.

Cainiao Network and logistics investments – achieving progress in
last-mile solutions as well as international and cross-border
fulfillment.
During the 2019 fiscal year, Cainiao Network focused on
delivering a comprehensive last-mile solution to consumers through both
organic growth and strategic investments. In urban areas, Cainiao
Network has developed neighborhood delivery solutions with a combination
of community 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. In March 2019, these Cainiao Post stations handled
over 10% of total daily packages generated by our China retail
marketplaces. In addition, during the fiscal year, we enhanced our
relationship with the express delivery industry through our investments
in ZTO Express and STO Express, two of the major express delivery
companies in China.

In international logistics, Cainiao Network and the logistics arm of
Lazada have developed a strong and growing network of assets and
partners to support our international commerce retail businesses
(AliExpress and Lazada). In March 2019, our proprietary fulfillment and
logistics solutions served over 75% of AliExpress packages and about 80%
of Lazada packages were delivered out of its own sortation centers. From
a China import standpoint, Cainiao Network is focused on developing
cross-border fulfillment solutions for Tmall Global, utilizing a
combination of bonded warehouses in China and direct shipping from
foreign countries. In March 2019, these cross-border fulfillment
solutions served over 90% of all Tmall Global packages.

International – building foundation for long-term growth. Our
cross-border and international retail businesses continue to show
promising growth. In the twelve months ended March 31, 2019, Lazada and
AliExpress had a total of more than 120 million annual active consumers.

In fiscal year 2019, we strengthened Lazada’s third party marketplace
business, management team and technology infrastructure. At the same
time, Lazada reduced its exposure to direct product sales of low-margin
categories, such as electronics, as we believe this strategy will better
position Lazada for sustainable, scalable and less capital-intensive
long-term growth. Lazada will continue to invest in logistics
infrastructure in order to improve user experience and reduce delivery
cost, as factors such as delivery speed and convenience have become key
competitive advantages in the Southeast Asian market.

To address increasing Chinese consumer demand for international products
and brands, Tmall Global serves as the premier platform that helps
overseas brands and merchants reach Chinese consumers directly, build
brand awareness and gain valuable consumer insight that inform their
overall China strategy. Some of the brands and merchants that have a
presence on Tmall Global are well established names, such as nutritional
products from Chemists Warehouse and Blackmores, baby products from
Pampers, accessories from Emporio Armani and nuts from Kirkland. Tmall
Global was the number one e-commerce import platform in China based on
transaction value in calendar year 2018, according to Analysys.

Cloud Computing

Cloud computing revenue grew 76% year-over-year to RMB7,726 million
(US$1,151 million) during the March 2019 quarter, primarily driven by an
increase in average spending per customer. We are seeing significant
traction and diversification of customers and revenue. In fiscal year
2019, Alibaba Cloud served more than half of the A-share listed
companies in China. We will continue to invest to further expand our
market share by developing value-added products and features.

During the March 2019 quarter, Alibaba Cloud launched major products in
the areas of graph database, anti-bot protection,
blockchain-as-a-service and real time communications. We continue to use
our scale to lower the pricing of products and services in the areas of
content delivery network, security, database and network infrastructure
so that we are able to pass on cost savings to our customers.

According to Gartner (April 2019), Alibaba Cloud is the largest cloud
computing service provider in Asia Pacific, as measured by market share
for IaaS (Infrastructure as a Service) and IUS (Infrastructure Utility
Service).

Digital Media and Entertainment

Digital Media and Entertainment is a key piece of our Live@Alibaba
vision and an extension of our strategy to capture consumption beyond
our core commerce businesses. In fiscal year 2019, we emphasized
developing our original content production capabilities in order to
attain greater control over content quality, format and scheduling. We
will continue to execute this strategy as we believe original content
will drive paying subscriber and advertising revenue growth. Youku’s
daily average subscriber base continues to grow at a healthy rate,
increasing about 88% and 50% year-over-year during fiscal year 2019 and
March 2019 quarter, respectively.

In March 2019, we increased our shareholding in Alibaba Pictures to 51%
and aligned the management of Digital Media and Entertainment and
Alibaba Pictures. Alibaba Pictures is principally engaged in the
production, promotion and distribution of theatrical entertainment,
serving consumers, studios, and cinema operators. Alibaba Pictures was
involved in the production, promotion and distribution of highly popular
films, including Chinese box-office hit The Wandering Earth,
which to-date is the second highest grossing domestic film in China, and
the Oscar-winning movie Green Book. We believe the alignment of
management and content strategy between Alibaba Pictures and our Digital
Media and Entertainment businesses will support and enhance our original
content strategy in the future.

Innovation Initiatives & Technology Development

Amap app is the largest provider of mobile digital map, navigation and
real-time traffic information in China by daily active users. Amap also
operates a leading open digital maps platform that powers many major
mobile apps in different industries, such as food delivery, ride
service, taxi-hailing and social networking.

Tmall Genie, our AI-powered smart speaker, connects consumers with
interactive services offered by participants in our digital economy.
Since Tmall Genie’s official launch in August 2017, more than 10 million
units have been activated.

Cash Flow from Operating Activities and Free
Cash Flow

In the quarter ended March 31, 2019, net cash provided by operating
activities was RMB18,553 million (US$2,764 million), an increase of 29%
compared to RMB14,383 million in the same quarter of 2018. Free cash
flow, a non-GAAP measurement of liquidity, in the quarter ended March
31, 2019 increased by 22% to RMB10,714 million (US$1,596 million), from
RMB8,767 million in the same quarter of 2018.

In the fiscal year ended March 31, 2019, net cash provided by operating
activities was RMB150,975 million (US$22,496 million), an increase of
20% compared to RMB125,805 million in the fiscal year 2018. Free cash
flow, a non-GAAP measurement of liquidity, in fiscal year 2019 increased
by 4% to RMB104,478 million (US$15,568 million), from RMB99,996 million
in fiscal year 2018, primarily due to an increase in capital
expenditures (excluding acquisition of land use rights and construction
in progress relating to office campus) by RMB16,735 million and an
increase in acquisition of licensed copyrights and other intangible
assets by RMB3,953 million.

A reconciliation of net cash provided by operating activities to free
cash flow is included at the end of this results announcement.

Share Repurchase

In September 2018, we announced an ADS repurchase plan to implement the
previously announced US$6 billion share repurchase program. As of the
end of March 2019, we had repurchased approximately 10.9 million of our
ADSs for a total of approximately US$1.57 billion.

Guidance

Looking ahead, we are confident about our value proposition to consumers
and merchants, and we will focus on solid execution to build our
businesses. In fiscal year 2020, we expect to generate over RMB500
billion in revenue.

KEY OPERATIONAL METRICS*

 

March 31,
2018

 

December 31,
2018

 

March 31,
2019

  Net adds
YoY   QoQ
 
China Commerce Retail:
Annual active consumers(1) (in millions) 552 636 654 102 18
Mobile monthly active users (MAUs)(2) (in millions) 617 699 721 104 22

__________________

*   For definitions of terms used but not defined in this results
announcement, please refer to our annual report on Form 20-F for the
fiscal year ended March 31, 2018.
(1) For the twelve months ended on the respective dates.
(2) For the month ended on the respective dates.
 

MARCH QUARTER SUMMARY FINANCIAL RESULTS

  Three months ended March 31,  
2018     2019
RMB RMB   US$(1)

YoY %
Change

(in millions, except percentages and per share amounts)
 
Revenue 61,932 93,498 13,932 51%
 
Income from operations 9,221 8,765 1,306 (5)%(3)
Operating margin 15 % 9 %
Adjusted EBITDA(2) 19,454 25,166 3,750 29%
Adjusted EBITDA margin(2) 31 % 27 %
Adjusted EBITA(2) 16,805 20,757 3,093 24%
Adjusted EBITA margin(2) 27 % 22 %
 
Net income 6,641 23,379 3,484 252%(4)
Net income attributable to ordinary shareholders 7,561 25,830 3,849 242%(4)
Non-GAAP net income(2) 14,099 20,056 2,988 42%
 
Diluted earnings per share/ADS (EPS) 2.88 9.84 1.47 242%
Non-GAAP diluted EPS(2) 5.73 8.57 1.28 50%

__________________

(1)   This results announcement contains translations of certain Renminbi
(“RMB”) amounts into U.S. dollars (“US$”) for the convenience of the
reader. Unless otherwise stated, all translations of RMB into US$
were made at RMB6.7112 to US$1.00, the exchange rate on March 29,
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.
(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 decrease was primarily due to our US$250
million settlement of a U.S. federal class action lawsuit.
Excluding this impact, our income from operations would have
increased by 13%.

(4) Includes revaluation gains of investments and businesses, as
discussed in detail in “Interest and investment income, net” below.
 

MARCH QUARTER INFORMATION BY SEGMENTS

The table below sets forth selected financial information of our
operating segments for the periods indicated:

  Three months ended March 31, 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 78,894 7,726 5,671 1,207

 

93,498 13,932
 
Income (loss) from operations 21,632 (1,036 ) (3,854 ) (3,270 ) (4,707 ) 8,765 1,306
Add: Share-based compensation expense 3,054 869 691 1,318 1,178 7,110 1,060
Add: Amortization of intangible assets 2,798 3 335 20 47 3,203 477

Add: Settlement of U.S. federal class action lawsuit

        1,679   1,679  

250

 
 
Adjusted EBITA

27,484

(2)

(164 ) (2,828 ) (1,932 ) (1,803 ) 20,757   3,093  
Adjusted EBITA margin 35 % (2 )% (50 )% (160 )%

 

22 %
 
Three months ended March 31, 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 51,287 4,385 5,272 988 61,932
 
Income (loss) from operations 18,660 (1,063 ) (3,541 ) (2,019 ) (2,816 )

 

9,221

Add: Share-based compensation expense

2,693

707

536

1,153

1,166

6,255

Add: Amortization of intangible assets

833   3   410   6   77   1,329  
 
Adjusted EBITA 22,186   (353 ) (2,595 ) (860 ) (1,573 ) 16,805  
Adjusted EBITA margin 43 % (8 )% (49 )% (87 )% 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 38%
year-over-year to RMB34,688 million (US$5,169 million).
 

MARCH QUARTER OPERATIONAL AND FINANCIAL RESULTS

Revenue

Revenue for the quarter ended March 31, 2019 was RMB93,498 million
(US$13,932 million), an increase of 51% compared to RMB61,932 million in
the same quarter of 2018. The increase was mainly driven by the robust
revenue growth of our China commerce retail business, the consolidation
of Ele.me, as well as strong revenue growth of Alibaba Cloud.

The following table sets forth a breakdown of our revenue by segment for
the periods indicated:

  Three months ended March 31,  
2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

YoY %
Change

(in millions, except percentages)
Core commerce:
China commerce retail
– Customer management 22,993 37% 30,119 4,488 32% 31%
– Commission 11,367 18% 14,790 2,204 16% 30%
– Others 5,825 10% 13,532 2,016 15% 132%
40,185 65% 58,441 8,708 63% 45%
China commerce wholesale 1,883 3% 2,547 380 3% 35%
International commerce retail 3,967 6% 4,944 737 5% 25%
International commerce wholesale 1,699 3% 2,133 318 2% 26%
Cainiao logistics services 2,852 5% 3,861 575 4% 35%
Local consumer services 5,266 785 5% N/A
Others 701 1% 1,702 253 2% 143%
Total core commerce 51,287 83% 78,894 11,756 84% 54%
 
Cloud computing 4,385 7% 7,726 1,151 8% 76%
Digital media and entertainment 5,272 8% 5,671 845 6% 8%
Innovation initiatives and others 988 2% 1,207 180 2% 22%
Total 61,932 100% 93,498 13,932 100% 51%
 

Core commerce

  • China commerce retail business

    Revenue
    Revenue from our China commerce retail business in the quarter ended
    March 31, 2019 was RMB58,441 million (US$8,708 million), an increase
    of 45% compared to RMB40,185 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 31%
    year-over-year, which represents an increase of 31% in customer
    management revenue and an increase of 30% in commission revenue. The
    growth of customer management revenue was primarily the result of
    increases in the volume of paid clicks. The growth of commission
    revenue was primarily due to the strong 33% year-over-year growth of
    Tmall physical goods GMV (excluding unpaid orders). “Others” revenue
    was RMB13,532 million (US$2,016 million), a significant increase
    compared to RMB5,825 million in the same quarter of 2018, primarily
    driven by contributions from direct sale businesses, including Tmall
    Direct Import and Freshippo.

  • China commerce wholesale business

    Revenue
    from our China commerce wholesale business in the quarter ended March
    31, 2019 was RMB2,547 million (US$380 million), an increase of 35%
    compared to RMB1,883 million in the same quarter of 2018. The increase
    was primarily due to an increase in the average revenue from paying
    members on 1688.com, our domestic wholesale marketplace.

  • International commerce retail business

    Revenue
    from our international commerce retail business in the quarter ended
    March 31, 2019 was RMB4,944 million (US$737 million), an increase of
    25% compared to RMB3,967 million in the same quarter of 2018. The
    increase was primarily due to our consolidation of Trendyol, Turkey’s
    leading e-commerce platform, and to a lesser extent an increase in
    revenue from AliExpress. Lazada’s revenue decreased by 4% in the
    quarter ended March 31, 2019 primarily due to a decrease in revenue
    generated from its direct sales business (where revenue is recorded on
    a gross basis including the cost of inventory). Last quarter, Lazada
    strengthened its core marketplace businesses and reduced exposure to
    direct sales in select merchandise categories. This business model
    shift continued to drive third-party marketplace GMV growth, although
    direct sales revenue declined during the same period.

  • International commerce wholesale business

    Revenue
    from our international commerce wholesale business in the quarter
    ended March 31, 2019 was RMB2,133 million (US$318 million), an
    increase of 26% compared to RMB1,699 million in the same quarter of
    2018. The increase was primarily due to increases in the average
    revenue from paying members and the number of paying members on
    Alibaba.com, our global wholesale marketplace.

  • Cainiao logistics 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 RMB3,861 million (US$575 million), an
    increase of 35% compared to RMB2,852 million in the same quarter of
    2018.

  • Local consumer services

    Revenue from local
    consumer services, which primarily represents revenues from platform
    commissions, provision of food delivery services and other services
    provided by our on-demand food delivery platform Ele.me, was RMB5,266
    million (US$785 million). We started to consolidate Ele.me in May 2018
    and Koubei in December 2018.

Cloud computing

Revenue from our cloud computing business in the quarter ended March 31,
2019 was RMB7,726 million (US$1,151 million), an increase of 76%
compared to RMB4,385 million in the same quarter of 2018, primarily
driven by an increase in average spending per customer.

Digital media and entertainment

Revenue from our digital media and entertainment business in the quarter
ended March 31, 2019 was RMB5,671 million (US$845 million), an increase
of 8% compared to RMB5,272 million in the same quarter of 2018. The
increase was primarily due to an increase in revenue from mobile
value-added services provided by UCWeb, such as mobile search and game
publishing.

Innovation initiatives and others

Revenue from innovation initiatives and others in the quarter ended
March 31, 2019 was RMB1,207 million (US$180 million), an increase of 22%
compared to RMB988 million in the same quarter of 2018. The increase was
mainly due to an increase in revenue from Tmall Genie and Amap.

Costs and Expenses

The following tables set forth a breakdown of our costs and expenses,
share-based compensation expense and costs and expenses excluding
share-based compensation expense by function for the periods indicated.

  Three months ended March 31,  

% of
Revenue
YoY
change

2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

(in millions, except percentages)
Costs and expenses:
Cost of revenue 32,504 53% 55,610 8,286 60% 7%
Product development expenses 6,686 11% 8,659 1,290 10% (1)%
Sales and marketing expenses 7,641 12% 9,649 1,439 10% (2)%
General and administrative expenses 4,551 7% 7,612 1,134 8% 1%
Amortization of intangible assets 1,329 2% 3,203 477 3% 1%
Total costs and expenses 52,711 85% 84,733 12,626 91% 6%
 
Share-based compensation expense by function:
Cost of revenue 1,680 3% 1,951 291 2% (1)%
Product development expenses 2,461 4% 2,801 417 3% (1)%
Sales and marketing expenses 671 1% 764 114 1% 0%
General and administrative expenses 1,443 2% 1,594 238 2% 0%
Total share-based compensation expense 6,255 10% 7,110 1,060 8% (2)%
 
Costs and expenses excluding share-based compensation expense:
Cost of revenue 30,824 50% 53,659 7,995 58% 8%
Product development expenses 4,225 7% 5,858 873 7% 0%
Sales and marketing expenses 6,970 11% 8,885 1,325 9% (2)%
General and administrative expenses 3,108 5% 6,018 896 6% 1%
Amortization of intangible assets 1,329 2% 3,203 477 3% 1%
Total costs and expenses excluding share-based compensation expense 46,456 75% 77,623 11,566 83% 8%
 

Cost of revenue – Cost of revenue in the quarter ended March 31,
2019 was RMB55,610 million (US$8,286 million), or 60% of revenue,
compared to RMB32,504 million, or 53% 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 increased from 50% in the
quarter ended March 31, 2018 to 58% in the quarter ended March 31, 2019.
The increase was primarily due to our consolidation of Ele.me, as well
as an increase of the cost of inventory and logistics from our New
Retail and direct sale businesses.

Product development expenses – Product development expenses in
the quarter ended March 31, 2019 were RMB8,659 million (US$1,290
million), or 10% of revenue, compared to RMB6,686 million, or 11% 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 7% in the quarter ended March 31,
2019 and the same quarter last year.

Sales and marketing expenses – Sales and marketing expenses in
the quarter ended March 31, 2019 were RMB9,649 million (US$1,439
million), or 10% of revenue, compared to RMB7,641 million, or 12% 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 11% in the quarter ended March 31,
2018 to 9% in the quarter ended March 31, 2019.

General and administrative expenses – General and administrative
expenses in the quarter ended March 31, 2019 were RMB7,612 million
(US$1,134 million), or 8% of revenue, compared to RMB4,551 million, or
7% 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 5% in the quarter
ended March 31, 2018 to 6% in the quarter ended March 31, 2019,
primarily due to our US$250 million settlement of a U.S. federal class
action lawsuit.

Share-based compensation expense – Total share-based compensation
expense included in the cost and expense items above in the quarter
ended March 31, 2019 was RMB7,110 million (US$1,060 million), an
increase of 14% compared to RMB6,255 million in the same quarter of
2018. Share-based compensation expense as a percentage of revenue
decreased to 8% in the quarter ended March 31, 2019, as compared to 10%
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    

March 31,
2018

 

December 31,
2018

 

March 31,
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 granted to:

– Our employees

4,176 7% 5,853 5% 5,613 836 6% 34% (4)%

– Ant Financial employees and other consultants(1)

389 1% 26

 

0%

486 73

 

1%

 

25%

1,769%

Ant Financial share-based awards granted to our employees(1)

1,483 2% 505

 

0%

435 65

 

0%

(71)%

(14)%
Others 207 0% 576 1% 576 86 1% 178% 0%
Total share-based compensation expense 6,255 10% 6,960 6% 7,110 1,060 8%

 

14%

 

2%

__________________

(1) Awards subject to mark-to-market accounting treatment.

 

Share-based compensation expense related to Alibaba Group share-based
awards granted to our employees remained stable in this quarter compared
to the previous quarter. Share-based compensation expense related to
Alibaba Group share-based awards granted to Ant Financial employees and
other consultants increased from the previous quarter, due to the
increase in the fair value of Alibaba Group share-based awards.

We expect that our share-based compensation expense will continue to be
affected by changes in the fair value of our shares, our subsidiaries’
share-based awards and the quantity of awards we grant to our employees
and consultants in the future. Furthermore, we expect that our
share-based compensation expense will continue to be affected by future
changes in the valuation of Ant Financial, although any such changes
will be non-cash and will not result in any economic cost or equity
dilution to our shareholders.

Amortization of intangible assets – Amortization of intangible
assets in the quarter ended March 31, 2019 was RMB3,203 million (US$477
million), an increase of 141% from RMB1,329 million in the same quarter
of 2018, primarily due to an increase in amortization of intangible
assets acquired from business combinations of Ele.me and Koubei.

Income from operations and operating margin

Income from operations in the quarter ended March 31, 2019 was RMB8,765
million (US$1,306 million), or 9% of revenue, a decrease of 5% compared
to RMB9,221 million, or 15% of revenue, in the same quarter of 2018,
primarily due to our US$250 million settlement of a U.S. federal class
action lawsuit. Excluding this impact, our income from operations would
have increased by 13%.

Adjusted EBITDA and Adjusted EBITA

Adjusted EBITDA increased 29% year-over-year to RMB25,166 million
(US$3,750 million) in the quarter ended March 31, 2019, compared to
RMB19,454 million in the same quarter of 2018. Adjusted EBITA increased
24% year-over-year to RMB20,757 million (US$3,093 million) in the
quarter ended March 31, 2019, compared to RMB16,805 million in the same
quarter of 2018. Reconciliations of net income to adjusted EBITDA and
adjusted EBITA are included at the end of this results announcement.

Adjusted EBITA and adjusted EBITA margin by
segments

Adjusted EBITA and adjusted EBITA margin by segments are set forth in
the table below. See the section entitled “Information about Segments”
above for a reconciliation of income from operations to adjusted EBITA.

  Three months ended March 31,
2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

(in millions, except percentages)
 
Core commerce 22,186 43 % 27,484 4,095 35 %
Cloud computing (353 ) (8 )% (164 ) (24 ) (2 )%
Digital media and entertainment (2,595 ) (49 )% (2,828 ) (421 ) (50 )%
Innovation initiatives and others (860 ) (87 )% (1,932 ) (288 ) (160 )%
 

Core commerce segment – Adjusted EBITA increased by 24% to
RMB27,484 million (US$4,095 million) in the quarter ended March 31,
2019, compared to RMB22,186 million in the same quarter of 2018.
Marketplace-based core commerce adjusted EBITA increased 38%
year-over-year to RMB34,688 million (US$5,169 million). Adjusted EBITA
margin decreased from 43% in the quarter ended March 31, 2018 to 35% in
the quarter ended March 31, 2019 due to strategic investments, primarily
including aggressive investment in local consumer services and gradual
revenue mix shift towards self-operated New Retail and direct sale
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 sale businesses.

Cloud computing segment – Adjusted EBITA in the quarter ended
March 31, 2019 was a loss of RMB164 million (US$24 million), compared to
a loss of RMB353 million in the same quarter of 2018. Adjusted EBITA
margin improved to negative 2% in the quarter ended March 31, 2019 from
negative 8% in the quarter ended March 31, 2018.

Digital media and entertainment segment – Adjusted EBITA in the
quarter ended March 31, 2019 was a loss of RMB2,828 million (US$421
million), compared to a loss of RMB2,595 million in the same quarter of
2018. Adjusted EBITA margin decrease from negative 49% in the quarter
ended March 31, 2018 to negative 50% in the quarter ended March 31, 2019.

Innovation initiatives and others segment – Adjusted EBITA in the
quarter ended March 31, 2019 was a loss of RMB1,932 million (US$288
million), compared to a loss of RMB860 million in the same quarter of
2018. The increase in adjusted EBITA loss was primarily due to
investments in new business initiatives, including Tmall Genie, as well
as our investments in technological research and innovation.

Interest and investment income, net

Interest and investment income, net in the quarter ended March 31, 2019
was RMB18,665 million (US$2,781 million), which mainly included net
gains arising from the change in fair value of listed equity investments
and a non-cash gain of RMB5,825 million (US$868 million) arising from
the revaluation of our previously held equity interest in Alibaba
Pictures when we obtained control in March 2019. The above-mentioned
gains were excluded from our non-GAAP net income.

Other income, net

Other income, net in the quarter ended March 31, 2019 was RMB1,449
million (US$216 million), compared to RMB884 million in the same quarter
of 2018. Royalty fees and software technology service fees under our
profit sharing arrangement with Ant Financial amounted to RMB517 million
(US$77 million) in the quarter ended March 31, 2019. In the current
quarter, Ant Financial continued its strategic investments to acquire
new users and capture growth opportunities in the offline payment
market. Currently, Alipay and its local e-wallet partners have over 1
billion annual active users globally.

Income tax expenses

Income tax expenses in the quarter ended March 31, 2019 were RMB5,025
million (US$748 million), compared to RMB4,164 million in the same
quarter of 2018.

Our effective tax rate was 18% in the quarter ended March 31, 2019,
compared to 38% in the same quarter of 2018. Excluding share-based
compensation expense, investment gain/loss and impairment of
investments, our effective tax rate would have been 21% in the quarter
ended March 31, 2019.

Share of results of equity investees

Share of results of equity investees in the quarter ended March 31, 2019
was a profit of RMB828 million (US$123 million), compared to a loss of
RMB70 million in the same quarter of 2018. We record our share of
results of equity investees one quarter in arrears. Share of results of
equity investees in the quarter ended March 31, 2019 and the comparative
periods consisted of the following:

  Three months ended
March 31, 2018   December 31, 2018   March 31, 2019
RMB RMB RMB   US$
(in millions)
Share of profit of equity investees 480 22 1,306 194
Impairment loss (493 )
Dilution (loss) gain (75 ) 26 (62 ) (9 )
Others(1) (475 ) (416 ) (416 ) (62 )
Total (70 ) (861 ) 828   123  

__________________

(1)   Others mainly include amortization of intangible assets of equity
investees and share-based compensation expense.
 

The share of profit of equity investees in the quarter ended March 31,
2019 primarily included our share of profit in Suning.

Net income and Non-GAAP net income

Our net income in the quarter ended March 31, 2019 was RMB23,379 million
(US$3,484 million), an increase of 252% compared to RMB6,641 million in
the same quarter of 2018.

Excluding share-based compensation expense, investment gain/loss,
impairment of investments and certain other items, non-GAAP net income
in the quarter ended March 31, 2019 was RMB20,056 million (US$2,988
million), an increase of 42% compared to RMB14,099 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
March 31, 2019 was RMB25,830 million (US$3,849 million), an increase of
242% compared to RMB7,561 million in the same quarter of 2018.

Diluted EPS and non-GAAP diluted EPS

Diluted EPS in the quarter ended March 31, 2019 was RMB9.84 (US$1.47) on
a weighted average of 2,625 million diluted shares outstanding during
the quarter, an increase of 242% compared to RMB2.88 on a weighted
average of 2,619 million diluted shares outstanding during the same
quarter of 2018. Excluding share-based compensation expense, investment
gain/loss, impairment of investments and certain other items, non-GAAP
diluted EPS in the quarter ended March 31, 2019 was RMB8.57 (US$1.28),
an increase of 50% compared to RMB5.73 in the same quarter of 2018. A
reconciliation of diluted EPS to non-GAAP diluted EPS is included at the
end of this results announcement.

Cash, cash equivalents and short-term
investments

As of March 31, 2019, cash, cash equivalents and short-term investments
were RMB193,238 million (US$28,794 million), compared to RMB192,317
million as of December 31, 2018. The increase in cash, cash equivalents
and short-term investments during the quarter ended March 31, 2019 was
primarily due to free cash flow generated from operations of RMB10,714
million (US$1,596 million), partly offset by net cash used in investment
and acquisition activities of RMB9,218 million (US$1,374 million).

Cash flow from operating activities and free
cash flow

Net cash provided by operating activities in the quarter ended March 31,
2019 was RMB18,553 million (US$2,764 million), an increase of 29%
compared to RMB14,383 million in the same quarter of 2018. Free cash
flow, a non-GAAP measurement of liquidity, in the quarter ended March
31, 2019 was RMB10,714 million (US$1,596 million), compared to RMB8,767
million in the same quarter of 2018. 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 March 31, 2019, net cash used in investing
activities of RMB16,751 million (US$2,496 million) primarily reflected
(i) cash outflow of RMB11,855 million (US$1,766 million) for investment
and acquisition activities, including those relating to STO Express and
iKang Healthcare, (ii) capital expenditures of RMB6,537 million (US$973
million), which included cash outflow for acquisition of land use rights
and construction in progress relating to office campus of RMB849 million
(US$126 million), as well as (iii) acquisition of licensed copyrights
and other intangible assets of RMB2,151 million (US$321 million). These
cash outflows were partly offset by cash inflow of RMB2,637 million
(US$392 million) from disposal of various investments.

Employees

As of March 31, 2019, we had a total of 101,958 employees, compared to
101,550 as of December 31, 2018.

FULL FISCAL YEAR 2019 SUMMARY FINANCIAL RESULTS

  Year ended March 31,  
2018   2019
RMB RMB   US$(1)

YoY %
Change

(in millions, except percentages and per share amounts)
 
Revenue 250,266 376,844 56,152 51 %
 
Income from operations 69,314 57,084 8,506 (18

)%(3)

Operating margin 28 % 15 %
Adjusted EBITDA(2) 105,792 121,943 18,170 15 %
Adjusted EBITDA margin(2) 42 % 32 %
Adjusted EBITA(2) 97,003 106,981 15,941 10 %
Adjusted EBITA margin(2) 39 % 28 %
 
Net income 61,412 80,234 11,955 31 %
Net income attributable to ordinary shareholders 63,985 87,600 13,053 37 %
Non-GAAP net income(2) 83,214 93,407 13,918 12 %
 
Diluted earnings per share/ADS (EPS) 24.51 33.38 4.97 36 %
Non-GAAP diluted EPS(2) 32.86 38.40 5.72 17 %

__________________

(1)   This results announcement contains translations of certain Renminbi
(“RMB”) amounts into U.S. dollars (“US$”) for the convenience of the
reader. Unless otherwise stated, all translations of RMB into US$
were made at RMB6.7112 to US$1.00, the exchange rate on March 29,
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.
(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 decrease was primarily due to an increase in
share-based compensation expense and our US$250 million settlement
of a U.S. federal class action lawsuit. Excluding these impacts,
our income from operations would have increased by 8%. The
increase in share-based compensation expense was mainly due to the
increase in share-based compensation expense related to Ant
Financial share-based awards granted to our employees as a result
of the increase in the fair value of such awards during the year.

 

FULL FISCAL YEAR 2019 INFORMATION BY SEGMENTS

The table below sets forth selected financial information of our
operating segments for the fiscal year 2019:

  Year ended March 31, 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 323,400 24,702 24,077 4,665

 

376,844

56,152
 
Income (loss) from operations 109,312 (5,508 ) (20,046 ) (11,795 ) (14,879 )

 

57,084

8,506
Add: Share-based compensation expense 17,694 4,332 2,988 5,774 6,703

 

37,491

5,586
Add: Amortization of intangible assets 9,161 18 1,262 50 236

 

10,727

1,599

Add: Settlement of U.S. federal class action lawsuit

       

1,679

 

 

1,679

  250  
 
Adjusted EBITA 136,167((2 )) (1,158 ) (15,796 ) (5,971 ) (6,261 )

 

106,981

  15,941  
Adjusted EBITA margin 42 % (5 )% (66 )% (128 )%

 

 

28

%

 
Year ended March 31, 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 214,020 13,390 19,564 3,292

 

250,266

 
Income (loss) from operations 102,743 (3,085 ) (14,140 ) (6,901 ) (9,303 )

 

69,314

Add: Share-based compensation expense

8,466

2,274

2,142

3,707

3,486

 

20,075

Add: Amortization of intangible assets 2,891 12 3,693 198 326

 

7,120

Add: Impairment of goodwill        

494

 

 

494

 
 
Adjusted EBITA 114,100   (799 ) (8,305 ) (2,996 ) (4,997 )

 

97,003

 
Adjusted EBITA margin 53 % (6 )% (42 )% (91 )%

 

39

%

__________________

(1)   Unallocated expenses are primarily related to corporate
administrative costs and other miscellaneous items that are not
allocated to individual segments.
(2) Marketplace-based core commerce adjusted EBITA increased 31%
year-over-year to RMB161,589 million (US$24,078 million).
 

FULL FISCAL YEAR 2019 OPERATIONAL AND FINANCIAL RESULTS

Revenue

Revenue in fiscal year 2019 was RMB376,844 million (US$56,152 million),
an increase of 51% compared to RMB250,266 million in fiscal year 2018.
The increase was mainly driven by the robust revenue growth of our China
commerce retail business, the consolidation of newly acquired
businesses, mainly Ele.me, as well as strong revenue growth of Alibaba
Cloud.

The following table sets forth a breakdown of our revenue by segment for
the periods indicated:

  Year ended March 31,  
2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

YoY %
Change

(in millions, except percentages)
Core commerce:
China commerce retail
– Customer management 114,285 46% 145,684 21,708 39% 27%
– Commission 46,525 19% 61,847 9,215 16% 33%
– Others 15,749

6%

40,084 5,973 11% 155%
176,559 71% 247,615 36,896 66% 40%
China commerce wholesale 7,164 3% 9,988 1,488 3% 39%
International commerce retail 14,216 6%

19,558

2,914 5% 38%
International commerce wholesale 6,625 2% 8,167 1,217 2% 23%
Cainiao logistics services 6,759 3% 14,885 2,218 4% 120%
Local consumer services 18,058 2,691 5% N/A
Others 2,697 1% 5,129 764 1% 90%
Total core commerce 214,020 86% 323,400 48,188 86% 51%
 
Cloud computing 13,390 5% 24,702 3,681 7% 84%
Digital media and entertainment 19,564 8% 24,077 3,588 6% 23%
Innovation initiatives and others 3,292 1% 4,665 695 1% 42%
Total 250,266 100% 376,844 56,152 100% 51%
 

Core commerce

  • China commerce retail business

    Revenue
    Revenue from our China commerce retail business in fiscal year 2019
    was RMB247,615 million (US$36,896 million), an increase of 40%
    compared to RMB176,559 million in fiscal year 2018. Revenue from our
    China retail marketplaces continued to see strong growth. Combined
    customer management and commission revenues grew 29% year-over-year,
    which represents an increase of 27% in customer management revenue and
    an increase of 33% in commission revenue. The growth of customer
    management revenue was primarily the result of increases in the volume
    of paid clicks and to a lesser extent the increase in price per click.
    The growth of commission revenue was primarily due to strong 31%
    year-over-year growth of Tmall physical goods GMV (excluding unpaid
    orders). “Others” revenue was RMB40,084 million (US$5,973 million), a
    significant increase compared to RMB15,749 million in fiscal year
    2018, primarily driven by contributions from direct sale businesses,
    including Tmall Direct Import and Freshippo. We expect that the
    proportion of revenue of our direct sales businesses will continue to
    increase as we further implement our New Retail strategy.

  • China commerce wholesale business

    Revenue
    from our China commerce wholesale business in fiscal year 2019 was
    RMB9,988 million (US$1,488 million), an increase of 39% compared to
    RMB7,164 million in fiscal year 2018. The increase was primarily due
    to an increase in the average revenue from paying members on 1688.com,
    our domestic wholesale marketplace.

  • International commerce retail business

    Revenue
    from our international commerce retail business in fiscal year 2019
    was RMB19,558 million (US$2,914 million), an increase of 38% compared
    to RMB14,216 million in fiscal year 2018. The increase was primarily
    due to an increase in revenue from Lazada, our consolidation of
    Trendyol, Turkey’s leading e-commerce platform, as well as an increase
    in revenue from AliExpress.

  • International commerce wholesale business

    Revenue
    from our international commerce wholesale business in fiscal year 2019
    was RMB8,167 million (US$1,217 million), an increase of 23% compared
    to RMB6,625 million in fiscal year 2018. The increase was primarily
    due to increases in the average revenue from paying members and the
    number of paying members on Alibaba.com, our global wholesale
    marketplace.

  • Cainiao logistics 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 RMB14,885 million (US$2,218 million),
    an increase of 120% compared to RMB6,759 million. The increase mainly
    reflected the full year effect of consolidation of Cainiao in fiscal
    year 2019. We started to consolidate Cainiao Network in mid-October
    2017.

  • Local consumer services

    Revenue from local
    consumer services, which primarily represents revenues from platform
    commissions, provision of food delivery services and other services
    provided by our on-demand food delivery platform Ele.me, was RMB18,058
    million (US$2,691 million). We started to consolidate Ele.me in May
    2018 and Koubei in December 2018.

Cloud computing

Revenue from our cloud computing business in fiscal year 2019 was
RMB24,702 million (US$3,681 million), an increase of 84% compared to
RMB13,390 million in fiscal year 2018, primarily driven by an increase
in average spending per customer.

Digital media and entertainment

Revenue from our digital media and entertainment business in fiscal year
2019 was RMB24,077 million (US$3,588 million), an increase of 23%
compared to RMB19,564 million in fiscal year 2018. The increase was
primarily due to an increase in revenue from mobile value-added services
provided by UCWeb, such as mobile search and game publishing, and an
increase in subscription revenue from Youku.

Innovation initiatives and others

Revenue from innovation initiatives and others in fiscal year 2019 was
RMB4,665 million (US$695 million), an increase of 42% compared to
RMB3,292 million in fiscal year 2018. The increase was mainly due to an
increase in revenue from Tmall Genie and Amap.

Costs and Expenses

The following tables set forth a breakdown of our costs and expenses,
share-based compensation expense and costs and expenses excluding
share-based compensation expense by function for the periods indicated.

  Year ended March 31,  

% of
Revenue
YoY
change

2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

(in millions, except percentages)
Costs and expenses:
Cost of revenue 107,044 43% 206,929 30,833 55% 12%
Product development expenses 22,754 9% 37,435 5,578 10% 1%
Sales and marketing expenses 27,299 11% 39,780 5,928 11% 0%
General and administrative expenses 16,241 6% 24,889 3,708 6% 0%
Amortization of intangible assets 7,120 3% 10,727 1,599 3% 0%
Impairment of goodwill 494 0% 0%
Total costs and expenses 180,952 72% 319,760 47,646 85% 13%
 
Share-based compensation expense by function:
Cost of revenue 5,505 2% 8,915 1,328 2% 0%
Product development expenses 7,374 3% 15,378 2,291 4% 1%
Sales and marketing expenses 2,037 1% 4,411 657 2% 1%
General and administrative expenses 5,159 2% 8,787 1,310 2% 0%
Total share-based compensation expense 20,075 8% 37,491 5,586 10% 2%
 
Costs and expenses excluding share-based compensation expense:
Cost of revenue 101,539 41% 198,014 29,505 53% 12%
Product development expenses 15,380 6% 22,057 3,287 6% 0%
Sales and marketing expenses 25,262 10% 35,369 5,271 9% (1)%
General and administrative expenses 11,082 4% 16,102 2,398 4% 0%
Amortisation of intangible assets 7,120 3% 10,727 1,599 3% 0%
Impairment of goodwill 494 0% 0%
Total costs and expenses excluding share-based compensation expense 160,877 64% 282,269 42,060 75% 11%
 

Cost of revenue – Cost of revenue in fiscal year 2019 was
RMB206,929 million (US$30,833 million), or 55% of revenue, compared to
RMB107,044 million, or 43% of revenue, in fiscal year 2018. Without the
effect of share-based compensation expense, cost of revenue as a
percentage of revenue would have increased from 41% in fiscal year 2018
to 53% in fiscal year 2019. The increase was primarily due to our
consolidation of newly acquired businesses, mainly Ele.me and Cainiao,
as well as an increase of the cost of inventory and logistics from our
New Retail and direct sale businesses.

Product development expenses – Product development expenses in
fiscal year 2019 were RMB37,435 million (US$5,578 million), or 10% of
revenue, compared to RMB22,754 million, or 9% of revenue, in fiscal year
2018. Without the effect of share-based compensation expense, product
development expenses as a percentage of revenue would have remained
stable at 6% in fiscal year 2019 and 2018.

Sales and marketing expenses – Sales and marketing expenses in
fiscal year 2019 were RMB39,780 million (US$5,928 million), or 11% of
revenue, compared to RMB27,299 million, or 11% of revenue, in fiscal
year 2018. Without the effect of share-based compensation expense, sales
and marketing expenses as a percentage of revenue would have decreased
from 10% in fiscal year 2018 to 9% in fiscal year 2019.

General and administrative expenses – General and administrative
expenses in fiscal year 2019 were RMB24,889 million (US$3,708 million),
or 6% of revenue, compared to RMB16,241 million, or 6% of revenue, in
fiscal year 2018. Without the effect of share-based compensation
expense, general and administrative expenses as a percentage of revenue
would have remained stable at 4% in fiscal year 2019 and 2018.

Share-based compensation expense – Total share-based compensation
expense included in the cost and expense items above in fiscal year 2019
was RMB37,491 million (US$5,586 million), an increase of 87% compared to
RMB20,075 million in fiscal year 2018. Share-based compensation expense
as a percentage of revenue increased from 8% in fiscal year 2018 to 10%
in fiscal year 2019. The following table sets forth our analysis of
share-based compensation expense for the periods indicated by type of
share-based awards:

  Year ended March 31,  
2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

YoY %
Change

(in millions, except percentages)
By type of awards:
Alibaba Group share-based awards granted to:

– Our employees

15,267 6% 21,942 3,269 6% 44%

– Ant Financial employees and other consultants(1)

1,603 1% 785 117 0% (51)%
Ant Financial share-based awards granted to our employees(1) 2,278 1% 12,855 1,915 3% 464%
Others 927 0% 1,909 285 1% 106%
Total share-based compensation expense 20,075 8% 37,491 5,586 10% 87%

___________________

(1) Awards subject to mark-to-market accounting treatment.

 

Share-based compensation expense related to Alibaba Group share-based
awards granted to our employees increased in fiscal year 2019 as
compared to fiscal year 2018. This increase is primarily due to general
increase in the average fair market value of the awards granted.

Share-based compensation expense related to Ant Financial share-based
awards granted to our employees increased significantly in fiscal year
2019 as compared to fiscal year 2018, mainly due to the increase in the
fair value of such awards during the year.

Amortization of intangible assets – Amortization of intangible
assets in fiscal year 2019 was RMB10,727 million (US$1,599 million), an
increase of 51% from RMB7,120 million in fiscal year 2018, primarily due
to an increase in amortization of intangible assets acquired from
business combinations of Ele.me and Koubei.

Income from operations and operating margin

Income from operations in fiscal year 2019 was RMB57,084 million
(US$8,506 million), or 15% of revenue, a decrease of 18% compared to
RMB69,314 million, or 28% of revenue, in fiscal year 2018. The
year-over-year decrease was primarily due to an increase in share-based
compensation expense (as discussed in the section titled “Share-based
compensation expense” above) and our US$250 million settlement of a U.S.
federal class action lawsuit. Excluding these impacts, our income from
operations would have increased by 8%.

Adjusted EBITDA and Adjusted EBITA

Adjusted EBITDA increased 15% year-over-year to RMB121,943 million
(US$18,170 million) in fiscal year 2019, compared to RMB105,792 million
in fiscal year 2018. Adjusted EBITA increased 10% year-over-year to
RMB106,981 million (US$15,941 million) in fiscal year 2019, compared to
RMB97,003 million in fiscal year 2018, primarily due to the increase in
marketplace-based core commerce adjusted EBITA, offset by the
consolidation of Ele.me and Cainiao Network, investments in digital
media and entertainment and other strategic initiatives. Reconciliations
of net income to adjusted EBITDA and adjusted EBITA are included at the
end of this results announcement.

Adjusted EBITA and adjusted EBITA margin by
segments

Adjusted EBITA and adjusted EBITA margin by segments are set forth in
the table below. See the section entitled “Information about Segments”
above for a reconciliation of income from operations to adjusted EBITA.

  Year ended March 31,
2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

(in millions, except percentages)
 
Core commerce 114,100 53 % 136,167 20,290 42 %
Cloud computing (799 ) (6 )% (1,158 ) (172 ) (5 )%
Digital media and entertainment (8,305 ) (42 )% (15,796 ) (2,354 ) (66 )%
Innovation initiatives and others (2,996 ) (91 )% (5,971 ) (890 ) (128 )%
 

Core commerce segment – Adjusted EBITA increased by 19% to
RMB136,167 million (US$20,290 million) in fiscal year 2019, compared to
RMB114,100 million in fiscal year 2018. Marketplace-based core commerce
adjusted EBITA increased 31% year-over-year to RMB161,589 million
(US$24,078 million). Adjusted EBITA margin decreased from 53% in fiscal
year 2018 to 42% in fiscal year 2019 due to strategic investments,
primarily including aggressive investment in local consumer services and
gradual revenue mix shift towards self-operated New Retail and direct
sale 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 sale businesses.

Cloud computing segment – Adjusted EBITA in fiscal year 2019 was
a loss of RMB1,158 million (US$172 million), compared to a loss of
RMB799 million in fiscal year 2018. Adjusted EBITA margin improved to
negative 5% in fiscal year 2019 from negative 6% in fiscal year 2018.

Digital media and entertainment segment – Adjusted EBITA in
fiscal year 2019 was a loss of RMB15,796 million (US$2,354 million),
compared to a loss of RMB8,305 million in fiscal year 2018. Adjusted
EBITA margin decreased to negative 66% in fiscal year 2019 from negative
42% in fiscal year 2018, primarily due to our continued investments in
licensing rights and the production of original content and an increase
in impairment charges on licensed copyrights.

Innovation initiatives and others segment – Adjusted EBITA in
fiscal year 2019 was a loss of RMB5,971 million (US$890 million),
compared to a loss of RMB2,996 million in fiscal year 2018. The increase
in adjusted EBITA loss was primarily due to investments in new business
initiatives, including Tmall Genie and our investments in technological
research and innovation.

Interest and investment income, net

Interest and investment income, net in fiscal year 2019 was RMB44,106
million (US$6,572 million), which mainly included non-cash gains of
RMB21,990 million (US$3,277 million) and RMB5,825 million (US$868
million) arising from the revaluation of our previously held equity
interest in Koubei and Alibaba Pictures when we obtained control in
December 2018 and March 2019, respectively, as well as net gains arising
from change in fair value of certain equity investments. These gains
were partly offset by impairment charges of RMB10,867 million (US$1,619
million) on certain investments. The above-mentioned gains and
impairment charges were excluded from our non-GAAP net income.

Interest expense

Interest expense in fiscal year 2019 was RMB5,190 million (US$773
million), an increase of 46% compared to RMB3,566 million in fiscal year
2018. The increase was primarily due to an increase in average debt
outstanding in fiscal year 2019 as compared to fiscal year 2018,
reflecting primarily an additional US$7.0 billion unsecured senior notes
issued in December 2017.

Other income, net

Other income, net in fiscal year 2019 was RMB221 million (US$32
million), compared to RMB4,160 million in fiscal year 2018. The decrease
in other income was primarily due to a decrease in income recognized in
respect of royalty fees and software technology services fees from Ant
Financial, which was RMB517 million (US$77 million) in fiscal year 2019,
compared to RMB3,444 million in fiscal year 2018 as Ant Financial
continued its strategic investments to expand its user base
significantly.

Income tax expenses

Income tax expenses in fiscal year 2019 were RMB16,553 million (US$2,466
million), compared to RMB18,199 million in fiscal year 2018.

Our effective tax rate decreased to 17% in fiscal year 2019 from 18% in
fiscal year 2018. Excluding share-based compensation expense, investment
gain/loss and impairment of investments, our effective tax rate would
have remained at 17% in fiscal year 2019.

Share of results of equity investees

Share of results of equity investees in fiscal year 2019 was a profit of
RMB566 million (US$84 million), compared to a loss of RMB20,792 million
in fiscal year 2018. As previously disclosed, the loss in fiscal year
2018 was primarily due to an impairment loss of RMB18,116 million with
respect to Alibaba Pictures. The increase in share of profit of other
equity investees in fiscal year 2019, compared to fiscal year 2018, was
primarily due to an increase in our share of profit in Suning. We record
our share of results of equity investees one quarter in arrears. Share
of results of equity investees in fiscal year 2019 and the comparative
periods consisted of the following:

  Year ended March 31,
2018   2019
RMB RMB   US$
(in millions)

Share of (loss) profit of equity investees:

– Koubei(1)

(1,340)

– Cainiao Network(2)

(518)

– Others

1,040 2,997 446
Impairment loss (18,153) (493) (73)
Dilution loss (128) (185) (28)
Others(3) (1,693) (1,753) (261)
(20,792) 566 84
(1)   We started to consolidate Koubei in December 2018 after obtaining
control over Koubei.
(2) We started to consolidate Cainiao Network in mid-October 2017 after
obtaining control over Cainiao Network.
(3) Others mainly include amortization of intangible assets of equity
investees and share-based compensation expense.
 

Net income and Non-GAAP net income

Our net income in fiscal year 2019 was RMB80,234 million (US$11,955
million), an increase of 31% compared to RMB61,412 million in fiscal
year 2018.

Excluding share-based compensation expense, investment gain/loss,
impairment of investments and certain other items, non-GAAP net income
in fiscal year 2019 was RMB93,407 million (US$13,918 million), an
increase of 12% compared to RMB83,214 million in fiscal year 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 fiscal year 2019 was
RMB87,600 million (US$13,053 million), an increase of 37% compared to
RMB63,985 million in fiscal year 2018.

Diluted EPS and non-GAAP diluted EPS

Diluted EPS in fiscal year 2019 was RMB33.38 (US$4.97) on a weighted
average of 2,623 million diluted shares outstanding during the year, an
increase of 36% compared to RMB24.51 on a weighted average of 2,610
million diluted shares outstanding in fiscal year 2018. Excluding
share-based compensation expense, investment gain/loss, impairment of
investments and certain other items, non-GAAP diluted EPS in fiscal year
2019 was RMB38.40 (US$5.72), an increase of 17% compared to RMB32.86 in
fiscal year 2018. A reconciliation of diluted EPS to non-GAAP diluted
EPS is included at the end of this results announcement.

Cash, cash equivalents and short-term
investments

As of March 31, 2019, cash, cash equivalents and short-term investments
were RMB193,238 million (US$28,794 million), compared to RMB205,395
million as of March 31, 2018. The decrease in cash, cash equivalents and
short-term investments in fiscal year 2019 was primarily due to cash
used in investment and acquisition activities of RMB119,766 million
(US$17,846 million) and share repurchase of RMB10,872 million (US$1,620
million), largely offset by free cash flow generated from operations of
RMB104,478 million (US$15,568 million).

Cash flow from operating activities and free
cash flow

Net cash provided by operating activities in fiscal year 2019 was
RMB150,975 million (US$22,496 million), an increase of 20% compared to
RMB125,805 million in fiscal year 2018. Free cash flow, a non-GAAP
measurement of liquidity, in fiscal year 2019 was RMB104,478 million
(US$15,568 million), compared to RMB99,996 million in fiscal year 2018.
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 fiscal year 2019, net cash used in investing activities of
RMB151,060 million (US$22,509 million) primarily reflected (i) cash
outflow of RMB119,766 million (US$17,846 million) for investment and
acquisition activities, including investments in Ele.me, Focus Media and
ZTO Express, (ii) capital expenditures of RMB35,482 million (US$5,286
million), which included cash outflow for acquisition of land use rights
and construction in progress relating to office campus of RMB3,146
million (US$468 million), as well as (iii) acquisition of licensed
copyrights and other intangible assets of RMB14,161 million (US$2,110
million).

WEBCAST AND CONFERENCE CALL INFORMATION

Alibaba Group’s management will hold a conference call to discuss the
financial result at 7:30 a.m. U.S. Eastern Time (7:30 p.m. Hong Kong
Time) on May 15, 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: 2579018

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: 2579018).

Our results announcement and accompanying slides are available at
Alibaba Group’s Investor Relations website at http://www.alibabagroup.com/en/ir/home
on May 15, 2019.

ABOUT ALIBABA GROUP

Alibaba Group’s mission is to make it easy to do business anywhere and
the company aims to achieve sustainable growth for 102 years. For fiscal
year ended March 2019, the company reported revenue of US$56 billion.

SAFE HARBOR STATEMENTS

This announcement contains forward-looking statements. These statements
are made under the “safe harbor” provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as “will,” “expects,”
“anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,”
“potential,” “continue,” “ongoing,” “targets,” “guidance” and similar
statements. In addition, statements that are not historical facts,
including statements about Alibaba’s strategies and business plans,
Alibaba’s beliefs, expectations and guidance regarding the growth of its
business and its revenue, the business outlook and quotations from
management in this announcement, as well as Alibaba’s strategic and
operational plans, are or contain forward-looking statements. Alibaba
may also make forward-looking statements in its periodic reports to the
U.S. Securities and Exchange Commission (the “SEC”), in press releases
and other written materials and in oral statements made by its officers,
directors or employees to third parties. Forward-looking statements
involve inherent risks and uncertainties. A number of factors could
cause actual results to differ materially from those contained in any
forward-looking statement, including but not limited to the following:
Alibaba’s expected revenue growth; Alibaba’s goals and strategies;
Alibaba’s future business development; Alibaba’s ability to maintain the
trusted status of its ecosystem, reputation and brand; risks associated
with increased investments in Alibaba’s business and new business
initiatives; risks associated with strategic acquisitions and
investments; Alibaba’s ability to retain or increase engagement of
consumers, merchants and other participants in its ecosystem and enable
new offerings; Alibaba’s ability to maintain or grow its revenue or
business; risks associated with limitation or restriction of services
provided by Alipay; changes in laws, regulations and regulatory
environment that affect Alibaba’s business operations; privacy and
regulatory concerns; competition; security breaches; the continued
growth of the e-commerce market in China and globally; risks associated
with the performance of our business partners, including but not limited
to Ant Financial; and fluctuations in general economic and business
conditions in China and globally and assumptions underlying or related
to any of the foregoing. Further information regarding these and other
risks is included in Alibaba’s filings with the SEC. All information
provided in this results announcement is as of the date of this results
announcement and are based on assumptions that we believe to be
reasonable as of this date, and Alibaba does not undertake any
obligation to update any forward-looking statement, except as required
under applicable law.

NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements, which are prepared
and presented in accordance with GAAP, we use the following non-GAAP
financial measures: for our consolidated results, adjusted EBITDA
(including adjusted EBITDA margin), adjusted EBITA (including adjusted
EBITA margin), marketplace-based core commerce adjusted EBITA, non-GAAP
net income, non-GAAP diluted EPS and free cash flow. For more
information on these non-GAAP financial measures, please refer to the
section entitled “Information about Segments” and the table captioned
“Reconciliations of Non-GAAP Measures to the Nearest Comparable GAAP
Measures” in this results announcement.

We believe that adjusted EBITDA, adjusted EBITA, non-GAAP net income and
non-GAAP diluted EPS help investors identify and understand underlying
trends in our business without the effect of certain income or expenses
that are reflected in income from operations, net income and diluted
EPS. We believe that marketplace-based core commerce adjusted EBITA is a
measure that can help investors better understand the performance of our
marketplace commerce business, which is the contributor of the large
majority of our revenue. We believe that adjusted EBITDA, adjusted
EBITA, non-GAAP net income, non-GAAP diluted EPS and marketplace-based
core commerce adjusted EBITA provide useful information about our core
operating results, enhance the overall understanding of our past
performance and future prospects and allow for greater visibility with
respect to key metrics used by our management in our financial and
operational decision-making. We consider free cash flow to be a
liquidity measure that provides useful information to management and
investors about the amount of cash generated by our business that can be
used for strategic corporate transactions, including investing in our
new business initiatives, making strategic investments and acquisitions
and strengthening our balance sheet. These non-GAAP measures should not
be considered in isolation or construed as an alternative to income from
operations, net income, diluted EPS, cash flows or any other measure of
performance or as an indicator of our operating performance. These
non-GAAP financial measures presented here may not be comparable to
similarly titled measures presented by other companies. Other companies
may calculate similarly titled measures differently, limiting their
usefulness as comparative measures to our data.

Adjusted EBITDA represents net income before (i) interest and
investment income, net, interest expense, other income, net, income tax
expenses and share of results of equity investees, (ii) certain non-cash
expenses, consisting of share-based compensation expense, amortization,
depreciation and impairment of goodwill, and (iii) settlement of a U.S.
federal class action lawsuit, 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, 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, and (iii) settlement of a U.S. federal class
action lawsuit, which we do not believe are reflective of our core
operating performance during the periods presented.

Marketplace-based core commerce adjusted EBITA represents
adjusted EBITA for core commerce excluding the effects of (i) local
consumer services, (ii) Lazada, (iii) New Retail and direct import and
(iv) Cainiao Network.

Non-GAAP net income represents net income before share-based
compensation expense, amortization, impairment of goodwill and
investments, gain on deemed disposals/disposals/revaluation of
investments, settlement of a U.S. federal class action lawsuit,
amortization of excess value receivable arising from the restructuring
of commercial arrangements with Ant Financial, immediate recognition of
unamortized professional fees and upfront fees upon termination of bank
borrowings and others, as adjusted for the tax effects on non-GAAP
adjustments.

Non-GAAP diluted EPS represents non-GAAP net income attributable
to ordinary shareholders divided by the weighted average number of
shares outstanding during the periods on a diluted basis, including
accounting for the effects of the assumed conversion of convertible
preference shares.

Free cash flow represents net cash provided by operating
activities as presented in our consolidated cash flow statement less
purchases of property and equipment (excluding acquisition of land use
rights and construction in progress relating to office campus), licensed
copyrights and other intangible assets.

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 March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB   US$
(in millions, except per share data) (in millions, except per share data)
Revenue 61,932 93,498 13,932 250,266 376,844 56,152
Cost of revenue (32,504 ) (55,610 ) (8,286 ) (107,044 ) (206,929 ) (30,833 )
Product development expenses (6,686 ) (8,659 ) (1,290 ) (22,754 ) (37,435 ) (5,578 )
Sales and marketing expenses (7,641 ) (9,649 ) (1,439 ) (27,299 ) (39,780 ) (5,928 )
General and administrative expenses (4,551 ) (7,612 ) (1,134 ) (16,241 ) (24,889 ) (3,708 )
Amortization of intangible assets (1,329 ) (3,203 ) (477 ) (7,120 ) (10,727 ) (1,599 )
Impairment of goodwill       (494 )

 

   
 
Income from operations 9,221 8,765 1,306 69,314 57,084 8,506
Interest and investment income, net 1,945 18,665 2,781 30,495 44,106 6,572
Interest expense (1,175 ) (1,303 ) (194 ) (3,566 ) (5,190 ) (773 )
Other income, net 884   1,449   216   4,160   221   32  
 
Income before income tax and share of results of equity investees 10,875 27,576 4,109 100,403 96,221 14,337
Income tax expenses (4,164 ) (5,025 ) (748 ) (18,199 ) (16,553 ) (2,466 )
Share of results of equity investees (70 ) 828   123   (20,792 ) 566   84  
 
Net income 6,641 23,379 3,484 61,412 80,234 11,955
Net loss attributable to noncontrolling interests 1,028   2,534   377   2,681   7,652   1,140  
 
Net income attributable to Alibaba Group Holding Limited 7,669 25,913 3,861 64,093 87,886 13,095
 
Accretion of mezzanine equity (108 ) (83 ) (12 ) (108 ) (286 ) (42 )
Net income attributable to ordinary shareholders 7,561   25,830   3,849   63,985   87,600   13,053  
 
Earnings per share attributable to ordinary shareholders
Basic 2.95 10.02 1.49 25.06 33.95 5.06
Diluted 2.88 9.84 1.47 24.51 33.38 4.97
 
Weighted average number of share used in calculating earnings per
ordinary share
Basic 2,560 2,579 2,553 2,580
Diluted 2,619 2,625 2,610 2,623
 

ALIBABA GROUP HOLDING LIMITED
REVENUE

The following table sets forth our revenue by segments for the periods
indicated:

  Three months ended March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB   US$
(in millions) (in millions)
Core commerce(1) 51,287 78,894 11,756 214,020 323,400 48,188
Cloud computing(2) 4,385 7,726 1,151 13,390 24,702 3,681
Digital media and entertainment(3) 5,272 5,671 845 19,564 24,077 3,588
Innovation initiatives and others(4) 988 1,207 180 3,292 4,665 695
 
Total 61,932 93,498 13,932 250,266 376,844 56,152

__________________

(1)  

Revenue from core commerce is primarily generated from our China
retail marketplaces, Freshippo, 1688.com, AliExpress, Lazada.com,
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 March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB US$
(in millions) (in millions)
Core commerce 18,660 21,632 3,223 102,743 109,312 16,288
Cloud computing (1,063 ) (1,036 ) (155 ) (3,085 ) (5,508 ) (821 )
Digital media and entertainment (3,541 ) (3,854 ) (574 ) (14,140 ) (20,046 ) (2,987 )
Innovation initiatives and others (2,019 ) (3,270 ) (487 ) (6,901 ) (11,795 ) (1,757 )
Unallocated (2,816 ) (4,707 ) (701 ) (9,303 ) (14,879 ) (2,217 )
 
Total 9,221   8,765   1,306   69,314   57,084   8,506  
 

The following table sets forth our adjusted EBITA by segments for the
periods indicated:

  Three months ended March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB   US$
(in millions) (in millions)
Core commerce 22,186 27,484 4,095 114,100 136,167 20,290
Cloud computing (353 ) (164 ) (24 ) (799 ) (1,158 ) (172 )
Digital media and entertainment (2,595 ) (2,828 ) (421 ) (8,305 ) (15,796 ) (2,354 )
Innovation initiatives and others (860 ) (1,932 ) (288 ) (2,996 ) (5,971 ) (890 )
Unallocated (1,573 ) (1,803 ) (269 ) (4,997 ) (6,261 ) (933 )
 
Total 16,805   20,757   3,093   97,003   106,981   15,941  
 

ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONSOLIDATED
BALANCE SHEETS

 

As of March 31,

 

As of March 31,

2018

2019

RMB

RMB

 

US$

 

(in millions)

Assets
Current assets:
Cash and cash equivalents 199,309

189,976

28,308

Short-term investments 6,086

3,262

486

Restricted cash and escrow receivables 3,417 8,518 1,269
Investment securities 4,815 9,927 1,479
Prepayments, receivables and other assets 43,228 58,590 8,730
Total current assets 256,855 270,273 40,272
 
Investment securities(1) 38,192 157,090 23,407
Prepayments, receivables and other assets 26,274 28,018 4,175
Investment in equity investees (1) 139,700 84,454 12,584
Property and equipment, net 66,489 92,030 13,713
Intangible assets, net 27,465 68,276 10,173
Goodwill 162,149 264,935 39,477
Total assets 717,124 965,076 143,801
 
Liabilities, Mezzanine Equity and Shareholders’ Equity
Current liabilities:
Current bank borrowings 6,028 7,356 1,096
Current unsecured senior notes 15,110 2,251
Income tax payable 13,689 17,685 2,635
Escrow money payable 3,053 8,250 1,229
Accrued expenses, accounts payable and other liabilities 81,165 117,711 17,540
Merchant deposits 9,578 10,762 1,604
Deferred revenue and customer advances 22,297 30,795 4,589
Total current liabilities 135,810 207,669 30,944
 

ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONSOLIDATED
BALANCE SHEETS (CONTINUED)

 

As of March 31,

 

As of March 31,

2018

2019

RMB

RMB

  US$

(in millions)

 
Deferred revenue 993 1,467 219
Deferred tax liabilities 19,312 22,517 3,355
Non-current bank borrowings 34,153 35,427 5,279
Non-current unsecured senior notes 85,372 76,407 11,385
Other liabilities 2,045   6,187   922  
Total liabilities 277,685   349,674   52,104  
 
Commitments and contingencies

Mezzanine equity

3,001 6,819 1,016

Shareholders’ equity:

Ordinary shares 1 1
Additional paid-in capital 186,764 231,783 34,537
Treasury shares at cost (2,233 )
Restructuring reserve (361 ) (97 ) (15 )
Subscription receivables (163 ) (49 ) (7 )
Statutory reserves 4,378 5,068 755
Accumulated other comprehensive income (loss) (1) 5,083 (2,335 ) (348 )
Retained earnings (1) 172,353   257,886   38,426  
 
Total shareholders’ equity 365,822 492,257 73,348
Noncontrolling interests 70,616   116,326   17,333  
 
Total equity 436,438   608,583   90,681  

 

Total liabilities, mezzanine equity and equity 717,124   965,076   143,801  
 

_______________________________

(1)   We adopted ASU 2016-01, “Financial Instruments — Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities” beginning in the first quarter of fiscal year
2019. After our adoption of this new accounting update, equity
investments other than those accounted for under the equity method
or those that result in the consolidation of the investee are
required to be measured at fair value, with subsequent changes in
fair value recognized in the income statement. We have adopted this
new accounting update using the modified retrospective method. For
available-for-sale securities, RMB8,196 million in unrealized gains,
net of tax recorded in accumulated other comprehensive income as of
March 31, 2018 was reclassified into retained earnings upon the
initial adoption as of April 1, 2018. Investments measured under the
cost method of RMB59,942 million as of March 31, 2018 was
reclassified into investment securities as of April 1, 2018. The
consolidated balance sheets as of March 31, 2018 was not
retrospectively adjusted.
 

ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

  Three months ended March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB   US$
(in millions) (in millions)
 
Net cash provided by operating activities(1) 14,383 18,553 2,764 125,805 150,975 22,496
Net cash used in investing activities(1) (19,976) (16,751) (2,496) (83,764) (151,060) (22,509)
Net cash (used in) provided by financing activities (4,605) 719 108 20,359 (7,392) (1,101)
Effect of exchange rate changes on cash and cash equivalents,
restricted cash and escrow receivables (1)
(2,653) (1,142) (170) (6,065) 3,245 484
 
(Decrease) increase in cash and cash equivalents, restricted cash
and escrow receivables
(12,851) 1,379 206 56,335 (4,232) (630)
Cash and cash equivalents, restricted cash and escrow receivables at
beginning of period
215,577 197,115 29,371 146,391 202,726 30,207
 
Cash and cash equivalents, restricted cash and escrow receivables at
end of period
202,726 198,494 29,577 202,726 198,494 29,577
 

_______________________________

(1)   We adopted ASU 2016-18, “Statement of Cash Flows (Topic 230):
Restricted Cash,” beginning in the first quarter of fiscal year
2019. As a result of adopting this new accounting update, we
retrospectively adjusted the consolidated statements of cash flows
to include restricted cash and escrow receivables in cash and cash
equivalents when reconciling the beginning-of-period and
end-of-period total amounts shown on the consolidated statements of
cash flows. The impact of the retrospective reclassification on cash
flows from operating activities, investing activities and effect of
exchange rate changes for the year ended March 31, 2018 was an
increase of RMB634 million, an increase of RMB126 million and an
increase of RMB2 million, respectively.
 

ALIBABA GROUP HOLDING LIMITED
RECONCILIATIONS OF NON-GAAP
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES

The table below sets forth a reconciliation of our net income to
adjusted EBITA and adjusted EBITDA for the periods indicated:

  Three months ended March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB   US$
(in millions) (in millions)
Net income 6,641 23,379 3,484 61,412 80,234 11,955
Less: Interest and investment income, net (1,945) (18,665) (2,781) (30,495) (44,106) (6,572)
Add: Interest expense 1,175 1,303 194 3,566 5,190 773
Less: Other income, net (884) (1,449) (216) (4,160) (221) (32)
Add: Income tax expenses 4,164 5,025 748 18,199 16,553 2,466
Add: Share of results of equity investees 70 (828) (123) 20,792 (566) (84)

Income from operations

9,221 8,765 1,306 69,314 57,084 8,506
Add: Share-based compensation expense 6,255 7,110 1,060 20,075 37,491 5,586
Add: Amortization of intangible assets 1,329 3,203 477 7,120 10,727 1,599
Add: Impairment of goodwill 494

Add: Settlement of U.S. federal class action lawsuit

1,679 250 1,679 250
Adjusted EBITA 16,805 20,757 3,093 97,003 106,981 15,941

Add: Depreciation and amortization of property and equipment and
land use rights

2,649

4,409

657

8,789

14,962

2,229

Adjusted EBITDA 19,454 25,166 3,750 105,792 121,943 18,170
 

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 March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB   US$
(in millions) (in millions)
Adjusted EBITA for core commerce 22,186 27,484 4,095 114,100 136,167 20,290
Less: Effects of local consumer services, Lazada, New Retail and
direct import and Cainiao Network
2,914 7,204 1,074 8,783 25,422 3,788
Marketplace-based core commerce adjusted EBITA 25,100 34,688 5,169 122,883 161,589 24,078
 

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 March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB   US$
(in millions) (in millions)
 
Net income 6,641 23,379 3,484 61,412 80,234 11,955
Add: Share-based compensation expense 6,255 7,110 1,060 20,075 37,491 5,586
Add: Amortization of intangible assets 1,329 3,203 477 7,120 10,727 1,599
Add: Impairment of goodwill and investments 89 3,450 514 20,463 11,360 1,693
Less: Gain on deemed disposals/disposals/revaluation of investments
and others
(153) (19,961) (2,974) (25,945) (47,525) (7,081)

Add: Settlement of U.S. federal class action lawsuit

1,679 250 1,679 250
Add: Amortization of excess value receivable arising from the
restructuring of commercial arrangements with Ant Financial
65 66 10 264 264 39
Add: Immediate recognition of unamortized professional fees and
upfront fees upon termination of bank borrowings
92
Adjusted for tax effects on non-GAAP adjustments(1)

(127)

1,130

167

(267)

(823)

(123)

 
Non-GAAP net income 14,099 20,056 2,988 83,214 93,407 13,918

__________________

(1)   Tax effects on non-GAAP adjustments are comprised of tax provisions
on the amortization of intangible assets and certain investment
gains.
 

ALIBABA GROUP HOLDING LIMITED
RECONCILIATIONS OF NON-GAAP
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES (CONTINUED)

The table below sets forth a reconciliation of our diluted EPS to
non-GAAP diluted EPS for the periods indicated:

  Three months ended March 31,   Year ended March 31,
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 7,561 25,830 3,849 63,985 87,600 13,053
Dilution effect on earnings arising from option plans operated by
equity investees
(11) (11) (1) (21) (42) (6)
Net income attributable to ordinary shareholders – diluted 7,550 25,819 3,848 63,964 87,558 13,047
Add: Non-GAAP adjustments to net income(1)

7,458

(3,323)

(496)

21,802

13,173

1,963

 
Non-GAAP net income attributable to ordinary shareholders
for computing non-GAAP diluted EPS
15,008 22,496 3,352 85,766 100,731 15,010
 
Weighted average number of shares on a diluted basis 2,619 2,625 2,610 2,623
Diluted EPS(2) 2.88 9.84 1.47 24.51 33.38 4.97
Add: Non-GAAP adjustments to net income per share(3) 2.85 (1.27) (0.19) 8.35 5.02 0.75
 
Non-GAAP diluted EPS(4) 5.73 8.57 1.28 32.86 38.40 5.72

__________________

(1)  

See the table above for the reconciliation of net income to
non-GAAP net income for more information of these non-GAAP
adjustments.

(2) Diluted EPS is derived from net income attributable to ordinary
shareholders for computing diluted EPS divided by weighted average
number of shares on a diluted basis.
(3)

Non-GAAP adjustments to net income per share is derived from
non-GAAP adjustments to net income divided by weighted average
number of shares on a diluted basis.

(4)

Non-GAAP diluted EPS is derived from non-GAAP net income
attributable to ordinary shareholders for computing non-GAAP
diluted EPS divided by weighted average number of shares on a
diluted basis.

 

ALIBABA GROUP HOLDING LIMITED
RECONCILIATIONS OF NON-GAAP
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES (CONTINUED)

The table below sets forth a reconciliation of net cash provided by
operating activities to free cash flow for the periods indicated:

  Three months ended March 31,   Year ended March 31,
2018   2019 2018   2019
RMB RMB   US$ RMB RMB   US$
(in millions) (in millions)
Net cash provided by operating activities(1) 14,383 18,553 2,764 125,805 150,975 22,496
Less: Purchase of property and equipment (excluding land use rights
and construction in progress relating to office campus)
(2,603) (5,688) (847) (15,601) (32,336) (4,818)
Less: Acquisition of licensed copyrights and other intangible assets

 

(3,013)

 

(2,151)

 

(321)

 

(10,208)

 

(14,161)

 

(2,110)

 
Free cash flow 8,767 10,714 1,596 99,996 104,478 15,568

__________________

(1)   We adopted ASU 2016-18, “Statement of Cash Flows (Topic 230):
Restricted Cash,” beginning in the first quarter of fiscal year
2019. As a result of adopting this new accounting update, we
retrospectively adjusted the consolidated statements of cash flows
to include restricted cash and escrow receivables in cash and cash
equivalents when reconciling the beginning-of-period and
end-of-period total amounts shown on the consolidated statements of
cash flows. The impact of our retrospective reclassification on cash
flows from operating activities for the year ended March 31, 2018
was an increase of RMB634 million.
 

ALIBABA GROUP HOLDING LIMITED
SELECTED OPERATING DATA

Annual active consumers

The table below sets forth the number of active consumers on our China
retail marketplaces for the periods indicated:

  Twelve months ended

Jun 30,
2017

 

Sep 30,
2017

 

Dec 31,
2017

 

Mar 31,
2018

 

Jun 30,
2018

 

Sep 30,
2018

 

Dec 31,
2018

 

Mar 31,
2019

(in millions)
Annual active consumers 466 488 515 552 576 601 636 654
 

Mobile

The table below sets forth the mobile MAUs on our China retail
marketplaces for the periods indicated:

  The month ended

Jun 30,
2017

 

Sep 30,
2017

 

Dec 31,
2017

 

Mar 31,
2018

 

Jun 30,
2018

 

Sep 30,
2018

 

Dec 31,
2018

 

Mar 31,
2019

(in millions)
Mobile MAUs 529 549 580 617 634 666 699 721
 

GMV

The table below sets forth the GMV, in respect of our China retail
marketplaces for the periods indicated:

  Year ended
Mar 31, 2017   Mar 31, 2018   Mar 31, 2019
(in billions of RMB)
GMV
Taobao Marketplace GMV 2,202 2,689 3,115
Tmall GMV 1,565 2,131 2,612
Total GMV 3,767 4,820 5,727