Alibaba Group Announced Earnings for Quarter Ending September 30, 2017

It is earnings season, so here is the Q earnings report from Alibaba Group. The company even provided a nice infographic for the highlights and it all looks really good.

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Bottom line, the company beat many estimates and the stock is slightly up in morning trading.

Here is The Press Release from Alibaba Group

Alibaba Group Holding Limited (NYSE: BABA) today announced its financial results for the quarter ended September 30, 2017.

“We had an outstanding quarter. Our consumer insights and technology innovation were the key drivers behind our customer value proposition across the Alibaba economy,” said Daniel Zhang, Chief Executive Officer of Alibaba Group.

“We are seeing the early results from our efforts to integrate online and offline with our New Retail strategy, and consumers have benefited from access to high quality products, improved customer experience and the tremendous convenience of shopping anytime, anywhere.”

“This quarter we delivered excellent results, with overall revenue growth of 61% demonstrating the robust momentum in our core commerce business and across the Alibaba economy,” said Maggie Wu, Chief Financial Officer of Alibaba Group.

“We generated approximately US$3.4 billion in non-GAAP free cash flow during the quarter, which enables us to invest in our future growth areas of core commerce, including logistics, cloud computing, digital entertainment and other innovation initiatives.”

For the quarter ended September 30, 2017, net cash provided by operating activities was RMB30,507 million (US$4,585 million).

BUSINESS HIGHLIGHTS

In the quarter ended September 30, 2017:

Revenue was RMB55,122 million (US$8,285 million), an increase of 61% year-over-year.
Revenue from core commerce increased 63% year-over-year to RMB46,462 million (US$6,983 million).

Revenue from cloud computing increased 99% year-over-year to RMB2,975 million (US$447 million).

Revenue from digital media and entertainment increased 33% year-over-year to RMB4,798 million (US$721 million).

Revenue from innovation initiatives and others increased 27% year-over-year to RMB887 million (US$134 million).

Annual active consumers on our China retail marketplaces reached 488 million, an increase of 22 million from the 12-month period ended June 30, 2017.

Mobile MAUs on our China retail marketplaces reached 549 million in September 2017, an increase of 20 million over June 2017.

Net income was RMB17,408 million (US$2,616 million), income from operations was RMB16,584 million (US$2,493 million) and adjusted EBITDA was RMB25,031 million (US$3,762 million). Operating margin was 30%, adjusted EBITDA margin was 45% and adjusted EBITA margin for core commerce was 57%.

Diluted EPS was RMB6.78 (US$1.02) and non-GAAP diluted EPS was RMB8.57 (US$1.29).
Net cash provided by operating activities was RMB30,507 million (US$4,585 million) and non-GAAP free cash flow was RMB22,505 million (US$3,383 million).

BUSINESS AND STRATEGIC UPDATES

Core Commerce

Taobao – innovative programs driving loyalty and engagement. Taobao App’s highly relevant personal recommendations and engaging content continue to drive robust growth in active users and engagement.

In September 2017, user activities on the Taobao App drove a quarterly net increase of 20 million mobile MAUs on our China retail marketplaces to a total of 549 million mobile MAUs.

The Taobao App is not only a destination for shopping but a community-based platform for sharing product knowledge and lifestyle content that drives user engagement and retention.

During the quarter, we launched a unified rewards-based loyalty program across the Tmall and Taobao marketplaces, called 88 Loyalty Membership, to enhance consumer engagement and loyalty.

Membership is free and members are tiered by loyalty scores based on their quality and frequency of spending and social engagement, entitling them to different levels of loyalty benefits.

Members in progressively higher tiers gain more access to exclusive privileges, products and content. Over 29 million consumers participated in our inaugural Members Festival on August 8.

Tmall – extending B2C market leadership and delivering high quality products to consumers. Tmall recorded 49% year-over-year growth for physical goods GMV in the quarter ended September 30, 2017.

We achieved robust growth across all major categories. In particular, the accelerated growth in consumer electronics and FMCG categories reflects our commitment to building leadership in these two important categories.

We witnessed success in new customer acquisitions through highly coordinated marketing and promotional campaigns, which partially drove an accelerated increase in annual active consumers to 488 million for the 12 months ended September 30, 2017, a net increase of 22 million from the prior quarter and taking annualized growth to double digits for the first time in the past four quarters.

During the quarter, Tmall demonstrated its data technology capabilities as the leading brand-building and retail distribution platform in China. Our Luxury Pavilion on Tmall offers a unique channel for premium brands to extend their reach, launch new product campaigns and take advantage of omni-channel solutions specifically targeting affluent Chinese consumers.

For example, the algorithms powering our Tmall App enabled easy access by higher tier members of our 88 Loyalty Membership to the Luxury Pavilion, with personalized brand pages and product recommendations.

These members also receive exclusive perks such as pre-orders of limited edition products and invitations to celebrity events. The growing list of partnering brands include Loewe, Burberry, LA MER, Maserati, Guerlain and Zenith.

11.11 Global Shopping Festival. In the ninth year of the world’s largest 24-hour shopping event, this year’s 11.11 will showcase:

Alibaba Economy at scale. 11.11 will demonstrate the technological innovation and global scale of the entire Alibaba Economy. More than 140,000 brands and hundreds of millions of consumers will participate in 11.11 this year.

This shopping festival will be supported by our global cloud, payment and logistics infrastructure. Consumers will enjoy seamless payment and consumer loan services provided by Ant Financial.

Alibaba Cloud will serve as the core technology and computing backbone to ensure the best consumer experience throughout the festival. Cainiao Network expects over 3 million logistics personnel to facilitate the hundreds of millions of packages that will be generated from the festival.

Power of the Chinese consumer. We expect that hundreds of millions of Chinese consumers who visit our platforms on November 11 will have access to over 60,000 international brands and merchants to satisfy their increasing demand for goods and products from around the world.

This year, Tmall will, for the first time, leverage its popularity outside China to bring over 100 domestic Chinese brands to international markets, targeting millions of overseas Chinese consumers in Asia and the rest of the world.

New Retail implementation. Our unique New Retail model with integrated online-offline customer offerings will be showcased in store locations across China. More than 1,000 brands will convert nearly 100,000 physical locations into “smart stores” and our channel distribution solutions make it easy for more than 500,000 local neighborhood stores and Rural Taobao service centers to sell to consumers in lower-tier cities and rural villages.

New Retail – from proof of concept to rapid expansion. As part of our effort to create a seamless online and offline consumer experience, we expanded our Hema fresh grocery footprint and launched Tmall-branded franchised convenience stores.

During the quarter, Hema added new stores in major cities in China, bringing the total number of Hema stores to 20 as of September 30, 2017.

We have taken our Hema model to our retail partners, who have begun to open and operate Hema franchised stores, extending coverage for the benefit of consumers.

In August, the first Tmall-branded franchised convenience store opened through the Lingshoutong Retail Sourcing Platform (“LST”).

The LST platform is a digital sourcing platform that has been adopted by over 500,000 neighborhood mom-and-pop shops across China. The platform allows merchants to source from a broad selection of brands and products that can be efficiently delivered to their stores; increasing their potential revenue opportunity and lowering operational costs.

The brand partners of LST benefit from deeper distribution channels, especially in lower tier cities in China where organized retail is less developed.

International – further investments for long-term growth. Our cross-border and international consumer businesses continue to exhibit robust growth.

Revenue from our international commerce retail business reached RMB2,878 million (US$433 million) in the quarter ended September 30, 2017, representing a 115% year-on-year growth, driven by strong growth in our Southeast Asian platform Lazada and our China outbound platform AliExpress.

The growth of Lazada and AliExpress further expands our customer base outside China.

During the quarter, cooperating with Taobao Marketplace, Lazada expanded the “Taobao Collection” to expand Lazada’s product offerings in three additional markets including Indonesia, the Philippines and Thailand, adding to the existing markets of Singapore and Malaysia.

We will continue to invest aggressively in the nascent markets in Southeast Asia as well as launch innovative services to benefit consumers in the region.

Building upon the significant progress made in educating the U.S. market on the Chinese consumption economy during the Gateway ’17 conference in June, we expanded the geographic reach of our efforts to on-board small businesses from outside China to sell into China by hosting the first Gateway ’17 conference in Canada in September.

Over 3,000 Canadian small businesses and entrepreneurs attended the event in Toronto to learn about business opportunities in the China market that present themselves through our ecosystem.

Cloud Computing

Cloud computing revenue grew 99% year-over-year to RMB2,975 million (US$447 million), driven by both robust growth in paying customers and improving revenue mix to higher valued-added services.

We are seeing significant traction and diversification of customers and revenue, and will continue to invest to further expand the market through valuable services for our cloud customers.

In the September 2017 quarter, Alibaba Cloud launched 245 new products and features, including major products that enable large enterprises to achieve higher computing performance and storage capability.

For example, our new self-developed X-Dragon Cloud server combines the performance and isolation capabilities of bare metal servers and the elasticity and agility of virtual machines. It is particularly suitable for mission critical applications requiring high performance guarantee and strong tenant isolation for enterprises.

In addition, the newly released relational database POLARDB is integrated with our proprietary distributed storage backend for optimized performance and can store up to 100TB of data per TB instance.

Alibaba Cloud continues to develop holistic solutions to tackle the challenges of large enterprises spanning a variety of industries. Selected large enterprise customers in China include:

Philips, one of Fortune 500 companies, has migrated their Enterprise IT applications in China onto Alibaba Cloud. This has resulted in improved operational data utilization and efficacy as well as largely reduced costs.

Kweichow Moutai, one of the world’s most valuable Chinese liquor companies, which is publicly-traded in China, is using our cloud products including elastic computing, content delivery, database, security and others services to build its digital marketing platform which enables it to better engage with its consumers.

Bank of Nanjing, a publicly-traded bank in China, is migrating the core system of its Internet finance business to the Alibaba Cloud platform. Bank of Nanjing is adopting a range of proprietary cloud products including our OceanBase database and big data platform as well as other services designed specifically for the financial service sector by both Alibaba Cloud and Ant Financial.

We held the annual Computing Conference 2017 in Hangzhou in early October. The four-day event featured more than 800 industry experts and thought leaders at over 120 forums, covering topics such as artificial intelligence, blockchain, Big Data, quantum computing, DevOps and the Internet of Things (IoT).

Approximately 60,000 people attended in person and millions viewed the conference online.

During the conference, we launched an innovative global research program, “Alibaba DAMO Academy,” which is designed to bridge the gap between academic and industry research in the field of technology development to solve real-world problems.

We intend to invest more than US$15 billion over the next three years on our research and development efforts, which will include the Alibaba DAMO Academy.

Digital Media and Entertainment

During the quarter, we successfully executed our strategy of acquiring and developing a mixture of licensed and original content that resulted in greater consumer mind share in both the drama and variety show categoris.

As a result, daily average subscribers of Youku video subscriptions increased over 180% year-on-year during the quarter ended September 30, 2017. We believe a strong content pipeline, especially with a focus on original content, offering greater flexibility around availability and distribution, will bring us sustainable long-term advantages in video entertainment.

Innovation Initiatives

AutoNavi continues to strengthen its position as a leading provider of digital map, navigation and location-based services in China. For the National Day Golden Week holiday campaign, AutoNavi launched location-based interactive marketing services for brands and retailers across different industries, resulting in approximately 4.7 billion branded impressions and enabled the distribution of RMB1.1 billion in targeted coupons.

Complete numbers are available here.

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