Earnings Call: Q1 2022

Aug 3, 2021

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's June Quarter of 2021 Results Conference Call. At this time, all participants are on listen only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Rob Lynne, Head of Investor Relations of Alibaba Group. Please go ahead. Good day, everyone, and welcome to Alibaba Group's June quarter 2021 results conference call. With us today are Daniel Zhang, our Chairman and CEO Jill Cai, Executive Vice Chairman and Maggie Gu, our Chief Financial Officer. This call is also being webcast from the IR section of our corporate website. A replay of the call will be available on the website later today. Now let me that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, Please refer to our latest annual report on Form 20 F and other documents filed with the U. S. SEC or announced on the website of the Hong Kong Stock Exchange. Any forward looking statements that we make on this call are based on assumptions as of today, and we do not undertake any obligations to update these statements except as required under applicable law. Please note that certain financial measures that we use on this call such as adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, commerce, adjusted EBITDA before strategic investments, non GAAP net income, non GAAP diluted earnings per shares or ADS and free cash flow are expressed on a non GAAP basis. GAAP results and reconciliations of GAAP to non GAAP measures can be found in our earnings press release. Unless otherwise stated, growth rate Of all stated metrics mentioned during this call refer to year over year growth versus the same quarter last year. Translation in Chinese on another conference line. Please refer to our press release for details. During the Q and A session, we will take questions in both English and Chinese, and a third party translator will provide consecutive translation. All translations are for convenience purpose only. In case of any discrepancy, management statements in the original language will prevail. With that, I will turn the call to Daniel. Thanks, Rob. Hello, everyone. Thank you for joining our earnings call today. We started this fiscal year with a strong quarter. Over the past 22 years, Alibaba has grown into a company encompassing consumer Internet and industrial Internet with multiple engines driving our long term growth. In consumer business, we operated the largest consumer marketplace globally With 1,180,000,000 annual active consumers as of June 30, 2021, During the 1st fiscal quarter, our annual active consumers grew from 890,000,000 to $9,000,000 to $925,000,000 outside of China, Representing quarterly net adds of $45,000,000 in total. At the beginning of this fiscal year, We announced the plan to invest all of our incremental profit this year into core strategic areas such as technology innovation, support programs for merchants to lower their operating cost, user acquisition and experience enhancement, merchandising and supply chain capability, infrastructure development and new business initiatives. They were designed to enlarge our total addressable market, differentiate consumer and merchant value propositions from our competitors and generate greater consumer engagement and purchase frequency. Now I would like to Marketplaces, a key strategic area for our incremental investments is to evolve from 1 super app of Mobile Taobao into a multi app product metrics. We are glad to see Taobao Deals progress in user acquisition in less developed areas, contributing to over 10,000,000 of our new AACs During the quarter, thanks to its best value for money value proposition, idle fish, Which is expanding from a marketplace for secondhand product trading to a consumer to consumer community based marketplace for products and services, reached over 100,000,000 app MAUs during the quarter. Mobile Taobao, our flagship app for China retail marketplaces is focusing on creating a more engaging shopping discovery experience while satisfying our diversified consumer demand with the most comprehensive product offerings. New retail is another strategic area for our incremental investment, where we have built a multi format business model To serve a wide range of consumer needs, today, our consumer can enjoy 1 hour doorstep delivery of products ordered online through Free Chipotle and Taoxanda or same day or next day delivery of groceries purchase from Tmall Supermarket or order value for money products delivered Neste to neighborhood pickup points. We believe such multi format, multi service level new retail infrastructure built on Our highly efficient digital supply chain and fulfillment model can best satisfy the diversified demand of different consumer segments in different regions. Our community marketplaces business grew approximately 200% quarter over quarter In terms of GMV, while we expanded the gross flow area of our regional distribution centers At a faster rate at 260% quarter over quarter to provide better logistics support For business growth, we view community marketplaces not as an independent market segment, but one of the multiple business format in new retail, which is meaningful to us for continuous consumer acquisition and engagement. In the past few months, Chinese regulators have issued ratification requirements against community marketplace players selling below cost, which hurts the market integrity and community livelihoods. We have paid full attention to the regulatory requirements and will continue to operate with discipline. We are committed to building A sustainable digital community marketplace with improvement of livelihoods In local consumer services, we completed an important organizational upgrade and formed business metrics consisting of Ele. Me, AMAP and FLIKI. Ele. Me and AMAP will be our major consumer entry points for local services to home and to destination, respectively. During the quarter, Ele. Me achieved strong order growth Of over 50% year over year, we will continue to increase our investments in Ele. Me, AMAP, after years of investment, is evolving from a MAP service provider to an important entry point for consumers' discovery of local services near their destinations. Today, our consumers can find a wide range of services in AMAP, such as ride hailing, fuel services, hotel booking, tourist attraction ticketing and so on. During this fiscal year, we expect to attract over 100,000,000 transacting consumers in AMAP cross destination based local service. FLIGI, our virtual FLIGI, our vertical business for travel services, We'll focus on organizing high quality supply of hotel rooms, transportation and the tourist attraction services For consumer platforms such as AMAP and Alipay to further expand its penetration in our more than 900,000,000 annual active We continue to see strong growth in both revenue and AAC across our consumer facing business, Achieving 265,000,000 AEC, over $10,000,000,000 revenue and a 55 percent year over year revenue growth during the quarter. Lazada recorded over 90% year over year order growth for the quarter And Indonesia and Vietnam achieving the highest growth of over 100% year over year. AliExpress continues strong momentum in its major markets such as Spain, France and Russia, leveraging the improved cross border logistics solutions in partnership with Cainiao. However, as As the European Union recently abolished the VAT exemption for imported goods below €22, effective on July 1, 2021, we expect AliExpress business growth in Europe will be negatively Starting the December quarter in the September quarter, over the long run, We remain confident towards the growth prospects for our international retail market, And we'll continue our commitment to invest in this area. Tanyou, digital logistics infrastructure operator for our consumer business delivered another solid quarter with over RMB10 billion revenue and revenue growth of 50% year over year, Which is an indicator of healthy business development across multiple segments. The Consumer Logistics segment, Cai Nyo Post, an important network of consumer facing logistics service points continue to process increasing volume of packages. Annual post operators also seeing new business opportunities in our community marketplaces business, Which offer the potential to their role from logistics service providers to community group promoters. In supply chain segment, Tainyo sees a major business opportunity in providing manufacturers With highly efficient supply chain and the logistics services alongside the rapid growth of Taobao deal. In Global Logistics segment, Hainio's development of cross border export logistic network from China to our major markets in Europe significantly improved the logistics experience for our users on the e commerce platforms, Which supported further business volume growth in e commerce and logistics in a virtuous cycle. Alibaba Cloud's revenue increased by 29% year over year during quarter, primarily driven by robust growth in revenue from customers in the Internet, Financial Services and Retail Industries. From a product perspective, solutions for storage, analytics, learning, efficiency and the safety use of data were among the important growth engines for Ali Cloud and deliver higher revenue growth Similar to the last quarter, the slower year on year revenue growth of Alibaba Cloud was primarily due to revenue decline from a top cloud customer in the Internet industry, Which has stopped using our overseas cloud service due to local regulatory requirements. Excluding the revenue from this customer, Alibaba Cloud's revenue growth this quarter would be close to 40% year over year. As an important partner to the International Olympic Committee, Alibaba's cloud solution in collaboration with Olympic Broadcasting Services is supporting service delivery for right holder broadcasters for the first time during the Olympic Games Tokyo 2020, transforming how the Olympic Games are broadcasted to the world since Tokyo 19 64. Other than the updates on our business side this quarter, I believe Our investors will be even more focused on the recent regulatory change in the China Internet industry and expected impact on Alibaba. We are in the process of studying the regulatory requirements, evaluating the potential impacts on our relevant businesses, and we will respond positively with actions. We believe all these new regulations aim to foster The healthy development of the Internet Industry over the long run. In the context of China's economic growth and livelihoods improvement. This is consistent with Alibaba's long term vision and vision To serve SMEs with digital technology, to serve the underprivileged groups And to serve our consumers' demand for a better life. We continue to stay optimistic about the long term potential of China's economy and the long term growth prospects of Alibaba. We will fulfill our responsibilities as a platform in accordance with the regulatory requirements and continue to carry out our commitments to be a good company That creates long term value for the society in China and globally. Thank you all. Now I will turn it over to Maggie, who will walk you through the details of our financial results. Thank you, Daniel. Hello, everyone. Let me start with financial highlights for the June quarter. We delivered a strong revenue growth of 34% year on year to RMB206 1,000,000,000 during this quarter, which is Mainly driven by robust growth of our China Commerce Retail Business, China Logistics and International Commerce Businesses. Total adjusted EBITDA was $42,000,000,000 a decrease of 8% year over year. Our main China retail marketplace businesses continued to generate solid profitability, but as discussed last quarter, we're investing Our excess profits in key strategic areas and have increased standing in specific programs designed to support our merchants. For businesses other than commerce, we're still improving profitability of cloud computing segment and narrowing losses for DME segment. For June quarter, net income RMB42.8 billion or $6,600,000,000 Non GAAP net income was RMB43.4 billion or US6.7 billion dollars up 10% year over year. Alibaba has evolved into a multi engine company with businesses across different runways and our revenue continues to be more and more diversified. During the quarter, customer management revenue contributed 39% of overall revenue, while it used to be a much higher percentage of total revenue in the past years. We now have many more revenue streams from a diversified base of businesses that are also fast growing. Businesses such as China and International Retail Commerce grew 50% For more and more important drivers of our organic revenue growth. Talk about the investment in key strategic areas. Within our Commerce segment, we're investing in a number of key strategic areas to strengthen consumer experience, enhance loyalty, penetrate into less developed areas in China and further expand our presence Now let's look at the financial impacts of these investments during the quarter. First, IdolFish and Taobao Life has achieved a robust user growth as we increased our investment in these growth businesses. We have also Increased our spending on specific programs throughout the quarter to support our merchants' operations in our China retail marketplaces. Service fees for several software tools designated to improve their marketing business analytics capabilities were waived. Merchant's logistics costs relating to customer returns were also significantly reduced. Combined impact of these investments resulted in a 6% growth to RMB 60,000,000,000 in commerce adjusted EBITDA Before Key Strategic Investments. Commerce adjusted EBITDA decreased to RMB 45,600,000,000. The decrease reflected stepped up investment in key strategic areas with combined losses increasing RMB 8,700,000,000 year over year to RMB 13,900,000,000 for the quarter. Consumer services and Lazada and other investment businesses. All of these businesses illustrated robust growth key operating performances. As you can see in the slide, right hand side of slide, Daniel just now also talk about all of these growth metrics. As discussed on our call last quarter, we're committed To invest in our excess profits into strategic areas within commerce as they address new consumption demands and we'll continue to expand our addressable market in China. We believe these businesses have the potential to be the long term revenue growth drivers Excluding SBC as a percentage of revenue, cost of revenue ratio increased in June quarter due to higher proportion of our direct sales businesses From the consolidation of Sunart, which resulted in increases in cost of inventory Our cost of revenue excluding SOLAR and other EPW1P business was relatively stable compared to the same period last year. These direct sales businesses will continue to strengthen our new retail initiatives, especially in the development of our product sourcing capabilities. Sales and marketing ratio also increased, which was primarily due to an increase in marketing and promotional spending for key strategic areas and growth initiatives. Also, these areas are focusing on user acquisition engagement enhancement on our marketplace. G and A expense ratio remained stable at 3% during the quarter. So the revenue and EBITDA by segment, this slide provides you with an overall summary of our segment revenue and profitability for June quarter. Next, let me speak about our important segments. So let's take a closer look at the revenue and profitability of our business segment Commerce segment first. CMR grew 14% year over year to RMB 81,000,000,000. This growth was primarily due to the growth of online physical goods GMV, our China Retail Marketplace. The growth also reflected the increase in revenue from new monetization formats such as recommendation fees, etcetera. China retail orders revenue grew 82% year over year to 55,000,000,000 Due to consolidation of stars and strong growth from our direct sales businesses, including Tmall Supermarket and Hema, Commerce adjusted EBITDA decreased by 11%, primarily due to the investment we talked about just now. Alibaba Cloud. The Cloud revenue grew 29% year over year to RMB 16,000,000,000 RMB. Similar to last quarter, the slower quarterly revenue growth is primarily due to this revenue decline from the top customer Internet industry that has terminated their relationship with respect to their international business due to non product related requirements. Going forward, we believe that our cloud computing revenues will be further diversified across customers and industries. Starting this quarter, we reclassified the results of Thinktalk business to cloud computing segment Because ThinkTalk remains in the investment phase, that the reclassification of ThinkTalk Financials resulted in lower of cloud computing profitability and did not materially add to revenue during the quarter. After incorporating Alibaba still generated adjusted EBITDA of $340,000,000 Next, our DME. DME revenue during the quarter was RMB 8,000,000,000 reflecting an increase of 15% year on year. The increase was Currently due to the increase in revenues from YUKO and iPicture, adjusted EBITDA losses continue to narrow to RMB0.4 billion during the quarter. This is primarily due to improved quality of content that resulted in Now let's review some of the client items for selected financial metrics. Interest and investment income was $14,000,000,000 in the quarter. Decrease was primarily due to the lower net gains arising from the fair value investments. The above mentioned gains were excluded from our non GAAP net income. Share of results equity method investees was RMB 6,000,000,000 in June quarter. The year over year increase was mainly due to the increase in share of profit of our equity investment company, including Ants and ATS, a bunch of other companies. So that's the selected financial metrics notes. And for the quarter, net income attributable to ordinary shareholders was $45,000,000,000 or $7,000,000,000 Non GAAP net income US7 $1,000,000,000 increase of 13% mainly due to an increase in share of profit Active Investment Investes. We continue to have a strong net cash position. As of June 30th. Cash and short term investments were RMB471 1,000,000,000, which is approximately seventy $3,000,000,000 Free cash flow was RMB 21,000,000,000 The decline of Approximately RMB 16,000,000,000 year over year was driven mainly by first partial settlement in the amount of RMB 9,000,000,000 of 18,200,000,000 anti monopoly fine, this payment of the penalty and increased spending in key strategic areas and growth Now to conclude my prepared remarks, I'd like to talk about 3 things. Number 1, our guidance fiscal year remains unchanged. Number 2, our investments in new strategic growth areas remain on target and all the businesses we have invested are showing rapid growth. In the coming quarters, we'll continue to invest additional capital into programs that support our merchants and developing new businesses in strategic growth areas that will help us increased consumer wallet share and penetrate into new addressable markets. Our strong profit and cash flow generation capability gives us internal resources to focus on long term value creation. Number 3, we are increasing our share repurchase program from US10 $1,000,000,000 to US15 $1,000,000,000 This is the largest share repurchase program in the company's history because we're confident of our long term growth prospects. Since April 1 until now, We have repurchased approximately 18,000,000 of our ADS for about US3.7 billion dollars Now let's open up for Q and A. Thank you. Hi, everyone. For today's call, you are welcome to ask questions in Chinese or English. 3rd party translator will provide consecutive interpretation for the Q and A session. Our management will address your question in the language you ask. Please note that the translation is for convenience purpose only. In the case of any discrepancy, our management statement So now operator, please connect speaker and SI conference lines now, and then we'll start the Q and A. Thank you. Thank while we compile the Q and A roster. And to give more people the opportunity to ask questions, please keep yourself to no more than first question comes from the line of Thomas Chong of Jefferies. Your line is open. Please go ahead. Thank you very much management. Good evening and thank you for taking my question. My first question has to do with the multi app strategy that you presented in your prepared remarks just now. In particular, we note that Taobao Deals is developing very well with robust growth in the user base. I'm wondering if you could tell us please what KPIs you have set and are looking at in terms of the ongoing development of Taobao Deals in terms of The kind of user base you intend to reach and your monetization strategy. Secondly, I'd like to ask about the recent media reports that we've all been reading about increased activity that is expected to be realized in the Internet industry. I'm wondering how management views these Thank you. Well, on your first question regarding the multi app strategy, as I said in my earlier remarks, With the development of Taobao Deals, we are working on building a more complete app matrix to better serve the different needs of different consumers. We already have very large consumer base with over 900,000,000 AACs and they all have different preferences. In fact, the same user So it's very important to us to be able to cater to all of those different kinds of needs and demands with an appropriate product matrix. Taobao Deals has a very clear value proposition, namely offering users the best value for money. And it's precisely that extremely clear positioning An important goal of Taobao Deals is to help us grow user base adding incremental new users, especially from the less developed regions of China, and also to cater to Yes, special demands of certain consumers when they're looking for value for money. So Taobao Deals is all about growing the user base, Growing the business and catering to these different kinds of demands. And we're particularly pleased to note that the development of Taobao Deals has already resulted in incremental growth of our user base In China, our AAC number in China by 10,000,000. Of course, while leveraging Tabo deals to satisfy these kinds of demands, we're also hard at work building a highly efficient supply chain direct from manufacturer or producer, including industrial manufacturing basis, agricultural production basis, direct to consumer logistics and supply chain. 2nd, let me address the question about connectivity. We're aware that there have been media reports in this connection and this will be a question of interest I'm sure to many investors. Our view on connectivity has been consistent and extremely clear. We believe that connectivity Is a core value of the Internet. And we also believe that openness is a fundamental and should be a fundamental characteristic of the digital economy. When you can achieve circulation of users, of information, of data, Not only within, but across and among different platforms that certainly will be conducive to realizing greater social value To a greater extent than the smaller circulation that could only be achieved within the same platform. So we do see cross platform openness and connectivity as a positive trend We note that this issue of connectivity and openness is also of concern to our merchants and consumers. For merchants and in particular for SMEs. It would certainly reduce their traffic acquisition costs And help improve their operating efficiency and make it more convenient for them to do business at lower cost. Similarly for consumers, it would enable a better user experience across platforms for shopping, for payment for accessing different services and bring a greater level of convenience to them as well. So for all of the key stakeholders On Internet Platforms, we see this as positive. We also take note of the launch by MIIT of a regulatory review and rectification project on Internet Companies, with a particular focus on practices like the discriminatory blocking of links to other platforms or blocking of services offered project and of course ensure our compliance with all regulatory requirements. And to borrow a popular saying Lately, we will work to find common ground and move forward together. Thank you. Our next question is from the line of Eddie Lang of Bank of America Merrill Lynch. Please go ahead. Good evening, guys. Thank you for taking my question. Just two quick questions about regulation. The first one is we have seen some regulatory focus on data in general. So how might that affect compliance and IT infrastructure course. And then secondly, in the past few months, we have also seen media reporting regulators seems to be looking at the use of heavy subsidies in the industry, including some commodity group buy business. So how may that affect our investment strategy and user acquisition tactics in some of these new initiatives. Thank you. Okay. Let me answer these two questions. First about data, well, I think Actually, in recent months, the Chinese regulators issued the data I think in June, they issued the data security law. And in recent months, they also have issued a guidance and also to waiting for comments About the data security review. We believe this is very, very important and we believe These laws and registrations will safeguard the long term development of digital economy because As digitalization is an inevitable trend and data is becoming is a common understanding that data is a core asset for company, for people and even for country. So, to adopting these legislations relating to data security, is very important. And China is not the Only country do this. Actually, when you look at what happened in U. S. And Europe, regulation on critical information infrastructure, personal data protection, so on and so forth has been already been implemented. So for Alibaba, digitalization is our is core of our business. Data security is always the core account tenant of our business. And we as always, we pay highest attention to this topic. And right now, we are carrying out a self compliance checks on the latest regulatory requirement. And we strongly believe that to further strengthen the data protection For the second question about the subsidies and the way of acquisition of new customers, I think generally speaking, I think we are very happy to see the recent, I mean, actions and guidance from the regulators for an orderly market. As always, we believe that Subsea cannot create the long term value of the business Cannot create the long term value of the customers. So if you look at the Alibaba history, actually, we never Grow Our Business on Subsidies based on subsidies. We strongly believe that the key thing is still the value creation for the long term. And so that's why we in this year, when we plan our incremental investment, we always believe focus on the value creation. And we strongly we think that For other companies who continues loss making, but still try to, I mean, enlarge the scale by subsidies. I think at the end of the day, Many thanks, Daniel and our translator. Thank you. Next question please. Thank you. Our next question is from the line of Alex Yao of JPMorgan. Your line is open. Please go ahead. Thank you. A couple of questions, if I may. First of all, I'd like to ask about We see very clearly in the financial results that you've released the spending side of the equation and where these investments have gone. Could you tell us a little bit more please about the ROI on those investments? How you'll be tracking that? What are the KPIs you'd be looking at internally? Will it be user growth or other KPIs perhaps? And then my second question By way of follow-up on the earlier question about data, I'm wondering how these new regulatory requirements and developments will perhaps affect Alibaba's ability going forward To make use of data, to collect data, process data, utilize data, especially for monetized services Like advertising, if you could speak about that in a bit more detail. Thank you. Investment in key strategic areas. Community marketplace. Thank you. Well, if you refer to the PowerPoint That I prepared to go along with my earlier prepared remarks. You will see that we outline all of these incremental investments that we're making in terms of the different areas they're going to. So as you say, where the expenditure is being channeled is very clear. We have our community marketplace business, Tawod Deals, Local Services, in the international business, Lazada, new retail and to a lesser extent also Sainiao. And then on the right hand side of that very same slide, we gave data to show how that spending is paying off. And you'll see that in all of those different areas, progress is being made and things are going very well. In the Q1, by 200% or be it in the GFA RDC area has been increased by 2 60%. So that's an upfront investment in capacity Idlefish has grown to MAU user base now of over 100,000,000 and Tabak deals, The AAC user base has exceeded now 190,000,000. Willema orders up by 150%. So in the different business areas, I think different metrics should be looked at to understand the return on investment. Certainly in the consumer business, number of users is a very important metric to keep tracking. As Daniel shared earlier, our total AEC number in China and overseas taken altogether has now reached 1,180,000,000 with the domestic user base in China, The AEC number now having reached 912,000,000. So the overall China Plus global user base Has grown by €45,000,000 Also as Daniel has previously stated, we have a goal in the foreseeable future within say 3 quarters to grow our domestic user base in China to €1,000,000,000 or more. Now you may say it's not a very big stretch to get from €900,000,000 plus to €1,000,000,000 But that's actually a huge difference if you think of that user base interacting with all of these different businesses, be it local services, be it Idlefish, be it Taobao and so on. We're talking about growing that user base further, but also significantly enhancing stickiness, so that those users avail themselves of all of those stickiness so that those users avail themselves of all of those different businesses. So just to finish the answer, internally, we will evaluate the success of these investments in different ways in different businesses, but primarily in three dimensions. The first of which I was just speaking about user base growth, but also applications and experience. So when it comes to user base, Something very important to understand that differentiates us from the other platforms and makes those numbers even more meaningful is that these users are Using different apps and different services within the Alibaba ecosystem and we'll continue to grow their usage across those different Secondly, when it comes to applications, we're tracking of course order growth and GMV growth and we'll continue to report to you on that. And then the 3rd dimension is user experience and that would include improvement in supply as well as in fulfillment. And going forward, we'll Certainly be sharing with you more specific KPIs in that context. For example, in our community marketplace business, our on time delivery rate, which is already very high. But going forward, we will be reporting to you in more detail on KPIs in each of those three dimensions. Thank you. This is Daniel to answer the second question regarding data. Alibaba has always held itself to the highest standards and the strictest of requirements when it comes to collecting data and utilizing data. We've always done that consistently and will continue to do that as New legislation and new policy requirements are developed. We will ensure strict and full compliance With the requirements of the law as well as with implementation guidance that is further developed, it is our commitment Your question also Touched on the potential impact of new laws and policy requirements around data collection and utilization. In terms of revenue growth, business growth, I would simply underscore that Alibaba has never looked at data utilization or algorithm utilization as a single standalone KPI And to give a specific example to illustrate what I mean by that, in our consumer advertising business, We have never sought to leverage data or algorithms to achieve the maximization monetization in the consumer advertising space. We think it's much Less important to maximize click through rates compared to the paramount importance of providing top quality user experience, a high level of user satisfaction. So we've always approached the utilization of data With the intention of growing value for the community, for the users and society. Therefore, we see the enactment of data security legislation efforts to ensure the better protection and stricter use of data as positive in terms of Being able to foster value for society in the long term and to allow good companies like Alibaba to Thank you. Just a minor correction on the English translation before, I think we meant to say Elemont Food Delivery's order growth is 50%, Not 150%. Next question? Thank you. Our next question is from the line of Piyush Mubayi of Goldman Sachs. Your line is open. Please go ahead. Thank you for taking my questions. I have two questions. The first is on the cloud growth rate, which is down to 29% from 37%. Could you just take us through what happened in the quarter to that resulted in that step down in growth rate when we had seen the impact of the customer moving out in the previous quarter. So how much of it was that customer? And also if you could just shed some light on what the core growth rate for the cloud business in China is that would be helpful. And the second is in looking at CMR. Could you just give us a feel for how the CMR is trending versus the core GMV for your business? And any color around how GMV projections would look like through the potentially the next quarter? And I ask that because Through the quarter or through the past quarter also we had, even based on NBS data, we had a sluggish May, but a remarkably better June. And I presume that a lot of the improvement in June was fostered by you. And if that pace of growth is a function of how you're fostering growth, I wonder how the rest of the year looks. Thank you. Thank you, Piyush, for your questions. Let me answer the 2 and then maybe Daniel's supplement. So for cloud revenue, we talked about the top this one single top cloud customers impact our revenue. So without this impact, our cloud revenue would have been showing close to 40% year on year growth. And we do see strong growth in many industries within our core business like Internet Finance and Retail Sector, etcetera. Talk about this one customer impact. We expect this impact to continue for the remainder of this year and until the full exit of this customer's international revenue. So Looking forward, as you've seen, there are many changes and also new rules and regulations comes out. There might be impact on other customers, for example, like online education customers. However, overall, we still believe the addressable market for Jai cloud service is still huge, And we just kept focusing on all of these solutions, products technology upgrade, ensure the customer experience and to grow the business. So That's for the call. There will be some near term bumps and a continued impact from that top customer. One more thing To add to the cloud revenue, it's about concentration risk you might have in mind. So if we take out that one customer, our top 10 external customers' revenue contribution to our total revenue is single digit. So we're pretty diversified in the cloud revenue. So question 2 about CMR growth. The CMR growth is has this linear relationship with the GME growth. So we see that relationship still there. One thing I want to highlight is that CMR as a percentage of total revenue right now is 39 percent. So we do have a lot of new revenue streams coming in and I think we will pass new pie. Going forward, GMV growth, I think with the total national GMV growth, you can tell from the MBS data. We are quite representative to the total Hi. If you look at our over $8,000,000,000,000 total GMV as a percentage of total China's consumption is becoming Very important and essential. So it can't be very different from the whole national online GMV Growth. Danny, you want to supplement? One thing to add before I give to Daniel is that the future revenue stream, I think whatever we're investing nowadays, including all of these new strategic business areas, including all these infrastructure like supply chain capability and fulfillment capability, construction, it aim to all of these aim to provide value, additional value to our customers. Once we get the skill of the business development The business and the customers keep coming to use our services. There will be opportunity for us to monetize the value provided. So these are going to be new revenue resources to our overall group revenue. Thank you. Yes. Just to add a few words on the cloud business. I think the most important thing Yes, to look at the cloud business about the total addressable market in the long term. And I think All the people can recognize that today is just at beginning stage. And Just Maggie share with you our business situation from a customer portfolio perspective. Now I would just I just want to add a few words on it from a product perspective. I think today for many enterprise customers, how to run an efficient I mean infrastructure is basically the entry point I mean services they need When they decided to move to cloud. And over time, we are happy to see that they get used to When they move to the cloud, they will have a higher demand in terms of how to collect and especially the computing and the usage of the data. So that's why they have a high demand on the not only on the data storage, but also on the data analytics, On the database and even data security relevant services. So actually, this is exactly what I said in my remarks that in this particular quarter, we see a very if you look at the growth rate by product, by services. Actually the services for data usage, data storage and data analytics, data securities. Actually, their growth rate is higher than average. So I think it's more like we have this entry point services As ours and then going forward, we try to up sales and cross sales many more services Thank you, Daniel. Thank you. Okay. Next question. Thank you. Next question is from the line of Jerry Liu of UBS. Please go ahead. Marketplace based quarter. Yes. Thank you, management. I have a question also on investment, which we have been discussing, but I'd like to know If you could tell us a bit more about the investments you're making in the marketplace based core and also in particular in Taobao live streaming. Marketplace Thank you. Well, I'll take that question. I think it's Very simple answer. When you ask about the marketplace based core and EBITDA And how we should look at that. We're investing as we said in new businesses. So when we used to talk about marketplace based core, it was Taobao And TMOS. Now we're working hard on building all of these different businesses each with its own unique and We take a different perspective in evaluating marketplace based core profit. In terms of live streaming, we see that not merely as a new approach to selling goods online, rather we see it as an integral part So One of the key things that Alibaba brings to merchants and that distinguishes Alibaba It's our ability to provide multi dimensional, multi use case, multi value services 360 and what merchants really want and need is the ability to conduct lifecycle management of their customers. The ability to track and measure a range of KPIs around their customers, revenue profitability and not just the ability to track the success of 1 or 2 live streaming sessions. That's just one part of the process, but So going forward, we will continue to develop this comprehensive digital ecosystem and a comprehensive suite of services To support and enable merchants. And when merchants are supported and enabled in this way, of course, that is how consumers will be able to experience the best possible online experience. Okay. I believe that's our time for today. I thank everyone for joining today. And if you have any questions Please do contact me and the IR team. Thank you very much. Thank you. Thank you.