Earnings Call: Q1 2021

Aug 20, 2020

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's June Quarter 2020 Results Conference Call. At this time, all participants are in a 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 Lin, Head of Investor Relations of Alibaba Group. Please go ahead. Good day, everyone, and welcome to Alibaba Group's June quarter 2020 results conference call. With us are Daniel Zhang, Chairman and CEO Zhou Cai, Executive Vice Chairman Maggie Wu, Chief Financial Officer. This call is also being webcast from our IR section of corporate website. A replay of the call will be available on our website later today. Now, let me quickly cover the Safe Harbor. Today's discussion will contain forward looking statements. These forward looking statements involve inherent risks and uncertainties that may cause 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, which are announced on the website of Hong Kong Stock Exchange. Any forward looking statements that we make on this call are based on our assumptions as of today, and we do not undertake any obligation 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, marketplace based core commerce adjusted EBITDA, non GAAP net income, non GAAP diluted earnings per share or ADS and free cash flow are expressed on a non GAAP basis. Our GAAP results and reconciliation of GAAP to non GAAP measures can be found in our earnings press release. Unless otherwise stated, growth rates of all stated metrics mentioned during the call refers to year on year growth versus the same quarter last year. In addition, during today's call, management will give their prepared remarks in English. A third party translator will provide simultaneous Chinese translation 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 the case of any discrepancy, management statement in the original language will prevail. With that, I will now turn the call to Daniel. Hello, everyone. Thanks for joining our earnings call today. We have delivered another strong quarter. Although the global community continues to struggle with uncertainties surrounding the pandemic, we have seen encouraging signs of recovery in China due to effective management of the outbreak in vast majority of the country. COVID-nineteen has accelerated digital transformation of consumer behavior and enterprise operations. Alibaba is a key beneficiary of this development, with most of our businesses, including core commerce and cloud computing, have recovered and resumed healthy growth. The pandemic has fundamentally altered our macroeconomic environment and everyday life, but it has also introduced new opportunities. Digital adoption and transformation is the prevailing trend in this changed landscape, and we are confident that we can create Alibaba's future by capitalizing on the opportunities in this challenging environment, just as we did in 2003 during SARS and in 2008 during the global financial crisis. In the 12 months ended June 2020, annual active consumers on our China retail marketplaces reached 742,000,000, representing a quarterly net increase of 16,000,000. Mobile MAUs on our China retail marketplaces reached 874,000,000, an increase of 28,000,000 since March. These numbers reflect Taobao's continuing strong consumer mindshare, healthy user stickiness and engaging youth experiences as the world's leading consumer community. Tmall online physical goods GMV, excluding unpaid orders, grew 27% year over year, with all major categories growing at a similar or faster rates relative to December 2019 quarter. Our unparalleled product offerings and engaging user experiences contributed to higher purchase frequency as well as higher average spending per customer across all city tiers that increased both year over year and quarter over quarter. In terms of user acquisition, we continued to increase our penetration in less developed markets. Taobao Deals, our new mobile app targeting value conscious consumers, reached 40,000,000 MAU in June. The disruption in international tourism presented an opportunity for our import commerce business. Tmall Global, the leading cross border import platform in China, grew over 40% year over year in GMV, excluding unpaid orders. Looking forward, our China retail marketplaces will focus on the following areas: number 1, continue to drive user acquisition, especially in less developed markets and work towards reaching our mid term goal of serving more than 1,000,000,000 Chinese consumers. Number 2, continue expanding our product supply, especially in categories currently underpenetrated by e commerce. And number 3, continue to enhance the shopping experience and the path to purchase on our platforms through new content platforms such as live streaming and short videos. Our investment in new retail over the past several years have well positioned our gross business grocery business, 3 Shippo, Tmall Supermarket and Taoxanda to capture unprecedented growth opportunities during the pandemic and continue to see healthy growth momentum in the past quarter. More than 60% of Free Shippo's GMV came from online, and the stores, which delivery services, which leverage Sun Art store based inventories, gained widespread popularity among consumers and helped Sunart increase consumer reach and create incremental sales. We enabled approximately 15% of SunR's total revenue during the June quarter. Ele. Me successfully rolled out an important branding upgrade in July. The new brand proposition, Anything You Love, We Deliver, represents the transformation of Ele. Me from a food delivery platform into a comprehensive, digitalized local service platform. In addition to food and beverage, Solarman now also delivers everyday necessities such as grocery, fresh produce, medicines and flowers from local merchants. In the June quarter, Ele. Me achieved positive unit economics as a result of improved operational efficiency. We also received positive year over year GMV growth, signaling healthy recovery of the business. We also saw promising early stage results in Ele. Me's strategic collaboration with Alipay. During the past quarter, approximately 45% of new customers ordering food delivery on Ele. Me was contributed by the Alipay mobile app. We will further deepen the cooperation, and we believe there is significant potential for value creation by combining Ele. Me and the power of the entire Alibaba ecosystem to capture opportunities that will emerge from the ongoing digital transformation of the food and beverage and the retail industries. We will continue to invest in this area. Lazada continued to show strong progress in the last quarter. With order volume growing more than 100% year over year. The pandemic has significant impact on many Southeast Asian countries, and it has converted many consumers into online shoppers. We believe the increasing adoption of online shopping is beneficial for healthy growth of the region's e commerce industry over the long term. Southeast Asia continues to be the strategic priority in our globalization strategy. In this highly competitive region, with Lazada's new leadership in place, we aim to build a sustainable digital business, leveraging Alibaba's technology to serve local consumers and business partners. During the June quarter, AliExpress, our cross border export marketplace, saw order conversion and delivery time negatively impacted by challenges in cross border logistics, but the situation has started to improve in July. Alibaba.comand1688.com, 2 of our oldest businesses, saw new market opportunities this year. Many international wholesalers have turned to alibaba.com to source products from China as global supply chains were disrupted and Chinese factories were the first to resume production. In June, daily active buyers on alibaba.com increased over 100% year over year. 1688.com also saw more than 50% year over year growth in daily active buyers as a result of increasing number of SMEs, especially small retailers looking for supply as Chinese economy reopen. The pandemic has also transformed the way enterprises worked, accelerating demand for cloud infrastructure and services. According to IDC's latest report, Alibaba Cloud maintained its position as the largest public cloud service provider in China, which is a testament to Alibaba Cloud's strengthening market leadership. In the June quarter, our cloud computing revenue grew 59% year over year. In sectors such as Internet, financial services, consumer retail and public services, Alibaba Cloud not only provides infrastructure as a service, but also develops industry specific technology and business solutions to address real world application requirements for our customers. As offices and schools reopened in China, SingTalk's DAU moderated from the peak level, but remained over 100% higher than pre COVID-nineteen levels. Approach to work and education have changed fundamentally, and DingTalk will be the important digital collaboration platform for working and learning moving forward, connecting all industries to services on cloud. For our digital media and entertainment business, Youku's daily active subscriber base increased by more than 60% year over year during the quarter with the release of popular TV series and variety shows. In July, cinemas started to gradually reopen in China, and Alibaba Pictures has been preparing for business to resume. We are closely monitoring the pace of recovery. Recently, we decided to stop the operations of UC Web and other innovation initiatives in India after extensive review of the business. We don't expect it to have a material impact on the group's overall financial performance. Today, we face uncertainties from not only the global pandemic, but also increasing tensions between U. S. And China. As the world's largest e commerce platform, Alibaba's primary commercial focus in the U. S. Is to support American brands, retailers, small businesses and farmers to sell to consumers and trade partners in China as well as the other key markets around the world. We believe global trade will continue, and Alibaba's active pursuit of our mission to make it easy to do business anywhere are fully aligned with the interests of both China and the United States. We are closely monitoring the latest shift in U. S. Government policies towards Chinese companies, which is in very fluid situation. We are assessing the situation and any potential impact carefully and thoroughly, and we'll take necessary actions to comply with any new regulation. Now I will turn it over to Maggie, who will walk you through the details of our financial results. Thank you, Daniel. Thank you, everyone, for joining us tonight. I'd like to review our financial highlights for our June quarter. We delivered a very strong start to our new fiscal year. Mobile MAUs in June was 874,000,000, quarterly net adds of 28,000,000 and annual active consumers was 742,000,000, quarterly net adds 16,000,000. We continue to acquire new users and consumers from less developed areas of China, reflecting our ongoing success in broadening product offerings to meet different demands. The purchase frequencies and the spending of our consumers coming from less developed areas also continued to improve. Our total revenue was RMB154 1,000,000,000, up 34% year over year. The increase was mainly driven by the robust growth of China Commerce Retail and Cloud Computing Businesses. Our domestic core commerce business has fully recovered from the COVID-nineteen impact and is showing strong growth. Cloud computing revenue grew 59%. Our free cash flow in June quarter increased by 39% to RMB36 1,000,000,000. Our strong profit growth and cash flow enables us to continue to strengthen our core business and invest for longer term growth. Now let's move on to revenue in details. China Commerce Retail grew 34% year over year. Customer management revenue grew 23%, primarily due to increased revenue contribution from search related revenue as well as new monetization formats. This new format includes recommendation fees and things like live streaming. We see number of paying merchants and spending per merchants both increased. Commission revenue was up 17%. Commission revenue growth was primarily driven by solid 27% growth in Tmall physical goods paid GMV. The gap between the growth of commission revenue and Tmall physical goods paid GMV growth was mainly because of faster growth in FMCG and consumer electronic categories that have lower blended commission rates and also because of our initiatives to support our merchant customers, including our wafer of annual service fees for the first half of twenty twenty. Revenue from Cainiao grew 54% year over year. This was primarily caused by the fast growth of our cross of border businesses such as Tmall Global supported by increased adoptions fulfilled by Cainiao Services. Revenue from local consumer services was RMB7.1 billion, up 15%. This is due to an increase in average order value and ongoing recovery in on demand delivery GMV growth. Unit economics per order for the non demand delivery businesses was positive during the quarter, reflecting improved delivery network efficiency as well as enhanced marketing efficiency that leverage our consumer insights technology. This has led to further narrowing of losses year over year for the local consumer service. Our merchant acquisition continued to accelerate for this local consumer services. Ali Cloud continues strong growth, so we show 59% year on year growth in revenue. And at the same time, the losses continue to be narrowed. So our average revenue per customer continue to improve and all the cloud services across are growing very well. So for DME and innovation initiatives, one thing worth mentioning about is that our online gaming business, which was developed from acquired businesses has been growing well. So it is not recognized as part of the DME segment. It grew into sizable revenue and user scale and was moved out of the incubator, which is the innovation initiative segment. Let's take a look at our cost trends. Cost and expense growth generally kept pace or was lower than revenue growth, reflecting ongoing improvement in operating efficiency. The savings from operating efficiency improvement were reinvested into strategically important businesses with strong long term growth potential. Let's move to segment reporting. We continue to enjoy solid revenue growth by segments. The strong profitability coming from the core business enables us to invest for the future. For the core commerce segment, market based core commerce profitability grew strongly to RMB 55,500,000,000, up RMB8.7 billion year on year. Developing businesses such as local consumer service, Lazada, new retail and Cainiao, all showed strong operating performance and improved operating efficiency. The combined losses of these development businesses was narrowed by RMB1.5 billion to RMB4.2 billion, which contributed to the 25 percent EBITDA growth of the overall commerce segment. Cloud Computing, we talked about the loss margin will narrow to 3%. For digital media and entertainment, we continue to focus on reducing losses in Youku through content cost control, while increasing paying subscribers growth. Losses reduced by about RMB 1,000,000,000 year on year to RMB 1,300,000,000 for DME segment. Innovation initiatives and others, the increased losses were primarily due to our investment in Intalk Businesses and also AutoNavy for the user expansion as well as the technology research and innovation. So overall, our business continued to deliver strong profit growth with improving efficiency. At the same time, we used our incremental profit to continue to invest back to our business. So June quarter free cash flow and CapEx, our businesses overall continued to show strong profitability and cash flow. As of June 30, cash, cash equivalents and short term investments were RMB382 1,000,000,000, which is over US50 $1,000,000,000 For the quarter, free cash flow was RMB36.6 billion, which increased by 39%, mainly due to our robust profitability growth. The June quarter other financial metrics, the share of results of equity method investees in the quarter was RMB349,000,000. We record our share of results of all equity method investees 1 quarter in arrears. Thus, for this June quarter earnings, we're recognizing our investees' March quarter share of results. But you can tell that the Ants Group has performed well in March quarter. The COVID-nineteen pandemic has caused wide spread disruption to the economy, which has and could continue to impact our investee companies. So June quarter GAAP to non GAAP net income reconciliation is shown on this page and is self explained. So looking ahead, China has managed a pandemic and the whole process is managed very well and the economy recovered very quickly. So our group has benefited from the overall China's recovery as well as the accelerated digitization of our customers. Our core and new businesses all developed well. This allows us to have multi engine drivers for the revenue and profit growth. Our strong profit growth will make it possible for us to reinvest. We will continue to reinvest our incremental profits back to our businesses and continue to expand our market leadership in various areas. Before our Q and A session, we would like to announce that our Investor Day will be held on September 28th to 30th. This time, it will be a virtual one due to the pandemic, the limitation on travel people. So we hope to provide in-depth business updates as we did in previous Investor Days. Details will be posted on the Investor Relationships section of Alibaba Group's website. Now we can open up for questions. Thank you. Ladies and gentlemen, and good morning everyone. Ladies and gentlemen, and good morning everyone. Ladies and gentlemen, and good morning everyone. You are welcome to ask questions in the language you asked. Please note that the translation is for convenience purpose only. In the case of any discrepancy, our management statement in the original language will prevail. Operator, please connect speaker and SI conference line now. Please start Q and A session when ready. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Eddie Leung from Bank of America. Please ask your question. Thank you. Thank you. My question is, given the existence of several large e commerce platforms in China in parallel, all of them already being at considerable scale, meaning that there are bound to be some consumers who are on multiple platforms simultaneously. The question is, in the future, what consumers, under what circumstances and with respect to what products do you see specifically coming to Alibaba's platforms? Thank you. I will answer that question. With respect to Alibaba's China retail marketplaces, for consumers, what we offer is an integrated service experience with the widest and richest product assortment, with highly competitive pricing, with excellent service, service that's provided presale, during sale and post sale. And therefore, we're already positioned to meet the needs of all kinds of different consumers in different categories. That's why Alibaba is the number one choice for online shoppers in China and we'll continue to keep working to keep that Secondly, from the merchant perspective, we have Tmall where brands make their goods available to consumers who can buy goods, in particular, new goods directly from brands. We also have Taobao where goods are made available through many different channels to consumers, including now with direct sourcing from origin, including of agricultural and food products. So the fact is that we can meet a whole range, the full range of different needs and demands from consumers, both in terms of different categories and products and also in terms of the range. You can have some consumers who are more affluent, but they could be also looking for value for money offerings. But in other cases, they'll be looking for products of higher quality or higher level of service. So our intention is to continue to provide more options and to meet needs in all of those different areas. Your next question comes from the line of Alicia Yap of Citigroup. Please ask your question. Hi. Good evening, management. Thanks for taking my questions and congrats on the solid results. My question is on your international retail business, especially Lazada. What is your latest view for the e commerce involvement in Southeast Asia regions? What are the differentiated approach that you have, your competitive strength and any areas that you think there are rooms to change or improve that you foresee? How the landscape will evolve as compared to China and in the region and how Lazada will position that? Thank you. Thanks, Alicia. Let me answer this question. I think, as I said in my script, Southeast Asia market is our strategic priority for Alibaba's globalization strategy. And I think when we look at our Lazada's operation, we are we expect to build a more tech driven, AI driven sustainable business. Actually today in this market, the competition is very extensive and people invest and even solidifies the buyers, sellers, even shipping fees and trying to get the short term growth. But we strongly believe we need to build a long term sustainable business. And the so our advantage is, first, it's about Alibaba technology infrastructure and especially our experience and know how and technologies in the AI and in the search and recommendation and the supply and demand mesh mechanism. I think this is our big advantage. And we after our Lazada's business transformation, we are also actually we are today gaining the benefit from this technology implementation. And second, I think we as part of Alibaba's operation, we have a big advantage to supply the Southeast Asian market with goods from China and from other countries. Today, Lazada is not a high city business for Alibaba. Actually, this is part of Alibaba global network and we are trying to sell not only from local to local, but also China to Southeast Asia and other countries to Southeast Asia. And at the end of the day, I think we are trying to build a global network and to sell anywhere, buy anywhere. And the third one, I think today for Lazada, we have we also have different segments. We have our lots more for brands operation and which provide high quality products directly from the brands and with good fulfillment delivery services. We have our Lazada marketplace, which is more like a small B2C or even C2C. And as I said before, we have like global, which is a cross border business from China and other countries. We will continue to invest and enhance the position of each of the marketplaces and provide an integrated experience to our customers. And as to the difference between China market and Southeast Asia market, I would say, I think maybe the biggest difference is that actually in Southeast Asia, social network is very, very popular and there are a couple of very important players in this market. And merchants also love to interact with customers via social network. So how to leverage the power of social networks, I think it's a very important goal to us. So actually we have done a lot and we will continue to do further. Thank you. Thank you, Daniel. Your next question comes from the line of Binnie Wong of HSBC. Please ask your question. Good evening, management. Congrats on a very successful quarter and also on a successful June 18 shopping festival. Question is on the Taobao news. We saw in news that you soon launched a short video channel to strengthen the ecosystem. And while Douyin on the other side also talking about expanding e commerce business making a closed loop. So question is how do live streaming and short video, I guess, in the terms of like social commerce? And how do we better help merchants to sustain the relationship longer with customers? And so far, do you see live streaming as cannibalized or incremental to merchants' marketing budget on Alibaba? Thank you. Okay. I think first of all, Taobao Deals targets value cautious customers by offering high quality products, high quality and value for money products. So I think the target customers for Taobao deal actually is very, very clear. And as part of the consumer experience in Taobao deal mobile app, we launched the short live streaming and short form video. I think this is not a complete user experience as part of the consumer interface. I think we are trying to give factories and supplies a tool to manage their customers and also trying to give customers different experiences in their consumer journey on Taobao deal. But I think the primary goal is to segment the Taobao deal with the value for money products and our low end customers. This is very clear. And the short form video is just a consumer feature. And this will highly integrate it with the whole entire consumer journey in Taobao Duo Mobile App. And in terms of the live streaming activities in other player, including Douyin, I would say, actually for our merchants, I think live streaming is more like event marketing and actually in there as part of their entire operation. And people can it's impossible for people to do 70, 24 hours live streaming in all the ways. And if you look at the details of live streaming today, actually most of the merchants viewed it as a way to do promotion and acquire new customers. But they do need a sustainable and day to day operation platform, which is Alibaba platform. So that's why a lot of merchants, they think they build their storefront on our platform and they operate they're trying to bring all the consumers, customers from different ways to Taobao and because this gives them a best way to operate and this also gives them a highest ROI in their operation. And for Taobao live streaming, I think we also introduced live streaming in Taobao and Taobao deal. And as we disclosed, the GMV from Taobao live streaming tripled in this quarter. I think this is already is a very important consumer feature, but that's not all. That's part of consumer experiences. And because of the incremental traffic generated from the Taobao live streaming, we're also identifying new opportunities for monetizing this additional traffic in Taobao live streaming. So but once again, this monetization model is not a separate one. It's part of the whole solution entire solution we provide for our merchants to manage their customers on our platform for their entire lifecycle. That's super clear. Thank you, Daniel. Your next question comes from Mark Mahaney. Please ask your question. Okay. Thank you. I just wanted to ask about the Ali Cloud business. Can you talk about the sustainability of growth there? Are there particular industry verticals that you've recently seen be more aggressive in terms of cloud deployments? And just talk about what's happening in terms of the competitive dynamics, whether pricing remains relatively consistent, you're seeing more aggressive pricing in the industry? Thank you very much. Cloud is a fast growing business. If you look at our revenue breakdown, obviously cloud is enjoying a very, very fast growth. And what we see is that all the industries are in the process of digital transformation. And cloud is very important I mean, moving to the cloud is a very important step to all the industries. And we strongly believe that sooner or later all the business will move to cloud. So that's why we do see the fast growing growth the fast growing we do believe the fast growing will continue in near and mid term. And this even in the longer term, this will totally change how enterprises work and how this is collaborated. And in terms of the industry development, even all the industries, they are embracing the cloud. But I think the people who take the first move fastest, first is from the Internet company, because all the Internet company, all the Internet operation actually could be powered by cloud. So Internet is a very, very important sector. But in recent months, we do see the fast growth from other sectors, including like financial services, like consumer retail and even like public sectors, like power and utilities, so on and so forth. So but we do believe it is still in an early stage. And as I said before, we don't want to just provide a cloud in terms of infra services. If we just do it as infra service, as our services, then price competition is inevitable. And then all the cloud service is more like a commodity business. Today, Alibaba's cloud is cloud plus intelligence services and it's about cloud plus the power of the data usage. So that's why we work hard to develop industry specific solutions with RaaS and PaaS services together with our SaaS partners and we will continue to do that to enhance our market leadership. Yes. Mark, this is Maggie. To supplement what Daniel said, regarding your question on the competition and cloud computing, Our peer company who also has cloud businesses, they report their results as well. And I think you can do the comparison, although none of these companies have disclosed the cost computing revenue and profitability, the P and L, the EBITDA like we do, but you still can figure out from derive the cost revenue from ZUNY. Obviously, we're the largest in terms of the business size. So we reported more than RMB 12,000,000,000 revenue in one quarter's time. This is more than doubled of our nearest competitor and we're growing faster. Just give you I would also like to add that if you look at if you compare to give you a global comparison of the China cloud market and the U. S. Cloud market, Based on the 3rd party studies that we've seen, the China cloud market is going to be in the somewhere in the $15,000,000,000 to $20,000,000,000 total size range. And the U. S. Market is about 8 times that. So the China market is still at a very early stage and we expect based on what we've seen of our customers, as well as observing the whole market growth, the China market is going to be a much faster growing market in cloud than the U. S. Market. So we feel very good, very comfortable to be in the China market and just being in an environment of faster digitization and faster growth of usage of cloud from enterprises because we're growing from such a smaller base, about oneeight the base of that of the U. S. Market. Thank you. Thank you. Your next question comes from Youssef Squali from Truist. Please ask your question. Great. Thank you and good morning. 2 very quick ones. First, it seems like the recovery have been somewhat uneven between higher income and lower income consumers. Daniel, I was just wondering if you believe that as a result of this pandemic, there has been a structural impact on lower income consumers and maybe how long it may take them to recover over time? And second, Maggie, any update to the guidance that you had given the last call about the total revenue in fiscal 2021 of more than RMB650 1,000,000,000? Thank you. Maybe I'll answer first quickly on this revenue guidance, Youssus. So we grow revenue for during quarter by 34%. We remain the guidance unchanged, although we're very confident on our business, because this is just the 1st quarter of this fiscal year, and there are still 3 more quarters to go. So we'll update you at due course if there's any update. Thank you. For the consumer segment, I think generally speaking, the recovery of Chinese consumption, I think, actually stay strong. As China is the 1st country who I mean, move out of the pandemic and all the situation is almost under control except for a couple of cities. So that's why the recovery of the consumption I think, is quite promising. And if you look at our number and our China retail market business reported very strong growth in this quarter. Most important thing is that the ASP for the consumers in all city tiers actually grows and they buy more frequently and they consume more. But if you look further, I agree that for the low income people, I think they are if you look at their consumption behavior, actually, there are still some uncertainties because of the because they are actually more cautious about the future of the economy. As you know that in China, a lot of low income people from the service sectors. And today, I think as compared to the physical goods consumption, the consumption in service sectors still take some time to fully recover. And the employment in this I mean, service sector also need more time to recover. So I think this will bring some sort of uncertainties, I mean, for these low income group. Your next question comes from the line of Gregory Zhao of Barclays. Please ask your question. Thank you very much. I'm delighted to have the opportunity to ask a question and congratulations on a strong quarter. So we know that China has produced a number of globally leading Internet giants with Alibaba as the most typical example. And these companies, including Alibaba, are at the front of the entire world in terms of developing all kinds of applications for the Internet. But when it comes to things like operating systems or even semiconductors and chips, China lags behind the rest of the world. So my question is, does Alibaba have any longer term plans to invest in that kind of key infrastructure. And as part of that, does Alibaba have plans to hire more talent from international markets? Thank you. Alibaba has always been committed to market oriented and user oriented development, and we continue to invest for the long term in technology with those objectives in mind. We believe that all technology must be tightly integrated with the market to meet needs in the market. We've done that with consumer facing technology and now also with the cloud where we're not just providing infrastructure, but are looking for ways to leverage on the cloud to help businesses enhance their operations and become more effective. So certainly this is our commitment. We're committed to long term investment and to doing research through our Damois Academy, among others. But we do believe very strongly that research and development should be highly integrated in order to create value for society. Thank you very much. Operator, next question. Your next question comes from the line of Jin Yu from New Street Research. Please ask your question. Maggie, I think on your prepared remarks, you talked about reinvestments back into the business, the profits reinvestment back into the business. Can you just kind of talk about the scale and scope of kind of what that investments look like and the duration and how we should be thinking about the rest of the fiscal year in terms of when some of these investments will hit? Thanks again. Sure. Tim, let me answer your question. First of all, as you can tell that we have very strong profit generation power, right? So if you look at the adjusted EBITDA for just 1 quarter, we have generated over RMB 50,000,000,000 profit. So we use that part of that profit to reinvest back to develop a business, while other people use the investors' money to invest that. So that's number 1. Number 2, in terms of to what extent, I think we got a lot of questions on you're talking about cost control efficiency. Does that mean that you are very cautious in terms of investing in marketing, in user acquisition, etcetera. The answer is not necessarily. We are very committed to further expand not only user base, but also enhance user engagement, but also their weakness of these users and provide them with broader products and services. So when you look at the marketing sales and marketing costs, we're less than over like $13,000,000,000 sales and marketing in onefour of time. It's not a small number. Operator, could you please take the next question? Operator, can you hear us? This is Maggie. Maybe let me summarize what I just answered to Jane's question. So with the strong revenue and profit growth, we're going to continue to reinvest back to these strategically important businesses. So I think our investment aims to for a longer term healthy and sustainable growth. Operator, could we have the next question please? Thank you. Your next question comes from Colleen Sebastian from Baird. Please ask your question. Great. Thanks and congratulations on the quarter. Two quick ones for me as well. First off, Daniel, I think you mentioned that the change in strategy in India, if maybe you could talk in a little more detail about the platforms opportunities in that market? And then secondly, looking at gap between the mobile MAUs and the total active commerce user base, The gap has increased a bit. And I'm wondering if that's an opportunity over time to engage those mobile monthly users that are not yet active customers. Thank you. First of all, as I said, we decided to stop operations of UC Web and other innovation initiatives in India after our business review. And we believe that globalization is our long term strategy. But in near term, I think we are closely monitoring the change of the geopolitical environment and also the national policy of other countries. And we will adjust our strategies according to this change. For the second question, I would say, today, our MAU and AAC still have a very strong growth given we have such a huge size of consumer base in China. But I think most important thing is that we have people engaged with us. That's the starting point. And our if you look at our historical number, you will see that the longer people stay with us, the more spending they will do and the more consumption they will do and the more categories they will consume. So we will continue to engage with customers and to convert the visitors, the new customers into our royalty buyers in the long run. Next question please. We are now going to take the last question. Your last question comes from Puneet Mubayee from Goldman Sachs. Please ask your questions. Thank you for taking my question and congratulations on a good set of numbers. May I just take a step back and look at COVID? And the aftermath of COVID, I wanted to understand from you if there were specific areas that you saw an increased opportunity emerge. And would that lead to a change in tactic? We did notice that your sixeighteen period, you were very you were much more aggressive and it bore fruit very, very quickly for you. And we wanted to understand if those 2 can be read together and we can see an emergence of potentially a much more aggressive stance from you that would bear fruit over time? That's my question. Well, I think this pandemic changed fundamentally people's lifestyle and change how enterprises work. And if you look at the consumption sector, I would say after the pandemic, people care more about the health, and that's why we see the healthcare categories grow very fast. But I think that's not all. And we do see a lot of increasing opportunities in FMCGs, in new brands and also in many sectors. And also from the retail perspective, I think all the retail operations moving to the digital sector I mean move to digital operation. So how to leverage the power of our new retail infrastructure to help these merchants to serve their customers from a local basis, I think this is a growing opportunity. And the cloud, we said many times, and cloud is a big wave, and we are still in early stage in terms of the fast growing. And I think 618 as a mid year campaign is part of our annual operation. And we think we take the right approach and to meet the growing meet the demand and grow emerging demand of the consumers, I think, post pandemic and also meet the demand of the suppliers who want to sell more products and deliver more services to their customers. So we are happy to see the good results and we will continue to create value for both our customers and the merchants. Yes. Piyush, as you observed that during this June 18 shopping festival, we, together with local government and together with our merchant partners, has invested 1,000,000,000 of RMB in consumer coupon subsidies to stimulate domestic consumption. And you asked us whether we're going to continue the aggressive investment, everything. I think I would put it in this way. We'll be aggressively invest into the business to expand our market leadership. At the same time, we also want to invest smartly, aggressive and smartly. Smartly means that we're aiming in long term sustainable growth rather than just temporarily acquire customers and GMV. So the investment is going to be focused on user base growth, also engagement, also retention. Also, by saying smart, it also means that we're going to leverage the resources from the Alibaba economy, which includes us and us together to grow our business. Thank you.