Earnings Call: Q4 2021

May 13, 2021

Welcome to Alibaba Group's March Quarter 2021 and Full Fiscal Year 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. Now I'd like to turn the call over to Rob Lim, Head of Investor Relations of Alibaba Group. Please go ahead. Good day, and good evening, everyone, and welcome to Alibaba Group's March quarter 2021 and full fiscal year 2021 results conference call. With us today are Daniel Zhang, our Chairman and CEO Zhou Cai, Executive Vice Chairman Maggie Wu, 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 our website later today. Let me cover the safe harbor. Today's discussion may contain forward looking statements. Forward looking statements involve inherent risks and uncertainties 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 Hong Kong Stock Exchange. Any forward looking statements that we make on this call are based on our assumption 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 as we use on this call, such as 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 non GAAP to GAAP measures can be found in our earnings press release. Unless otherwise stated, growth rate of all the stated metrics mentioned during this call refers to year over year growth versus the same quarter or same period last year. In addition, during the call today, management will give their prepared remarks in English. A third party translator will provide simultaneous 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 purposes only, in the case of any discrepancy, management statement in the original language will prevail. With that, I will turn the call now to Daniel. Thank you, Rob. Hello, everyone. Thank you for joining our earnings call today. We delivered another solid quarter, making the strong finish to this eventful fiscal year. China started this past year with the national battle against the COVID-nineteen outbreak and ended the year as the 1st country in the world to effectively control the pandemic and return to normal life. Based on IMF estimates, China was the only major economy that achieved positive real GDP growth in 2020. According to the National Bureau of Statistics, China recorded retail sales of RMB 42,000,000,000 during the 12 months ended March 31, 2021, and the GDP growth in the quarter ended March 2021 reached 18.3% year over year. Against the backdrop of this macroeconomic recovery and accelerated digitalization in China, Alibaba Group achieved healthy growth across all businesses. During the past fiscal year, we made significant progress in our 3 key strategies, namely domestic consumption, globalization and cloud computing. Such progress demonstrated the tremendous power of Alibaba's digital commerce infrastructure as well as our long term commitment to invest for the future and to create value for our consumers, merchants and partners through innovations. For our consumer facing businesses, Alibaba Ecosystem recorded RMB 8,100,000,000,000 in GMV or US1.2 trillion dollars during the fiscal year, A net increase of over RMB 1,000,000,000,000 year over year. Annual active consumers for our ecosystem reached a historical milestone of over $1,000,000,000 with a net increase of $170,000,000 year over year. Our annual active consumers outside of China increased by 60,000,000 to over $240,000,000 as of March 2021, which reflects the progress of our globalization strategy, Benefiting from the increasing demand for digitalization across industries, Alibaba Cloud's revenue exceeded RMB 60,000,000,000 for past fiscal year, Representing a year over year growth of 50% as it continued to strengthen its market leadership in China and Asia Pacific. During the past fiscal year, we have gone through all kinds of challenges, including the COVID-nineteen pandemic, fierce competitions as well as the anti monopoly investigation and a punitive decision by Chinese regulators, we believe the best way to overcome this challenge is to look forward and to And invest for the long run for the long term to create value for our customers through technology and innovation and to solve major problems in society. Therefore, we plan to invest all of our incremental profits in this coming year, into core strategic areas such as technology innovation, support programs for merchants to lower their operating costs, user acquisition and experience enhancement, merchandising and supply chain capabilities, infrastructure development and new business initiatives. Considering that our incremental profits are expected to be significant, our investments will be highly targeted and disciplined. They will be designed to enlarge our total addressable market, differentiate consumer and the merchant value proposition from our competitors and generate greater consumer engagement and purchase frequency, we will establish key metrics to measure the effectiveness of these investments, which we believe will generate significant results in the long term. Our annual active consumers in China reached 880 891,000,000 by the end of March. We hope to grow this customer base in China by over 100,000,000 in the coming fiscal year to reach over 1,000,000,000. Annual active consumers for our China retail marketplaces were 811,000,000 by the end of March, representing a net increase of $85,000,000 year over year, these consumers spent an average of 9,200 yen annually per person on our platforms. We believe this is the largest and the best quality consumer base in China, we will continue to serve the demands of consumers this diversified lifestyle based on their segmented preferences. As the largest digital consumption marketplace in China, Taobao App will continue to strengthen its comprehensive supply of branded products, value for money products, agricultural products, imported products and differentiated long tail products to meet the diversified demands of our consumers. In underpenetrated categories such as groceries, real estate, Home furnishings and pharmaceuticals, we will redefine the consumer journey and digitalized experience for the sector to enhance its online and new retail penetration. We will also work on improving the overall consumer experience and engagement in Taobao app, by offering diversified consumer journeys based on different user segmentation and intent, at the same time, we are improving the tools and enabling capability for merchants to enhance their customer engagement and reviewing our platform policies to lower their operating costs. As part of our China retail marketplaces, Taobao Deals has grown rapidly over the past year, reaching over 150,000,000 annual active consumers as an indication of the activeness of our APP users, monthly active users of Taobao Deals reached 130,000,000 in March, a net increase of $27,000,000 from December. Taobao Deals offers the best value for money products for price conscious consumers, it features single product design and a direct to consumer supply from farms and manufacturers. The rapid growth of Taobao Deals contributed positively to our China retail marketplaces. During the past fiscal year, average spending of consumers who purchased on Taobao Deals increased more than the average spending of China retail marketplaces consumers. We will further increase our investment in Taobao Deals in the new fiscal year, to serve more price conscious consumers in less developed areas. Next, I would like to talk about new retail, which includes the community marketplace model that has attracted a lot of attention lately. Alibaba introduced our new retail strategies in 20 16, and we have executed our strategy based on multiple business models to serve the various demands of consumers, for groceries, fresh produced and FMCG products, we transformed off line retailers such as SANAD through digitizing their operations and created new retail formats such as free Shippo that integrate online and offline experience. The combination of these new retail formats satisfies consumer demand not only in store, but also in nearby communities by offering comprehensive delivery options As part of our latest exploration in new retail, we started the community marketplace business in select regions in China, our community marketplace is supported by the supply chain capabilities of Free Shippo, Sunnart and other partners. In addition to 1 hour, half day, same day and the next day delivery options mentioned above, we now offer community consumers with the option of order today and pick up tomorrow. We believe new retail is a multi format consumer infrastructure, of which the community marketplace model is one of the essential ways to serve price conscious consumers. This model can help us acquire new customers in low tier cities and rural areas and further increase our users' consumption frequency and stickiness. We believe the key to unlocking the full value of the community marketplace model is not only about the standard loan P and L of the business, but also about the overall efficiency and the servicing capability of the entire commerce platform where the business sits. We believe the latter can generate far greater value than the former. Alibaba has the most sophisticated and efficient commerce infrastructure in China with the most comprehensive product and service offerings to serve consumers of diversified segmentation and demands. Accordingly, we believe we will be able to create and capture the highest consumer lifetime value through investments into the community marketplace business. We will grow this business leveraging Alibaba Ecosystems' 4 core capabilities, including merchandising and supply chain capabilities, logistics and fulfillment infrastructure, consumer engagement capabilities and the distribution channel development and management capabilities. While we are still in the early stage of business expansion, our goal for the new fiscal year is to expand our geographic coverage nationwide and define a healthy and sustainable community marketplace business model. Tainyo Network has delivered solid revenue growth during the fiscal year. Revenue from external customers outside of Alibaba Group, grew 68% year over year and contribute to over sales 70% of Tanyo Networks' total revenues. Tanyo also reached an important milestone of generating positive operating cash flow during the year. We believe Cainiao's continuous growth will be driven by 3 important engines: number 1, 1st mile business based on Tanyao Post and Tanyao Guo Guo 2nd, fulfillment service from factory to consumers and third, cross border supply chain services for importing and exporting merchants. Building on top of the significant improvement in operating efficiency in the new fiscal in the last fiscal in the last few quarters, Ele. Me invested in user acquisition and the logistic capacity during the Chinese New Year period, where many residents were encouraged by the local government to stay in the same city, they work and avoid long distance travel due to the pandemic. As a result, Ultima's annual active consumer we grew strongly at close to 20% year over year during the fiscal year when user experience it improved. Looking forward, we will continue to invest in Ele. Me consumers' mind share as the entry point for local service through converting more consumers in Alibaba ecosystem into Ele. Me user as well as cross selling between food delivery and other non other on demand services to increase order frequency. In our international commerce retail business, Lazada and AliExpress each achieved more than 100,000,000 of annual active consumers by March 2021. Lazada delivered another quarter within triple digit order growth year over year. AliExpress continued to achieve rapid growth By significantly improving the logistics experience for its consumers, leveraging tinyout networks, global smart network smart logistic infrastructure. For example, France and Spain, 2 of the key markets that AliExpress invested in logistics infrastructure improvement recorded triple digit GMV growth year over year during the quarter. In the future, we will continue to invest in key cross border logistic hubs in Europe, develop local logistic network in target markets and strengthen infrastructure support for our cross border in the local e commerce businesses. In fiscal year 2021, our cloud computing revenue grew 50% year over year to over RMB 60,000,000,000. I'm very excited about the massive potential of our cloud computing business, as the post pandemic world is facing a massive opportunity for industrial digitization, cloud infrastructure will eventually replace IT infrastructure, empowering enterprises to achieve digital operation. As China's industrial sector undergoing it's digital transformation. Manufacturers are moving forward smart manufacturing and direct to consumer initiatives, while other traditional industries such as retail, energy, finance and transportation have all noticed the tremendous value and the new opportunities that big data and intelligent applications could create. Alibaba Cloud will capture the historical opportunity by: 1, investing in core art and parts products such as database, storage, elastic computing and big data platforms to establish our core product competencies, benchmarking against the global cloud leaders and number 2, further expanding the integration of intelligence with cloud infrastructure to provide our customers with more diversified industry Intelligent Solutions together with our partners. Lastly, we announced in April 2021, that we received the administrative penalty decision issued by the China's State Administration of Market Regulation. We have stated that we accept the penalty with sincerity and will ensure our compliance with determination. As a result of the anti monopoly fine of RMB 18,200,000,000 leveled by the SAMR, we recorded an operating loss this quarter for the first time since our history as a public company. The penalty decision motivates us to reflect on the relationship between the platform economy and the society as well as our social responsibilities and commitments, we believe the self reflection and adjustment we've made will help us better serve our community of consumers, merchants and partners and position us well in the future. 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 for the fiscal year 2021 and for the March quarter. So our total revenue was RMB 717,000,000,000, an increase of 41% year over year. Excluding the consolidation of ZARRT, our revenue would have grown 32% year over year to RMB674,000,000,000. This is well exceeded revenue guidance we gave at the beginning of the year, which was RMB 650,000,000,000. For March quarter, our total revenue was RMB187,000,000,000, up 64% year on year. Excluding salad, the growth would have been 40%, still very strong. The growth was driven by the robust revenue growth of our China Commerce Retail Business as well as continued growth of cloud computing businesses. Total adjusted EBITDA was RMB170,000,000,000, an increase of 24% year over year. And for the March quarter, it was RMB 23,000,000,000 with an increase of 14% year over year, primarily driven by healthy profitable profit growth of our market based core commerce business partially offset by increased investments in new businesses and key strategic areas. Total adjusted EBITDA increased 25% year over year to RMB197 1,000,000,000 for the year an increase of 18% year over year for the March quarter. So net income was RMB143 1,000,000,000 for the fiscal year, which includes the one time filing levied and increases in SBC expenses. The non GAAP net income for the year was RMB172 RMB 2,000,000,000, 30 percent year over year growth. March quarter, we showed net loss of RMB 7,700,000,000 primarily due to the anti monopoly fine of RMB 18,200,000,000. Excluding this impact and certain other items, non GAAP net income was RMB 26,000,000, an increase of 18% year over year. We continue to maintain a solid cash position of US72 $1,000,000,000 with strong cash flow generation capability. Our free cash flow grew strongly at 32% to RMB173 1,000,000,000 or around US26 dollars Now let's look at the fiscal 2021 revenue in more detail. Our revenue continues to be more diversified on the back of strong organic growth. The revenue of our China retail marketplaces continue to grow we are pleased to report strongly as reflected by our customer management revenue growth of 24%. Our Alibaba Cloud and Taino Businesses we're the 2 fastest growing businesses and important drivers of our organic revenue growth. Both have also achieved important financial milestones with the cloud computing business proving its capability to be profitable in December quarter and continue to showing increasing profit in March quarter, Cainiao generating positive cash flow. These two growth businesses exemplify our track record of committing to invest in businesses over the long term that we believe can create tremendous value for our ecosystem. It is important to note that we have continued to invest and grow new seat businesses such as Taobao Deal, Taobao Grocery, Freshable Market, which is the community marketplace business and new features on the core platform such as Taobao Live and short form video. These initiatives address new consumption demands and behaviors that will continue to expand our addressable markets in China and create many cross standing opportunities in our ecosystem. We believe these businesses have the potential to be the long term revenue growth drivers that continue to catalyze our multi growth engine in the future. Let's look at our overall cost trends. Excluding SDC as a percentage of revenue, cost of revenue ratio increased in March quarter fiscal year, due to higher proportion of direct sales business, this increase was primarily attributable to higher proportion of our direct sales business from the consolidation of Sunart as well as the growth of Tmall Supermarket. These direct sales businesses will continue to strengthen our new retail initiatives, especially in development of our product sourcing capability, sales and marketing ratio also increased in March quarter and fiscal year given increase in marketing and promotion spending to drive user growth and engagement. I would like to remind everyone that we added 84,000,000 annual active consumers on our China retail marketplace in fiscal 2021, especially in lower tier cities, with Taobao Deals ending the year with 150,000,000 anti active consumers. G and A expense ratio was significantly higher at 30% for the quarter, primarily due to excluding this item, G and A ratio would have decreased by 1 percentage point to 4 percent. Revenue and adjusted EBITDA. This slides provide you with an overall summary of our segment revenue and profitability for the March quarter fiscal year. For the next part of the discussion, I'll first provide you with an overall financial recap by segments for the fiscal year and then followed by quarterly discussion of important segments. Let's look at the segment revenue and profitability for fiscal year 2021, starting this quarter, for purpose of presenting our market based core commerce adjusted EBITDA, we expanded the list of the new initiative businesses that we break out in order to present the progress of our strategic investments as well as the profitability of our market based core commerce business. This is on a like on a like basis, the new initiative businesses, which now include our new retail business, Local Consumer Service, Laudada, Taobao and China represents strategic areas where we are executing to capture incremental opportunities. As previously mentioned, we are very excited about the growth perspectives of these fast growing businesses that will not only increase our addressable market, but also require long term investment commitment. We believe these new businesses will be the drivers of our multi engine revenue growth in the future. So under this new presentation for fiscal 2021, our market based core commerce adjusted EBITDA was RMB 229,000,000,000, Growing 17% year on year. Combined losses of strategic investment areas was RMB 34,600,000,000 reflecting investment in new retail, local consumer service, Lazada as well as addition of losses reflecting our aggressive investment in Tapadio. Core commerce adjusted EBITDA reached $194,000,000,000 The cloud computing and DME continued to narrow and during this fiscal year, our innovation initiatives recorded adjusted EBITDA loss of RMB 10,000,000,000, up RMB 1,800,000,000 as we continue to be advancing technological research and innovation. Overall, our adjusted EBITDA for fiscal year grew 24%, reflecting the strength of our core commerce business that was partly offset by the investment we made in the new initiative areas. Segment reporting, I wouldn't go into detail for each one of them, just some highlights. So for the core commerce, CMR grew 40% year over year to RMB 64,000,000,000. These are all for the discussion for the quarter. This growth Actually, it's driven by solid growth of our China retail marketplaces. Overall, online business GMV was grew 33%, reflecting the rapid recovery of growth in apparel, luxury and home furnishing category, etcetera. SMCG also exhibited solid growth during this quarter, from a merchant spending perspective, we saw strong growth in higher spending per merchant and an increasing number of paying merchants on our China retail marketplace. In March quarter, China retail orders revenue grew 134 percent to RMB60 1,000,000,000 due to consolidation of start. In March quarter, marketplace based EBITDA reached RMB44 1,000,000,000, up 28% year on year, reflecting solid CMR growth, partially offset by the increase in the marketing, promotional spending for user acquisition and increasing engagement are channel retail marketplace. Let's take a look at the cloud computing business. Ali Cloud revenue grew 37% year over year to RMB17 1,000,000,000 during the quarter. This slower revenue growth due to the during the quarter was due to a change in our relationship with a top cloud customer in the Internet industry. This customer has a sizable presence outside of China that used our overseas cost services. They have decided to terminate their relationship with us with respect to their international business due to non product related requirement, we expect the impact of reduction revenue from this customer to affect our year on year growth rate with when compared to prior years. Excluding this customer impact, Alibaba Cloud top 10 non affiliated customers together accounted for no more than 8% of Alibaba Cloud's total revenue. So you get a sense on this concentration the revenue is really not high. Going forward, we believe that our cloud computing revenue will be further diversified across customers and industries. Alibaba Cloud was profitable for the quarter and generated an adjusted EBITDA of RMB308 1,000,000. Our clock business has delivered profits over the last two quarters, which demonstrates that we can run this business on a profitable business. We believe it is still more important to drive market share leadership given the rapid growth of the industry, we will continue to invest in innovation in innovative technology, expanding customer servicing capabilities and enabling a robust developer ecosystem for the clock business in the future. Our DME business for the quarter grew to $8,000,000,000 in revenue, 12% year on year growth. This is a sector that's impacted by the pandemic as well. Income statement, selective financial metrics. So when you look at the interest and investment income, it was RMB111 1,000,000 in March quarter. This year over year increase is primarily due to the decrease in net loss arising from the fair value changes of our investments. Our share of results of equity method investees was RMB 6,000,000,000 during the March quarter. Our free cash flow was outflow of RMB658,000,000 this quarter. It was also this was similar pattern in last year. The cash flow outflow during this quarter was mainly due to our increased strategic investment as well as the increase in marketing and promotional spending for user acquisition and retention. And at the same time, there was a merchant's deposit funds that as a practice that we discussed in the earnings release that we just take it out from the free cash flow calculation. Okay. So let's take a look at the non GAAP net income attributable to shareholders was RMB 5,500,000,000 for the quarter. This was mostly due to expensing of RMB 18,200,000,000 fine, partially offset by the reduced net loss arising from the fair value changes of our investments. Now outlook and the guidance. So total revenue excluding SAAR consolidation was RMB674,000,000,000 for fiscal 2021, which as I mentioned, surpassed our annual revenue guidance. This was driven by robust performance of our core business as well as continued growth of cloud. Going forward, we expect to generate over RMB930,000,000,000 in revenue in fiscal 2022. Considering the total market potential as well as our strong profit and cash flow generation capability, this gives us the internal resources to focus on long term value creation. In fiscal 2022, we plan to invest all of our incremental profits and additional capital it is supporting our merchants and developing new businesses and the key strategic areas that will help us increase consumer wallet share and penetrate into new addressable markets. That we completed our prepared remarks. Let's open up for Q and A. Thank you. Hi, everyone. So for today's call, we welcome to ask you're welcome to ask questions in Chinese or English. A third 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, the management statement in the original language will prevail. Operator, now we can connect to the speaker and SI conference lines and start a Q and A session when ready. Thank you. Thank you need to press star 1 on your telephone. To withdraw your question, please press the pound or hash key. Please stand by while we compile the Q and A roster. To give more people the opportunity to ask questions, please keep yourself to no more than one question at a time. First question comes from the line of Alex Yao of JPMorgan. Your line is open. Please go ahead. Incremental profit to reinvest Thank you, and good evening, management. I have some questions on the investment side. First of all, I'd like to know if you could please clarify the remarks made, I believe, by both Maggie and Daniel in your presentations as regarding The intention to completely reinvest all incremental profit in the coming year, Does that mean that we're talking about an outlook with 0 profit growth in the coming financial year? Secondly, you listed a lot of different areas into which that investment will be channeled. I'm wondering if you could tell us which of those will we will be the top priorities. And thirdly, Daniel in his remarks spoke of how these investments will be managed in a prudent fashion with internally defined KPIs to monitor investment effectiveness. I'm wondering if you could please tell us More about how that will work and on those KPIs, how performance has been year to date? Thank you. Yes. Hi, Alex, and good evening. Let me start by answering as to what we intend to or what we meant with this announcement of our investment Of incremental profits and what the priorities will be in terms of making this investment. So as we stated in our earnings guidance, we plan to invest all incremental profit in the coming year into growing our business further and investing for the future. Does that mean then that in the coming years, there will be No prospect of profitability of profit growth or will maximum profit growth be restricted to what it was this year. Well, let's look at what we can achieve with this investment first. In the market, as you know, there are very, very few companies that Very robust profit growth. So I think it's fair to say that there's a huge potential for us To further grow, be it in our core market or in other areas, there's still lots of scope and lots of room for us to do new things and grow the And I think any long term investor would say that promising to Maintain a certain level of profit or prioritizing a higher level of profit would be a stupid thing to do, In the market today, there are so many competitors who are investing large amounts to gain a foothold in the market, to grow the market, we are in a great position to create value and capitalize on our existing resources to drive Future growth going forward. So that is the intention. We're going to be investing in a highly targeted and highly disciplined way in order to lay a foundation for even better growth going forward. And at the end of the day, users will vote with their feet. So we see these investments ultimately as playing out in terms of growing the business and more deeply engaging users. And then by way of follow-up in terms of the specific areas we intend to be investing in, as we've talked about, certainly core commerce, new retail, as Daniel mentioned in his remarks, the community marketplace business, Taobao Deals, but also our Zhong Wang, the fujong, who will attach it. And then another way of breaking down the investments, not by business, But in terms of the results that we seek, certainly these would include growth in the user base, enhanced Yes. I'd just like to add to that briefly. When it comes to making these investments, we do have 3 major strategic priorities. As I mentioned in my script, these are domestic consumption, Globalization and the cloud or high advanced technology part of the business, and we intend to be investing in all three of those Starting with the first of those three strategic priorities, namely domestic demand, Our AAC number has now reached 890,000,000 In China, this is the latest total figure across the ecosystem, all of the different platforms, an aggregate AAC figure You have $890,000,000 However, there's still a lot of scope to grow the frequency of purchase And engagement of these 890,000,000 AECs to convert them into MECs, monthly active consumers or even DACs, Daily active consumers. So huge scope for development there. We have today within this user base The broadest, largest, multi tiered consumer base in China. So as I said in my remarks, a major priority for us and further developing that user base is to continue to drive higher levels of purchase frequency across all classes of consumers. China Retail Marketplace And then although we already have 890,000,000 still there is quite some scope for further growth in that figure with respect to users In lower tier cities and in rural areas, in fact, in my script just now, I reported the growth achieved in the past year in our user 70% of those new users came from rural areas. So we will continue, as I said, to strive to grow user base adding new users and have set the target surpassing 1,000,000,000 apart from growing the number of consumers and their frequency of consumption, another important initiative for us is helping merchants by reducing their burden, reducing their costs as well as creating facilitating and conducive environment For their long term development and success, in this respect, we will have many measures, some have already been announced, some have yet to be announced, they all aim at helping merchants. Finally, also in the same area of domestic demand and domestic consumption, another place we'll be investing is in the continued construction and improvement of our infrastructure, our logistics, our supply chain and merchandising capabilities, this is also an important area where we can discover and satisfy user demand and create long term value for users and for the company. In the interest of time, I will not expand any further. I I will merely end by saying that we will put in place detailed KPIs to monitor all of these investments and ensure they're conducted in a disciplined fashion. So the above was always with respect to the domestic consumption piece of our strategy. Turning now to globalization. As was mentioned in my speech earlier, we're very pleased that we now have 240,000,000 international And we hope to double that figure going forward. So growing the international user base is also very finally, I'd like to talk briefly about Technology, we see the cloud as an epoch defining opportunity and we'll continue to invest in cloud But also in big data and other kinds of technology as well, including technology to enable the next Generation consumption experience to better support logistics services and in other areas to ensure The technology is supporting the realization of our domestic consumption strategy, our globalization strategy as well as our cloud and high-tech strategy, we want to enable all of these strategic areas to benefit from further improvement in our technology Okay. Next question, please. Thank you. Yes, our next question is from the line of Songtrust Chong of Jefferies. Your line is open. Please go ahead. Hi, good evening. Thanks management for taking my questions. May I ask about the trend in terms of the CMR, given that we have seen the CMR growth rate is very solid, can you comment about the FY 2022 outlook? In particular, how we should think about the take weight trend for this year. And my second question is about the competitive landscape. Given that we have a wide product selections And very strong technology. How would we leverage our core capabilities in different areas like lower tier Citi's penetration as well as our strategic initiative in local service and NAFADA. Thank you. Yes. Hi, Thomas. In terms of CMR growth, you've seen that we reported 24% year on year growth for the quarter. And if you look at the past few quarters, it has been growing strongly considering it's a large base. I believe the CMR growth it's going to be have continue to have high potential. If you look at this revenue, actually the time is merchants budget, right, to pay for the services and we provided currently, our take is somewhere around 4%. This is mainly where our merchants paying for the sales and marketing branding services were provided. So even in this And there are also other areas that we could provide merchant service. So take rate has been growing over the past years, I think this year, as we talked about, we're going to provide more support to the merchants, in our last call, we talked about the details on how we support the merchant fees including waiving certain charges, fees and also invest in the platforms and infrastructures to support merchants. So we're not aggressively monetizing the value we Created for the merchants actually. The one thing worth to mention is that CMR currently accounts for approximately 43% of our total revenue. If you look at 3 years ago, 5 years ago, it used to be like 70%, 80%, right? So it has been growing very fast, but as a percentage of revenue coming down, I think that trend will continue. That is because of our multi Anjin's strategy, we have so many new businesses and revenue contributed from these new that become more and more important and significant to our total revenue. Your growth is for the annual fiscal 2021. For this quarter, the growth rate for CMR was 40%. Let me answer the second question in terms of the technology, how to apply technology into the competition. Actually, we always believe that technology is so critical in the competition, and we are proud of our technology development and integration with the real operation and even in the fierce competition. So let me just give you a few examples. In the market consumption area, actually, one of the key thing How to acquire and retain the customers on our China retail market basis. But the key thing is how to use technology to match the most comprehensive product offerings we have on our platforms with the right customers And it generates the real consumption. So the matching capabilities is all driven by AI and driven by technologies. So I think that's our big advantage to make sure we have most effective conversion over years, our conversion rate continue to grow And which not only to grow our GMV, but also to meeting the diversified demands of our customers. The second example I want to give you is that once we acquire new customers, it's all about how to maximize the lifetime value of these customers are across category setting opportunities. And so in this regard, we have this we built a very comprehensive user profile and the product features profile to make sure we can maximize we can understand our customers very well and provide all the needs during their lifetime cycle. Let me start here for translation. Well, our technology application is not limited to the consumer management side. Actually, it covers all the areas. Just a few more examples. For example, on the logistics side, technology actually played a very important role for Cainiao to build a smart data driven logistic network and operating and to serve our merchants as well both in China and in International market. And on the cloud side, I think technology is a key. As I said in my script, we continue to invest in technology to build our competitive advantage in the arts and the past products. But this our benchmark is not only in China. Actually, we benchmark the global leaders in all of their, I mean, core cloud products and to make sure we are at the top tier of the world. Thank you. Okay. Next question. Thank you. Next question is from the line of Jerry Liu of UBS. Your line is open. Okay. Thank you, management. Yes, my question is really on the business model. If we look at the recent past years, we've seen an increase in the 1P revenue mix, right? As Alibaba consolidates Sonarz and as we grow AGMAA or Cresipo. So today we talk about investing in community marketplace. And from the presentation, it looks like the providers of groceries and FMCG into this business includes also Sanath and I believe Thelma as well. So as we invest in these high frequency categories, how does this change the long term business How do we envision the ecosystem looking long term? And maybe more specifically, do we have a target 1P, 3P mix in mind? Thank you. In short, we don't have any specific goal for 1P3P mix. We strongly believe that this mix is an organic result outcome for our operation. And we don't manage The 1P, 3P mix intentionally. Over the years, we built our 2 flying wheels in our in our consumption business, one is to build our continues to build the capability to manage the customers smartly and efficiently. And in this regard, we said how to create demand. So the demand side, we continue to invest to improve our user interface with creativity and with technologies. And we strongly believe that it's very important for us to engage enhance our engagement with our customers, not only to have more customers on our platform, but also to help them spend more time with us. And we strongly believe that a very diversified supply from the merchants from different sources is very, very important, and the selection is very, very important to enhance the user stickiness. So I think that's some that's the area we continue to invest and to build capability on the customer management and demand creation. And on the other hand, over the years, we try to build a very strong, I mean, merchandising capabilities and supply chain management capabilities, which we believe, actually, over years, no matter how frequency how changed the user interface will be, The efficient supply is a must to do a successful commerce business, including e commerce business. So that's why we invest a lot to build our supply side capabilities, and we believe that these capabilities the advantage of this capability will not change even without even with user interface upgrading and change. So these are 2 flying wheels to Alibaba. I'm so proud that maybe we are one of the few companies in the world which have the has had excellent, I mean, consumer management capabilities, but at the same time, has this merchandising and supply chain management capabilities in 1 company and in one team. I think that these two flying wheels are the critical successful factor for our long term growth. Next question? Thank you. Next question is from the line of Han Joo Kim of Macquarie. Please go ahead. Great. Thank you for your time today. I wanted to ask about Taobao Deals. I think it's been one of the fastest growing apps And last year, and are you guys empowering it to kind of grow up to $700,000,000 $800,000,000 kind of Hello. Hi, just sorry to interrupt. Can you repeat your question, maybe get closer to the mic? Sure. It's regarding Taobao deals. I'm wondering if we are empowering it to try to grow to 700,000,000, 800,000,000 EPI users Hopefully, this is a little bit better. Yes. Yes. Sorry, just to repeat, for Taobao Deals, just wondering if this is a business you're empowering to try to get to kind of 700,000,000 to 800,000,000 kind of These are based in a few years' time. And if that's the case, how do we see this interacting with, I guess, Taobao and Tmall In the sense of as TABA deal grows, do we see any kind of cannibalistic behavior to our own services? And part of this is also I don't feel like I'm seeing your competitors in that similar space being particularly impacted as Taobao deal grows. So I'm also kind of thinking how this impacts perhaps the competitive landscape as well. Thank you. Well, the value proposition of Taobao deal is very clear. It's for price conscious consumers, and we provide on Taobao Dios platform, the value for money products for these, I mean, price sensitive customers. And in terms of supply side, actually, we focus on manufacturers and farmers and their direct offer and end to end to the customer in the which care more about price. So I think the value proposition and the simple consumer journey shopping journey, I think is a key for Taobao deals. And we are very happy To see the progress we've made during the last year and as I said, our MAU in March reached 130,000,000 And for the entire year, we our annual active consumer reached 150,000,000. So I I think that's a good start. And because China is so big and with so many population with different consumption power and with different So we try to as part of Alibaba China Retail Marketplaces, we try to provide multiple destinations to the customers with different purposes. So I think Taobao Deals is a good supplement to our to other application other business we have in China retail marketplaces. And in terms of the incremental value we create from Taobao Deals, I just give a good example in my script to you, which is the average spending of our customers on top of deals, the increased rate of the spending for the customers on Taobao deals is bigger For those on spend for the average spending on China retail marketplace, which indicate that if we have people if we give people multiple choices, the overall the total spending within Alibaba Ecosystem will be bigger. So that's a very good indicator. And so that's why we will continue to invest in Taobao deals. And as to whether this have any impact On other players, I think it's very important that we on top of deal, our goal and value proposition it's very clear and straightforward and even simple. So we are confident the impact is coming and because for these customers, they just need a simple choice and price sensitive and price advantage. That's it. We will strengthen this very proposition on Taobao deals. While on Taobao mobile app, our flagship, I think we provide more comprehensive offerings to different segment customers, And they will enjoy more selections and more funds. So the value propositions are quite different. And we are Well, as I said, our goal is to build a metrics application metrics Okay. Thank you, everyone, for joining today's call. We have all the materials that will be provided in our IO website. We look forward to communicating with you in the coming months. Please contact me and the IR team, Alibaba. Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.