AGM 2019

Jun 15, 2019

Good morning. Welcome to the Alibaba Group Annual Meeting of Stockholders. I would now like to turn the conference over to Daniel Zhuang. Please go ahead. Good evening and good morning, ladies and gentlemen. I'm Daniel Zhang, Director and Chief Executive Officer of Alibaba Group Holding Limited. I will be chairing today's meeting. On behalf of the Board of Directors and management team of Alibaba Group, I would like to welcome our shareholders and ADS holders to our 2019 Annual General Meeting. I would also like to thank you for all your continuing support and trust in our company. And now, I'd like to call the meeting to order. Tim Steiner, our General Counselor and Secretary is appointed as Inspector of Elections and the Secretary for this meeting. I would like to delegate my authority to Tim to conduct this meeting. I will now turn it over to Tim. Thank you, Daniel. Welcome, everyone. Before we start, please mute your phones and other mobile devices. We ask that everyone here with us today to kindly refrain from taking photos or videos during the meeting. This meeting will be conducted primarily in English, although we will accept questions later in Chinese. Let me introduce other members of our senior management team who are with us today in person. Michael Yao, Senior Vice President, Corporate Finance and Rob Lin, Head of Investor Relations. We hope to have Maggie Wu on the call, but she's traveling in the United States and is having trouble dialing in. She may dial in while we're on the call. Also present today are representatives of Citibank NA, the depository bank for our American depository shares, representing our ordinary shares. Citibank is also record holder of the ordinary shares underlying our ADSs. PricewaterhouseCoopers, the company's independent accountants Maples and Calder, our Cayman Islands Council and Simpson Thatcher, our U. S. Council. We will first attend to the official business. To ensure an orderly meeting, we will not be taking questions that are not related to the items on the agenda during this part of the meeting. We will have a general question and answer session after voting is completed. Before the general question and answer session, we ask that ordinary shareholders attending this meeting in person to pass any questions you may have about the agenda items to Dora Chan. Dora, please stand up so we can see you. Those of you who are attending this meeting online may submit your questions via our virtual shareholder meeting website at any time. However, because of time constraint, we will only be able to answer some of these questions. Thank you in advance for your cooperation. I have received confirmation of mailing from Computershare, the transfer agent for our ordinary shares and Citibank, the depository bank for our ADSs that notice of this meeting has been duly given and that copies of the proxy statement and proxy cards or voting cards have been furnished to all holders of ordinary shares and ADSs of record as of the close of business on June 7, 2019, New York Time. A count of shares present, including those represented by ADSs, before the commencement of this meeting indicated that we have more than 2 point 5,000,000,000 shares represented in person or by proxy at this meeting. This total represents approximately 98% of the total shares entitled to vote as of the record date. As Inspector of Elections, I have determined that we have present in person or by proxy a sufficient number of shares to constitute a quorum. Therefore, the meeting is duly convened and we may proceed with the business of the meeting. All items submitted for vote at today's meeting will be decided by poll. To our ordinary shareholders who are present at the meeting today, if you have turned in a proxy and do not intend to change your vote, then you do not need to vote again because we will count your proxy. If you did not turn in a proxy or wish to change your vote, you may vote by casting the ballots provided to you when you signed in. To holders of our ADSs who are attending this meeting via our virtual meeting website, pursuant to our articles association and the deposit agreement governing the ADSs, you must vote through Citibank, the holder of record of the ordinary shares underlying the ADSs you hold. If you have provided your voting instructions to Citibank by the date indicated in the meeting notice, then your vote will be cast by Citibank at this meeting as you have instructed and you will not be able to change your vote today. If you have not provided your voting instructions to Citibank, you will not be able to vote today via the virtual meeting website. In accordance with the terms of the deposit agreement for the ADSs, holders of approximately 555,000,000 ADSs who did not provide timely voting instructions to Citibank were deemed to have instructed Citibank to give a discretionary proxy to the company. The company has designated me to vote the shares represented by such unvoted ADSs in my discretion. I will vote all of the shares represented by such unvoted ADSs in favor of all the items submitted for vote at today's meeting. We will announce the voting results at the end of the meeting following the question and answer session. The polls for each matter to be voted on at this meeting are now open. We will collect your ballots after the voting on all the proposals is completed. The first item of business is to approve the proposal to increase the number of the company's authorized ordinary shares and affect a 1 to 8 share subdivision of the company's ordinary shares, including all outstanding options, RSUs and share awards. Please note that if the proposal is approved, it will take effect on a date to be determined at the discretion of our Board, but no later than July 15, 2020. To be clear, one ordinary share will become 8 ordinary shares after the share split takes effect. Simultaneously, we will also change our ADS to ordinary shares ratio to 1 ADS representing 8 ordinary shares. The details of this proposal are included in the proxy statement. Is there a motion for the approval of the proposal to increase the number of the company's authorized ordinary shares and affect a 1 to 8 share subdivision of the company's ordinary shares? Is there a second? The matter is now called for a vote. The proxy solicited by us will be voted as instructed by the shareholders or ADS holders completing and returning proxies or voting cards as applicable. Ordinary shareholders present who wish to vote in person today should mark your ballot indicating the way you wish to vote. Are there any questions on this matter? So, we have received a few similar questions online about this agenda item. Let me summarize these questions for the management to answer. Our first question, I guess, for Michael. Would the stock split affect the price of the company's ADS? Yes, Rob, I'll take that. We don't expect the stock split to have any effect on the price of our ADSs because we're changing the ratio of ordinary shares to ADSs to 8:one at the same time. I guess a follow-up. Why is the company changing the ordinary shares to ADS ratio? We are changing the ordinary share to ADS ratio to avoid any potential impact on the trading of our ADSs. In addition, not splitting our ADSs also means that the annual fees payable by our ADS holders, which is based on the number of ADSs held will not increase. Will there be any change in the voting rights associated with each ADS? The voting rights for our shareholders and ADS holders will not change. And does the company have any plans for stock buyback after the stock split? We don't have any plans to buy back shares in connection with this stock split. However, people know we do have a regular repurchase program, which our Board refreshed in May, in the amount of 6 $1,000,000,000 over the course of 2 years. Okay. Those are some of the key questions from our line. Any other questions? Thank you. I'm also informed that Maggie has joined us on Maggie Wu has joined us on the line, CFO of the company. 2nd order of business is the election of 4 directors to serve as Group 2 directors until our 2022 Annual General Meeting or until their successors are duly elected or appointed. The persons named in the proxy statement have been nominated for election by the respective nominating parties as explained in the proxy statement. They are Daniel Yong Zhang, Chihua Tong, Jerry Yang and Wanling Martello. The biographies of the nominees are also included in the proxy statement. Is there a motion for the election of each of these nominees as a Group 2 Director as stated in the proxy statement? I so move. Is there a second? I second. Thank you. The matter is now called to a vote. The proxy solicited by us will be voted as instructed by the shareholders or ADS holders completing and returning to voting cards as applicable. Ordinary shareholders present who wish to vote in person today should mark your ballot indicating the way you wish to vote. Are there any questions on this matter? We have not received any questions on this matter to be voted on. We'll proceed to the final order of business. The final order of business is ratify the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending March 31, 2020. Is there a motion to ratify PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending March 31, 2020. I so move. Is there a second? I second. Thank you. The matter is now called for a vote. The proxies solicited by us will be voted as instructed by the shareholders or ADS holders completing and returning proxies or voting cards as applicable. Ordinary shareholders present who wish to vote in person today should mark your ballot indicating the way you wish to vote. Are there any questions on this matter? There being no questions, that completes the voting portion. The polls for each matter to be voted on at this meeting are now closed. No additional ballots, proxies or votes and no changes or revocations will be accepted. Computershare, our transfer agent, is now counting the votes. We will report the results at the end of this meeting. We will now proceed with the question and answer session. I will turn the mic over to Rob Lin for him to moderate the question and answer session. Thank you, Tim. So before we get started, please note that today's Q and A session may include forward looking statements. These forward looking statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations. Please refer to our filings with the SEC for a detailed discussion of these risks and uncertainties. Any forward looking statements that we make on this call are based on assumptions as of today, and we do not undertake any obligation to update these statements, except as required under applicable law. This Q and A session may also contain certain financial measures such as adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, marketplace based core commerce adjusted EBITDA, marketplace based core commerce adjusted EBITDA margin, non GAAP net income, non GAAP diluted EPS and free cash flow, which are expressed on a non GAAP basis. Our GAAP results and reconciliations of GAAP to non GAAP measures can be found in our filings with the SEC. Please also note before our earnings results for the June quarter are announced, we will not be in a position to address any questions or comments relating to our financial or operating performances. In addition, while we will do our best to address all questions received, we may not be able to address each of them today due to time constraints. We have budgeted approximately 15 minutes to answer the general question at this meeting. So maybe let me move to the first question from our line. So this question is for Daniel. Daniel, given the macro uncertainties, what is the trend of China consumption today? And what is the company's strategy for China consumption? Hello. I think today Chinese economy is transformed from an export driven and investment driven economy to an consumption driven economy. I think that's the landscape and that's really the opportunity we have, I mean, for Alibaba Group. I think many people know that today we are the largest retail marketplaces in the world in terms of GMV. And we have I think every year we have over in the last fiscal year, we have over 650 living annual active consumers around us. So I think with this, I mean, consumer base, we can, I mean, well tap into the opportunity and for the consumption upgrade and the consumption expansion? I was I think that the opportunity we need to work hard, I mean, in the coming years. Thank you, Daniel. I guess the next question is also for you. What are the impacts of the trade war between China and the U. S? Well, the U. S.-China trade disputes are both the challenge and opportunity to Alibaba. And I think, as I said just now, Chinese economy is transformed to an consumption driven economy. I think in this case, Alibaba can do a lot to help our business partners to capture this opportunity in this world largest consumption market. And I think today, we have done a lot to help the overseas imports to China and every business partners, they are keen to pursue the opportunity of getting access to Chinese families directly. That's exactly what we can do to help them. And I think this is, I mean, also very good to balance the deficit between China and the U. S. I think going forward, we'll continue to do that to lead the consumption in the Chinese society. And the company has many different businesses such as e commerce, entertainment, cloud and many other new initiatives. So how do we how do all of these different businesses fit into our company's overall strategy? Well, our overall strategies for the next few years are very clear. First of all, we will I mean, still working on the consumption, domestic consumption, especially in the rural and the low tier cities in China. And you know that over half of the Chinese population living in these rural areas. And with the power of Internet, we are able to get access to the Chinese individuals, I mean, using the most efficient way. So I think we'll continue to work on this consumption. That's the reason why we expand our business from the physical goods categories into the digital content and the local services. I think that's all about the category expansion, and we want to share and leverage our user base in all the consumption categories. And the second strategy we have is globalization. I think today we have done a lot to help the overseas partners to import to China, but at the same time, you also expand to other markets such as Southeast Asia, and we will continue to grow our overseas market and to try to serve the people not only in China, but also globally. And the 3rd strategy we have is about the cloud community and big data. Today, we are in a digital era. Every industry is moving to the cloud is taking opportunity of utilizing the big data. So with the infrastructure, with the technical infrastructure we build up, we are able to serve our business partners in different industries to helping them to be a data company, to be a cloud company. So I think that these are the 3 strategies we have and we will continue to working on this in the coming few years. Thank you, Daniel. Maybe we can shift gears to Maggie. Maggie, I think you are aligned. The question for you is, is the company doing a stock split because of potential listing in Hong Kong? Right. As discussed in our proxy statement, we're proposing the stock split to increase the flexibility for future capital market activities. For example, the stock split will increase the number of shares available for issuance at a lower per share price. So as to a potential listing in Hong Kong, policies do not comment on any market rumors. The next question is for Michael. Does company have any plans to repurchase share from Ultaba? So Rob, Altaba, they previously announced that they are liquidating their holdings in Alibaba and in fact are in the process of doing so. The markets appear to absorb that sale volume. So we expect an orderly disposal to continue and we have no plans to repurchase our shares from Altava. I guess next question is more financially related to and goes to Maggie. The company has started to do a lot more direct sales business in recent years. What is the progress of the company's direct sales business and what is the management's plan for the direct sales business? Right. So we're not doing direct sales for sake of doing direct sales. We're experimenting with direct sales to identify issues and challenges for offline retail and come up with solutions. We can then provide these solutions to 3rd party businesses to enable them to operate more efficiently. For example, our proprietary grocery chain, Fresh Houma, has been bringing much better consumer experience such as better product quality and 30 minutes delivery service and achieving more efficient operations. So we'll first bring these solutions to offline partners, particularly our investee companies then expand to other third parties to help them to better operate their business. Currently, if you look at their revenue, the first pay business accounts for approximately 10% of our total revenue. Okay, Tim. Those are the questions we have online. Any further questions from people here in the room? There being none, I have the results of the polls here in front of me. I'm happy to say that all of the proposals have passed. I will summarize the results. Regarding the proposal to increase the number of authorized ordinary shares of the company and to effect a 1 to 8 shares of subdivision of the company's ordinary shares, including all outstanding options, RSUs and share awards, approximately out of a total of 2,544,000,000 shares represented at the meeting, approximately $2,540,000,000 or 99.87 percent voted for 1,000,000, 1,600,000 voted against and approximately 1,400,000 abstained. Regarding the election of Daniel Yong Jiang, approximately 2.28 $1,000,000,000 voted or about 89.6 percent voted for, 200 and 62,800,000 voted against and 1,400,000 or about 0.05% abstain. Regarding the election of Zhihuatong, approximately $2,522,000,000 or 99.1 percent voted for and $20,400,000 or about 0.8 percent voted against and $1,400,000 or about 0.05 percent abstained. Regarding the election of Jerry Yang as Group 2 Director, approximately $2,518,000,000 voted or 98.9 percent voted for and 24.2 $1,000,000 or 0.95 percent voted against and $1,300,000 or about 0 0.05% voted abstained. Regarding the election of Wenling Martello as Group 2 Director, approximately CAD 2,535,000,000 or 99.66 percent voted for, CAD7.0 1,000,000 or 0.27 percent voted against and $1,400,000 or about 0.05 percent abstained. Regarding the ratification of the appointment of PricewaterhouseCoopers as our independent registered public auditing firm for the fiscal year ending March 31, 2020, approximately $2,513,000,000 or 99.5 percent voted for, 11 point $5,000,000 or 0.45 percent voted against and $1,100,000 or about 0.04 percent abstained. Based on the voting results, I declare that the proposal to increase the number of the company's authorized ordinary shares and to affect a 1 to 8 share subdivision of the company's ordinary shares has been approved. Each of Daniel Yong Zhang, Chi Huatong, Jerry Yang and Wenling Martello has been elected as a Group 2 Director to serve until our 2022 Annual General Meeting or until their appointment of PricewaterhouseCoopers as Alibaba Group's independent registered public accounting firm for the fiscal year ending March 31, 2020, has been ratified. Final detailed results of voting will be disclosed in a current report on Form 6 ks that we will file with the SEC shortly after this meeting. This concludes today's meeting. There being no further business to be conducted at this meeting, may I have a motion to adjourn the 2019 Annual General Meeting? I so move. Is there a second? I second. Thank you. There being no objection, our 2019 Annual General Meeting of Shareholders is adjourned.