Zhitong Financial APP learned that on August 4th,$BABA (BABA.US) $Hold a quarterly performance exchange meeting in June 2022. BABA said that in the second quarter of this year, the group maintained a stable total revenue, improved operating efficiency and reduced operating losses in a number of strategic businesses. In the future, BABA will focus on the growth of wallet share of different consumer groups, rather than pursuing the growth of domestic absolute user scale. BABA management stressed that in the following quarter, the group's overall cost optimization control plan will continue to be implemented. Management also said that BABA will look for opportunities in emerging industries such as new energy from the perspective of cloud computing.
Business performance
We have overcome many difficulties and achieved stable results in a very unusual and challenging quarter. Maintain the stability of total revenue, and improve operating efficiency and reduce operating losses in a number of strategic businesses.
In the field of consumption, we should give full play to the advantages of our far, middle and near field digital business infrastructure, do a good job of user layering, and focus on the deterministic consumption needs of different consumer groups.By the end of last fiscal year, we had reached the goal of 1 billion domestic AAC. In the future, we will focus on the growth of wallet share of different consumer groups, rather than pursuing the growth of the absolute size of domestic users.
In the field of cloud computing, focus on the continuous improvement of relevant core technologies and focus on serving industries and customers that represent the general direction of social and industrial development. In the global market, focus on selecting countries and regions with good prospects for economic and social development in the next five to ten years. Focus on localized capacity-building and build logistics and cloud computing infrastructure.
In China's digital business sector, Taobao and Tmall's GMV fell by a median year on year this quarter.Mobile Taobao's DAU and consumer PV basically remained stable. In the 12 months ending June 30, 2022,The number of consumers who spend 10, 000 yuan on Taobao and Tmall exceeds 123 million.The four-year retention rate for such users remains at a high level of 98%. At the top of the user pyramid, our 88VIP users are still growing healthily, reaching 25 million at the end of the quarter. The annual ARPU value per capita reaches 57000 yuan.
The complementarity between our different businesses and different models in the field of digital commerce in China is beginning to emerge.In this quarter, the GMV of Box Horse grew by more than 30% compared with the same period last year, and the non-delivery business GMV of ele.me grew by more than 50% year on year.We must also see that the overall growth of Taobao and Tmall in this quarter is lower than the average growth of total retail sales.
For BABA, our competitive strategy is to continuously strengthen the awareness of hand Amoy as the main position of consumers on the consumer side, and focus on the consumer groups with more consumption power. Can provide different levels of users, different value propositions of the consumption matrix, such as Amoy, vegetable Amoy, Xianyu, Box Horse and so on. Provide better tools and services for merchants on the merchant side, and strengthen the position of merchants in the main position of sustainable management. At present, our market size is much larger than that of our competitors, and more importantly, our profitability advantage is more obvious. Make good use of our financial reserves, invest in the mental construction of users, as well as logistics, after-sales service and other key links of user experience and capacity building is the strategy that we must adhere to for a long time.
In the current quarterThe overall GMV of ele.me was less affected, and with the relief of the epidemic, GMV returned to positive growth in June.Offline store sales of Box Horse and Da Runfa were greatly affected by the epidemic. However, depending on the establishment of digital sales capability and near-field compliance capability, online sales accounted for 68% and 36% of online sales in this quarter, respectively. During the quarter, due toWith the increase of the average order amount on ele.me platform, UE became a regular employee.We will continue to build the minds of ele.me users from catering takeout to daily takeout around the strategy of key cities, and continue to improve the quality of operationWe are also confident that ele.me 's losses have narrowed throughout the fiscal year.
DAU reached a new high of 120 million in June after the epidemic alleviated in this quarter.With more and more destination-based content and services on Amap, Gao de continues to make progress on the destination life platform service platform.
The total annual GMV of the international commercial retail business has exceeded 50 billion US dollars.Looking to the future, we will continue to adhere to the combination of cross-border market and local market, and give full play to the core role of logistics construction. Despite the ups and downs of short-term sales, we will focus on the construction of cross-border logistics networks from China to Europe and local markets in Southeast Asia, which will bring long-term value.
The revenue of cloud computing business grew by 10% year-on-year in this quarter, which slowed down.It is affected by many factors. We will also continue to focus on building core technical competencies in areas such as cloud computing, big data and AI. Focus on the huge opportunities brought about by the industrial Internet, while constantly strengthening the ability to strictly adhere to the cloud's data security bottom line. We have also seen that these strategies have made good progress.Non-Internet customers accounted for 53% of cloud computing revenue this quarter, up more than 5% from a year ago.Nailing will continue to strengthen the positioning of digital collaborative work platform, enhance the ability of digital office basic tools such as documents and conferences, and customer penetration, and build a low-threshold work application development platform on this basis.
Finally, in the face of all kinds of uncertainty, the only thing we can do is to continue to improve ourselves through subjective efforts, such as the promotion of operational efficiency and various cost optimization measures mentioned earlier in this quarter. The operating losses of Taote, Taocai, Box Horse, ele.me, Lazada and Youku all improved significantly compared with the previous quarter. At present, the operation quality of the whole group is still improving. We also see that, despite the challenges, our overall financial position remains healthy, our free cash flow is abundant, and our net cash reserves are adequate, which is our greatest advantage.
Financial data
The total revenue of the group in the quarter was 206 billion yuan, which remained stable compared with the same period last year.China's business revenue fell slightly 1 per cent year-on-year to 142 billion yuan, while cloud business revenue rose 10 per cent to 18 billion yuan. Adjusted EBITA fell 7.3 billion yuan to 34.4 billion yuan, mainly due to a 7.2 billion yuan drop in adjusted EBITA in China's commercial business, which was partly offset by a 1.7 billion yuan narrowing in losses on local living services.
Let's take a look at the cost trend, excluding equity incentive fees. The percentage of various costs as a percentage of revenue in the quarter is as followsQuarterly operating costs as a percentage of total revenue rose to 62% in June from a year earlier.The main reason is that the proportion of direct business such as box horse and Tmall supermarket has increased, and the growth of Alibaba Health Information Technology's direct business has increased the percentage of inventory in total income. Second, the growth of Cainiao business has led to an increase in logistics costs as a percentage of revenue, which is partly offset by a decline in the cost per distribution of ele.me. Product development expenses accounted for 5% of total revenue in the current quarter, which remained stable compared with the same quarter last year. The share of quarterly sales and market expenses fell to 12 per cent in June, reflecting the group's efforts to improve the acquisition and retention of new customers across business segments. The share of general and administrative expenses rose slightly to 4% in June compared with the same period last year.
Non-GAAP net profit was 30.3 billion yuan, down 13.2 billion yuan from the same period last year.This is mainly due to the decrease in adjusted EBITA and the decline in our performance share from invested companies calculated on an equity basis.
The cash flow and balance sheet are as follows. As of June 30, 2022, the Group continued to maintain a strong net cash level of 340 billion yuan, or about US $51 billion. During the quarter, we repurchased approximately 38.6 million American depositary shares at approximately $3.5 billion under the share repurchase program.We generated $3.3 billion in free cash flow in the quarter and the Group currently has a net cash position of $50.8 billion.This gives us good financial flexibility to further drive business growth and bring better returns to our shareholders.
Although we have seen a gradual recovery in demand in the Group's consumer business in China in July, we believe that there are still many risks and uncertainties due to the slowdown in macroeconomic activity in China. In the face of these challenges, in a highly uncertain environment, we will continue to promote the three core strategies to focus on high-quality growth, while we will continue to improve operational efficiency, optimize cost structure and build long-term capacity around the main business sectors of the Group.
Question and answer communication
Q: can you share with us the recent situation of GMV and CMR? How's the recovery going?
A: from our platform, the consumption trend began to recover in June.After entering July, we see that this trend continues, and it will be a little better than in June.We also see that although consumption is recovering steadily, the desire for consumption as a whole still has a process of recovery.
The changing trend of consumption and the willingness of businesses to invest have always been very positive. Especially when it is more difficult, in fact, the businessman wants to be able to stimulate his business. We see that the business will of the whole business is as strong as ever.
Q: would you like to know the trend of EBITA and overall EBITA in China commerce in the next few quarters? Is there a good chance of positive growth in the next quarter or two? What is the future direction of 1p mode strategy?
A: we will pay close attention to the whole cost optimization and related control. Well, as you have seen in this quarter,From the whole cost optimization, we still got a better result. In the coming quarters, we will firmly continue to implement the cost.For Ali, cost optimization is definitely not a financial perspective. Our pursuit of high-quality growth is our consistent business policy.
In fact, in the process of efficiency improvement and cost optimization, the final result will be reflected in EBITA margin. We also believe that adhering to high-quality and efficient growth will eventually help improve in EBITA margin.
Our future work will focus on the increase in the number of absolute users.Transferred to be able to serve these consumers, do a good job in their hierarchical and classified operations, and increase the wallet share of users at each layer.Such a change in focus is of great help to the overall efficiency optimization and the improvement of margin.
To do a good job of tiered services for users, we can improve on Co-Commerce in the past two years. The simple answer is that today we have established a consumption matrix for different users. For BABA, we choose which way consumers are more satisfied with, 1p or 3p in the Co-Commerce. This is our current business philosophy. Although we are also doing 1p business, we have redefined 1p business.We don't want 1p to be a wall between brand partners and consumers.On the contrary, it is hoped that brands can give consumers the same effect as the 3p model.
Q: what is the underlying business logic behind reducing costs and increasing efficiency? Just now you said from the development stage of the whole group, if from the perspective of the business line, do you have some other views? For example, is the progress of digitization in some industries slower than previously expected, or the strategic goals in some directions have been adjusted?
A: if some quick results can be achieved by reducing costs and increasing efficiency, there is actually a lowest logic: we still think that the minds of consumers are BABA's most precious asset after so many years of construction.It means you don't have to spend money, and users will come back.Even in this difficult quarter, the DAU of online users and the page view of consumption are actually relatively stable. This is also a very important basis for us to achieve some results in China's retail business after we have a 1 billion user base and a differentiated consumption matrix to serve users with different value needs.
Q: how do you view the growth momentum of cloud business in the second half of the year?
A: from the perspective of the overall situation, I think cloud is not a so-called cyclical opportunity, but a structural opportunity. Therefore, whether in China or in the international market, we will make cloud as one of our core strategies. In the future, under the background of the slowdown of China's Internet industry, what will be the next growth point?In fact, it is very simple, that is, the digitization of the whole industry. In the era of industrial digitization, every company will become a digital company.
So we often pay attention to a figure, that is, how much of the revenue in our cloud business comes from non-Internet companies, and we are glad to see that this share is increasing. This quarter is an increase of five percent over the same period last year, and we will continue to launch more of these applications for different vertical industries in the future to capture related opportunities.
Q: in the past few years, we have all observed some changes in users' habits, which may be felt by all Internet companies other than short videos: more and more users and time are precipitated on short videos. So from the management's point of view, the impact of this external change on the e-commerce field: next, we judge whether it is still in a period of rapid rise, or has reached a relatively mature stage? And, from the company's point of view, and even jump out of the company's point of view, in order to better deal with this change in the behavior and habits of users and merchants. What proactive strategic adjustments will BABA make, and what will we not do?
A: short video is the expression of a product, e-commerce is an industry, it is a reality for e-commerce companies to use short video, and short video is no longer a new technology. Today, on the Mobile Taobao platform, more than half of our products, perhaps five years ago, were expressed in pictures and words, and more than half of today's products are expressed in short videos.
In fact, the problem discussed is not between short video and e-commerce, but between entertainment and e-commerce.In the end, the problem here is that the most valuable asset we have built is the user's psychological share:He wants to spend money and come to us.We often say that consumption is a part of entertainment, but here, BABA is focused on doing a good job in the entertainment category, that is, this sub-category of consumption.
I think today's short video is definitely not the last technology. New technology will certainly change consumers' consumption experience in the near future, and of course, it will also change consumers' entertainment experience in addition to consumption.But any platform must eventually have a clear user positioning, it is first of all to serve the needs of users.I think this is the core positioning problem of what is staple food and what is dessert.
Q: what are the biggest obstacles and challenges BABA is facing now? And then some of the strategies that the company retains for the people we have? Are there any other areas in the future that we haven't invested yet but are interested in, such as some new energy sources? can the management have some comments?
A: BABA has come to this day over the years because of China's rapid development, and because of China's economic growth, which has made BABA a success. BABA has been given a chance to get to where we are today. We also hope that at a future stage, China will become better and better and the society will become better and better. in this way, we will have a stronger desire to consume, and the common people will have a stronger desire for a better life. to be able to satisfy them better.
With regard to talents, in fact, for BABA, the foundation, experience and technology of all our customer service come from people. Therefore, with our desire for talent and investment in talent, we continue to adhere to it. Although we have also seen some uncertainty in the macro situation this year,We still have nearly 6000 fresh graduates from universities, the vast majority of whom have already taken up posts in BABA.We hope that when we need it most, we will not only make contributions to society, but also meet the needs of BABA himself, so that we can use continuous talents to promote our cause and make continuous new innovations.
I think we should still look at the emergence of these new technologies and new industrial opportunities from the perspective of BABA's core strategy.For example, new energy is a huge industrial opportunity. Well, for BABA today, we will first consider this opportunity from the perspective of cloud computing.Because of such a sunrise industry, cloud computing can play a huge role in the middle. It also includes, like the autopilot and meta-universe that we discussed, which we all focus on consumption, logistics, such as autopilot, logistics, and the experience of meta-universe around consumption, and we look for such opportunities to get the opportunity to grow with this industry.
Today's three major strategies, we are two vertical and one horizontal, two vertical is our consumption, our cloud computing, this is a vertical view. But there is also an opportunity to look at the level, that is, can we go to overseas markets other than China? How do we stand in terms of consumption, and how can we capture such opportunities in new overseas markets from the perspective of cloud computing? I think this is also the direction of our efforts.