Good day ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group March Quarter 2017 and Full Fiscal Year 2017 Results Conference Call. At this time all participants are on a listen-only mode. After managements prepared remarks, there will be a Q&A 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 March Quarter 2017 and full fiscal year 2017 results conference call. With us today are Mr. Joe Tsai, Executive Vice Chairman; Daniel Zhang, Chief Executive Officer; Maggie Wu, Chief Financial Officer. This call is being webcast from our IR section of the corporate website. A replay of the call will be made available on our website later today. Now, let me go 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 actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and Form 20-F and other documents filed with the U.S. Securities and Exchange Commission. 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. Please note that certain financial measures that we use on this call, such as adjusted EBITDA, adjusted EBITA, non-GAAP net income, non-GAAP diluted EPS and free cash flow are expressed on a non-GAAP basis. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings release. With that, I will turn the call over to Joe.

Thank you, Rob. Thank you all for joining us. We had a great quarter. Before we get into the details of our business, I want to give some perspective on the China macro environment as well as our vision of new retail. Both of these are important to understanding a long view of Alibaba. On China macro, there is an important secular trend underway. Chinese consumers are driving the shift of the Chinese economy from an export and investment led to a consumption led economy. When looking at investing in China, this secular trend is absolutely important to pay attention to, and that is what we focus on when we plan our strategy rather than on quarter to quarter cyclical trends. There are a few underlying reasons for this secular shift to a consumption economy and these reasons are why we think the trend will be long term and sustainable. First, China’s GDP per capita is now more than US$8000. For Context [ph] when I started at Alibaba in 1999, Chinese per capita GDP was US$870. So at the current US$8000 level, people’s basic needs were shelter and foods are satisfied. So consumption is moving up the higher key of economic needs, in other words people are spending more on discretionary goods and services. We believe the growth of per capita GDP in China will continue for years to come and eventually approach advanced economy such as the United States where GDP per capita is over US$50,000. Second, over the past several years, among Chinese urban employees, wages have increased over 10% per year, year-on-year. So people have disposable income to spend. And lastly, the high savings rate in China means that Chinese consumers have a lot of cash on hand. Net cash on the Chinese household balance sheet that…

Thanks, Joe. Hello, everyone, and thank you for joining us on our earnings call today. We enjoyed an outstanding quarter and a fiscal year. Over the past year, our businesses have prospered through innovation and a realization of synergies between our various problems in commerce, digital entertainment, logistics and cloud computing. Our business is more than making connections. We are transforming existing business models so helping manufacturer’s rents, and the retailers cope with digital transformation. In this ever changing environment, the impact of the internet continues to move up the retail chain from sales and marketing to supply chain, manufacturing and even further design. Our mission of making it easy to do business anywhere is more relevant than ever. Our core commerce business sustained very healthy growth. It is defining more than expectations about the Chinese economy and even our own flow of large numbers. Today, we have more than 500 million mobile active users as a result of our continued excellence in capturing the consumers time and wallet share with discovery, personal recommendations and entertainment. Taobao has transformed into a consumer community, powered by a risk mix of content and impacted features, such as live streams, news feeds, short – videos, photos generated by everyone from influences to celebrities to brands. Even as our active user base grows, average time spent per user continue to remain robust while user stickiness, as measured by TAU divided by MAU ratio has increased to 41%. Taobao is moving from satisfying demand to creating demand so the continuous improvement through our aggressive [ph] driven personalization and the roll out of [Indiscernible] merchandizing for different user segments. Tmall remains the founder of choice for brands serving as cornerstone of their channel online retail strategy and operations. The value that it brings to merchants and…

Thank you, Daniel. Hello, everyone. We are very happy to announce that we delivered another quarter of excellent results. In terms of quarterly revenue, this quarter the total revenue growth accelerated to 0%, the highest growth rate we have achieved since the IPO. This was led by robust growth in our core commerce, Alibaba cloud as well as digital media and entertainment businesses. Our non-GAAP free cash flow was US$1.2 billion for the quarter demonstrating the strength of our business. Revenue from China commerce retailing business now represents 57% of total revenue, down from 76% for the same period the last year. We now have a more diversified revenue base with gross drivers including Alibaba cloud, digital media and entertainment and the international businesses. Our ability to monetize the users on our platforms continues to improve. Annual revenue per annual active buyers continued to increase, reaching RMB251 US$36 in the March quarter. Mobile revenue per mobile user reached RMB179 or US$26 in the March quarter. Our mobile commerce platforms have become the destination for social commerce, consumption of content and brand engagements. Quarterly cost trends; cost of revenue excluding stock-based compensation was RMB14.3 billion, as a percentage of revenue increased year-over-year, primarily due to the increase in content acquisition cost of Youku Tudou, cost of inventory of Lazada and the logistic cost associated with Tmall supermarket as we are talking about in previous quarters. We continue to see strong operating leverage from our China commerce business. This operating leverage allows us to make strategic investments which positions us for long term revenue and margin expansion. Our effective tax rate excluding SBC and the one-off items was 23% in the quarter ended March 31, 2017, up from 14% in the same quarter of 2016. The lower tax rate a year ago…

Ladies and gentlemen, we will now begin the question and answer section. [Operator Instructions] Your first question comes from the line of Piyush Mubayi from Goldman Sachs. Please ask your question.

Thank you, and congratulations on founding top-line growth, a record since the IPO, Joe, Daniel and Maggie. My first question is with regard to 46% growth in online marketing services we’ve seen. Would you be able to split that between the brand and pay-for-performance advertising? And if possible the growth that you’ve seen in paid click and cost per click. And while you talk through that if you could give us a sense of for how much longer we can expect this very quick pace of growth to be maintained? Thank you.

Hi, Piyush. Thank you for the question. The strong growth we’ve seen in our China retail marketplace especially online marketing service. Actually when I look at these drivers. Number of clicks, click through rate, all of these shows very healthy growth. And this actually due to our continue efforts in providing the relevant content through our data and technology to attract more users and buyers to our platform. So, in terms going forward, we are very confident that all of these efforts we made will generate good results going forward and things like our aggregate improvement, personalization and the use of data, right now we see this is still at starting point at early stage.

Piyush, I just want to supplement that. You asked about the distinction between brand and pay-for-performance advertising as those two are different types of -- coming from different types of advertising budgets. We actually don't see it that way. If you take a typical FMCG company, they are -- they will use pay-for-performance, in other words click-based type of advertising even to promote their brand because the landing page of the click could fall on something that as a brand promotional page as opposed to a detailed product item to be purchase. So, they are seeing are suite of potential online marketing products from pay-for-performance to CPM-based advertising to special sort of customized brand promotional campaigns using our data sets. So, I don't think we are seeing the online marketing business as brand versus P-for-P type of split.

Understood. Thank you.

Operator, next question.

Thank you. Your next question comes from the Mark Mahaney from RBC Capital Markets. Please ask your questions.

Great. Thanks. I just want to ask about international. You had that data point in there about how you’ve now achieved 83 million active buyers. When you think about overall investment priorities for the company where does and since the IPO, as international now become much more material investment area for you in terms of potentially strategic actions or organic growth? Just lay that versus the other growth initiatives that you have now how does international rank? Thank you.

This is Daniel. Yes. International is core strategy for the next five to ten years. We are very happy to see we made a concrete progress in the Southeast Asia. Actually last April since our investment in Lazada last April, actually their business grow very well and together with the existing AliExpress which is the cross-border export business, actually we are happy to see in terms of the GMV, in terms of the annual active buyer we a robust growth, but we do believe this is just the early stage of the new gain in the in the market outside China. What we want to do is to leverage what we call the China engine to emprove the growth in other markets. China is famous for the manufacturing and we have so many local brands, China local brands and retailers and a small – OEM factories on our China retail platforms. Today they are eager to go with us to the new market outside China. We believe this give us a unique value proposition and the unique advantage to grow the new market outside China.

Thank you, Daniel.

Operator, next question.

Your next question comes from the line of Alan Hellawell from Deutsche Bank. Please ask your question.

Thank you. And hi, Dan, congratulations. I was hoping to gain further color on margin profile for core e-commerce and media and entertainment as we move into FY 2018. Its very well profiled that in core e-commerce you have countervailing plan which is the extremely profitable and leverageable core retail business and for the time being at least the impact of growth businesses such Lazada and TMall supermarket. And so I’m just curious how we should think about the interplay of those two broad pieces in commerce from an EBITDA margin perspective as we move into FY 2018. And then similarly, Maggie has very helpful you pointed out or suggested that there is scope for negative margin compression or margin improvement in digital media and entertainment. And I’m just wondering whether you could just outline the basic content center plans for IGE [ph] and then maybe topline related progress in subscriptions. And then finally, so much just a big picture, so much of these story and the success story marketing services seems to crystallize in the experience of key account TMall storefronts. They get the brand and value proposition that Joe and company has been talking about over the past year. I’m just wondering the guys in the middle and the bottom of the pyramid what are we doing for them, because its been said at time that we have more than 1 million advertisers and love to find out how they are achieving success? Thank you.

Thank you, Alan. In terms of the margin as you have seen that our channel retail business continues to see very strong margin and that is a result of how the operating leverage offset our investments in those new areas. So, going forward, we continue to see this huge potential in each of our business development. So high profitability of our core commerce will support our investment in new business such as cloud computing and digital media and entertainment. In the long run we do expect to see cross segments synergies that will further deliver overall leverages in the entire business, but having said that, like we mentioned before that we don’t manage the business to manage our overall margin profile. We will ensure the growth of the whole business and profitability. That’s how we look at the business margin.

I would have a few more comments on the first question. I think in terms of Tmall Supermart and Lazada, I would say, like Tmall Supermarket, we never view this as a separate independent business, and we view this – it’s a very important piece of the entire team operation. And as far as this Tmall Supermart operation we very effectively improve the user stickness and improve the user experience because they all buying the daily necessities on Tmall Supermart. Today our fresh products business also grown very well through Tmall Supermart. So even we have a lot of investment in Tmall Supermart, but on a general basis you can see we have very robust growth and probability and we do believe this is a model, is a very healthy model. We will continue to invest on this. And in terms of Lazada, actually today is still early stage, but we are very happy to see the fast growth of their business, but we do see a strong synergies between the overseas market and China market, on top of the China supply to the world I mentioned just now, and we also trying to leverage the fulfilment network Lazada built in South Asia and to leverage this network to ship the product from China to that region and for multiple retail platforms of Alibaba. So that's the synergy we can see in our globalization.

Alan, I’ll address your second question about kind of the content spending layout for the Youku business. The first thing to say is that we don't think this is a winner-take-all market. This is entertainment market that is large enough that can accommodate several players. And the market has basically settled to three main players as you know and we think that over time the market will become more rational. Although in the near term they are still going to be pretty fierce competition for licensed content, but I think just like other players we have moved towards not just licensing content that we don't produce, but also to develop ways for developing proprietary content and we’re working with talent and directors for proprietary contents. So, over time, the cost of content should come down. Obviously, we’re not going telegraph to you how much we’re going to spend over the next 12 to 18 months. This is a very competitive market and we will find a content that we want spend on accordingly.

This is Daniel again. For the last question about the small scale business on our platform, I would say that's very important question and these group of business are very important to Alibaba, because our mission to help SMEs to make it easier to do business anywhere. So in terms of how to help them to do business better, today what we do is to leverage the data and technology, we develop a lot of tools and services to enable them to do bit efficiently. And for example, today the small scale business they can -- maybe they don’t afford to do a very big brand activities, but they do have the tool, very efficient tool, to tailor-made their storefront homepage which could be driven by big data and for the visitors to the store and they can see the different selections and different views, even different views. And we also give them lot of promotion and marketing tools to these small merchants. And I think this is a gross, continues gross of our small merchant is very, very critical for the long-term success of our business.

Thank you.

Operator, next question.

Thank you. And your next question comes from the line of Eddie Leung from Merrill Lynch. Please ask your questions.

Hi. Good evening. Questions, the first one is about the product mix on your Chinese e-commerce platform. I’m just wondering if we have see a shifts of product mix from high margins products to low margin business [ph] or the other way round. And how it can affects the ability of your merchants to pay for your marketing and other services. So that’s my first question. And then the second question is also related to your overseas business. So just wondering broadly speaking are we at the moment, are we going deeper in the existing market? Are we thinking more about increasing our geographical coverage to more countries? Thanks.

In terms of product mix, I would say, actually we are such a big platform and we have over 500 million monthly mobile active users. So, we cannot give 500 million people the consistent high value or low value product, low price products. So that's why the data and the data driven business is so important for us. So today what I can share with you is that, we already accomplish the 100% data-driven personalization of page in all our major user interface and our mobile app. And people – but we run this not only big based on the price, but most important thing is based on the lifestyle, based on the demographic of our customers. So that’s the core of our operating mythology. And in terms of the international strategy, as I said before this is a long term commitment, this is long-term strategy. We start with Southeast Asia. We believe this is a very, very important region with very big population, but close to China and perhaps have enough Chinese population there and Chinese products are very popular in this market. So that's why we start with South Asia. But so far our cross-border platform AliExpres we also cover a lot more countries. And we will continue to invest in this international market, but this is a long -- that’s a long way to go.

Thank you.

Operator, next question.

Thank you. Your next question comes from the line of Eric Sheridan from UBS. Please ask you question.

Thank you very much for taking the questions. Maybe the first, I was curious how short-form video or video around brand awareness or selling might become a bigger part of the platform longer-term sort of merging the world of video consumption with e-commerce. And what that might be for bandwidth or infrastructure cost longer-term? Second question would be following up on Joe's comment from the presentation, maybe an update on how your leading advantage on mobile commerce is accelerating your efforts to blur the lines between off-line and online retail? Thank you so much.

This is very interesting question. For the short-form video, we believe this is a very important content format and in the future in mobile commerce. And we do see, actually in our mobile ecosystem before we have buyer and seller, but now we have a lot more roles, a lot more partners than in this ecosystem. Some of them are the content providers and celebrities influences or even brand sell. But short compare to other form – content formats, actually short-form video are the e-commerce actually they have some advantage. The biggest advantage is that, it’s a – lot of content are evergreen. Lot of contents can be repeatedly consumed and which will give us a lot of operating leverage and in the longer run we do see some costs increasing short-form video, but if we look at the overall user experience and the merchants tools, video as a merchant tools to promote their brand and broadcast their new content, new products, we believe this will definitely enrich their user experience and enriched the ROI of the merchant operations.

Eric, on your second question I think there is a -- this is a -- digitizing the offline retail sector is the very, very complex question, so its probably would take some time to get into all the details, but I think to get people better understanding of this is to understand that we are the partner of choice right now because of our large scale online presence and hundreds of millions of consumers coming to our platform and all the data we have on these consumers, so that the these physical retailers, retailers with physical footprint are very, very interested in working with us, try to figure out how to increase their foot traffic as well as obviously increasing their sales per square foot, how to better leverage their real estate to make their operations more efficient and also more sales. They are now -- again a lot of the retailers are with physical footprint are not doing great, but they see an opportunity those that are willing to sort of disrupt themselves and adopt changes working with us will come out ahead and that's why we are pushing the strategy of new retail very, very hard. And I think if you come to Investor Day we’ll develop a more sort of comprehensive understanding of new retail. It is a complex area. We think we’re the only people that have the capability and understanding and the know how to execute it.

Thank you.

Operator, next question.

Thank you. Your next question comes from the line of Alicia Yap from Citigroup. Please ask your question.

Hi. Thank you. Good evening managements. Congrats on the strong results. Thanks for taking my questions. I have a question, can management share with us among the big brands on your platform, how much of the percentage of ad budgets that you believe Ali is not capturing? And how much higher the overall as a percentage you could ultimately capture over the medium to long term? And then a quick question you said is there any plans for investing or partnering into the autonomous driving technology? Thank you.

Yes. Today our retail marketplace we have a lot brand partners, they are not only sell products on platform but also are doing brand building activities, customer management activities, promotions and we do see they spend more and more starter on our platform. But we do see very interesting changing trend which is before they more like – they spend more like a dollar in nature of credit marketing before the people who running the business on our platform are traditional e-commerce team, we call e-commerce team, but today more and more company connect that e-commerce team with digital marketing team. So today especially after our development of the digital media and entertainment platform we established a very good connection between us, digital marketing and the commerce and we are very confident that over time people will spend more and more marketing dollar, a branding dollar for the data driven cost platform solutions on our ecosystem.

On the autonomous driving question, I think you have to understand, a lot of technology companies are doing this. Obviously the long term commercial opportunities are very murky, nobody has figured out the long term economic model for this, but people are doing it because there are some very interesting artificial intelligence related technology in a autonomous-driven car that gets all the technology, company is very intrigue, things like computer vision, LIDAR technology, simultaneous localization and mapping and all these technologies are very interesting and that's why companies are all investing in those technologies and the same is true in the case of Ali Baba. We may not be investing those technologies for to create a driverless car, but we are investing in all those component technologies for other applications.

Thank you.

Operator, next question.

Thank you. Your next question comes from the line of Chi Tsang from HSBC. Please ask your question.

Great. Thank you very much and good evening everybody. I want to ask you about rural strategy. Can you give us an update on your plans to expand coverage and also to drive demand in rural China? And I'm also wondering if you can give us an idea of what percentage of your China retail businesses being driven by retail in terms of whether its buyers or sort of spending and how fast that’s growing? Thank you so much.

Yes. Rural strategy is very, very important and during the past two years we have already develop a very – we have very rapid gross in rural areas. We have a rural Taobao strategy which today cover close to 30,000 villages across China. And today what you’ll see that -- and traditional brick-and-mortar chains cannot effectively and efficiently cover of the rural areas. Internet does give us a new way to serve the people in the village. So what we are doing right now is to help our merchant’s brands on our retail marketplaces to work closely with them, to serve the people in the village. We even do tailor-made products with our partners to develop, to eliminate all the distribution channels to serve the end customers in the village. But looking ahead we will do – we are not only trying to sell more from urban city to the rural areas, actually in rural village we also can have a very good organic agricultural product supply and what we want to do to -- again use our retail platform. We want to help them, help the farmer to sell more to the people in the city.

Regarding to your question on the revenue driver for China retail marketplace revenue, if you look at the direct driver, people were paying us are these merchants and brands, so the number of paying merchants and brands are increasing, as well as their spending level and our platform. So what makes them paying more and more people coming to us is what we have done on a marketplace both on user and user experience side. So, I mentioned about the gross driver of revenue increases in number of users coming to our platform. We’ve reported 507 million MAUs by the end of this quarter, and so that bottom of the clicks, and also the conversion of these matches all showing very positive growing trend. This reflect that our ability to deliver more rather than content consumer improve the data and technology. So this is – also by the end of day, merchants and brands look at the value we’ve provided to them, they vote by their feet right. They started -- more and more people start to realize that the value we provided are not only the transaction value but also help them acquire consumer and make the consumer to buy and then retain consumer, their loyalty, basically it’s a whole customer operations in the entire customer life. So that’s driver for the growth in China retail marketplace.

Thank you for that. I was actually referring to framing that question around rural, trying to get a understand of how much rural is impacting the china retail in terms of buyers or in GMV or something like that?

Yes. Rural is right now is still a very small business compared to our entire China retail, so, not that significant, nothing significant.

Operator, we will take the last two questions, please.

Okay. Thank you. Your next question comes from the line of Jason Helfstein from Oppenheimer. Please ask your question.

Thanks. Perhaps a longer term question, specific to the 2020 goal [Indiscernible] GMV and 2 billion customers, generally how do you see that broken down between domestic and international, just as you were thinking long term about our global strategy? Thank you.

Well we do have a goal in 2020 we want to achieve a RMB6 trillion in GMV to end by fiscal year 2020, but I think to serve 2 billion consumers is a even longer term goal and we are working very hard towards that goal, but I think we just at the beginning stage to get our business globalized. And Southeast Asia is the first area we are exploring and we want to make sure that we understand the local culture and the local people because shopping is hardly relevant to the culture and the lifestyle. So actually this also gives us a lot of opportunities to train our people and upgrade our team to be a real global team. I think that’s the most important thing at this stage and with the more powerful team and people and we can serve more consumers around the world. Last question, please.

Your last question comes from the line of Evan Zhou from Credit Suisse. Please ask your question.

Hi, good evening. Thank you for taking my questions. My question is regarding our media related revenue, just wondering whether we can have some more colors on kind of the breakdown for that revenue because I think UCWeb has been doing really well besides the Youku business has also within Youku I think the industry trend is by the pace or circulated revenue in surpassing the [Indiscernible] revenue. So I was wondering whether we kind of see within the trend and also are there any other sort of like user [Indiscernible] singing and music related revenue that we can, we can kind of have some more colors on. And then finally on our RMB6 billion buyback program I think traditionally we view this as a kind of to offset the impact on SBC but as we see our SBC also being kind of trending down both on absolute numbers and as a percent of revenue. So I was wondering that whether we are kind of seeing the program to bar their program as on their way to kind of mutual value to shareholders. Thank you.

For the first question, actually we view Youku, we view UCWeb and then our assets in digital media etcetera not a standalone assets again. We view this as an integrated part of our consumer media platform which is our mobile power and Tmall. So actually we have – we do see a big advantage to leverage our existing advertisers place on our China retail platform and to help them to promote their products and build their brands across platforms to Youku and to Youku to UCWeb. But using organic at format consistent with the contents in both of the – in each of the apps. So today what we are in a very unique position to have a consumer media, we have a video side, we have the mobile search plus in use fees and as format and which is all – actually which is all in one solution to our advertisers. But most important thing is that backhand we have our unified ID in place to help our advertisers to track the footprints and of the advisors and all the datas could be collected and used further in their future operation. This is a unique position of our UCWeb and Youku revenue operation. Yes, coming on the buyback program. So I think you need to look at the buyback program in the context of what we have already done over the last two and a half years since we became a public company. Over that period we spent a total of US$5.1 billion and brought back approximately three percentage points of our shares, and our reason that we have communicated very clearly was that we want to prevent dilution, so I’m very happy to say that since the IPO our share count, our outstanding share count has not increased despite the stock based compensation programs. So the primary reason for buyback is to sterilize the dilutive effect of our stock-based comp program. And I think this US$6 billion buyback is no different, it’s for that name purpose, but when you say you know return value to shareholders it is you know in a buyback anytime you counter the dilutive effects you are --it’s not returning value to shareholders you are preserving value to shareholders. But where obviously cash is going out the door to some shareholders in a buyback program but we are not saying that, oh we have cash sitting on the balance sheet we don’t know what to do with. There are lot of very important strategic activities where we have US$20 billion of cash on the balance sheet that we want to deploy. And the buyback is part of our capital allocation thinking, but it’s not the only thing, there is – there are plenty of strategic areas and opportunities that we would want to be able to deploy our cash.

Okay. Thanks to everyone for joining. If you have further questions, please reach out to the investor relations team. Thank you.

Thank you ladies and gentlemen. Unfortunately we have run out of time for further questions. That does conclude our conference for today. Thank you for participating. You may all disconnect.