Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's March Quarter 2018 and Full Fiscal Year 2018 Results Conference Call. At this time, all participants are in a listen-only mode. After management's 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.

Thank you, operator. Good day, everyone, and welcome to Alibaba Group's March quarter 2018 and full fiscal year 2018 results conference call. With us are Joe Tsai, Executive Vice Chairman; Daniel Zhang, Chief Executive Officer; Maggie Wu, Chief Financial Officer. This call is also being webcast from our IR section of corporate website. A replay of the call will be available on our website later today. Now let me quickly cover the Safe Harbor. Today's discussion will contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that may cause 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. Securities and Exchange Commission. Any forward-looking statements that we make on this call are based on assumption as of today and we do not undertake any obligation to update these statements, except as required under applicable law. Please also note that certain financial measures that we use on the call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted EBITA, adjusted EBITA margin, 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 press release. With that, I will turn the call to Joe.

Thank you, Rob. Thank you all for joining us. We had an excellent year in fiscal 2018. Overall, revenues grew 58% year-over-year, and Taobao and Tmall GMV accelerated its growth from the 22% growth last year to 28% growth this year. I want to thank our team for a truly exceptional year. On these great results, I want to highlight a few things that demonstrate the success of our strategy and execution. There are three things worth noting. First, we gained incremental market share and a larger share of the consumer e-commerce wallet despite the law of large numbers. How is that possible? Because, through technology and consumer insights, we put the right products in front of the right customers at the right time. We also executed tailored strategies in supply chain, product and merchant curation, and logistics for key categories, including apparels, FMCG, home appliances, and consumer electronics. The combination of our superior technology and operating excellence means that we can continue to achieve substantial growth at scale, conquering the law of large numbers. The second thing worth noting is that our New Retail initiatives are substantially growing Alibaba's total addressable market in commerce. In retail, we are anticipating changing consumer behavior and increasing expectations of quality and convenience, whether these consumers shop online or in offline stores. Through our proprietary technology and operational implementation, we're enabling our retail partners to meet and even exceed these consumer expectations and capture incremental sales and operating efficiency. And this process of digitizing the entire retail operation, we are driving a massive transformation of the traditional retail industry. It is fair to say that our e-commerce platform is fast becoming the leading retail infrastructure of China. With this transformation, China's US$5 trillion in retail sales will be available to Alibaba as our total addressable market. The third thing worth noting is that Alibaba is well-positioned to capture more discretionary spend of Chinese consumers through entertainment and local service offerings beyond e-commerce. Over the past year, we made substantial investments in our digital media and entertainment business, which strengthened our offerings in streaming content and subscription video services for an expanding viewership. We also made a key strategic acquisition to take full control of Ele.me an online food ordering and delivering business that comes with a comprehensive local fulfillment and delivery network, which will help to power our New Retail strategy. The substantial assets in entertainment and local services can leverage our user base of over 550 million annual active consumers in e-commerce. We're extremely excited by the potential flywheel effects of expanding the wallet share of these 550 million users across our ecosystem, as well as the synergies and consumer insights that can be achieved through a platform built on the Alibaba technology infrastructure. Now, I would turn it over to Daniel for his comments about the quarter.

Thanks, Joe. Hello, everyone, and thank you for joining our earnings call today. We delivered another outstanding quarter and fiscal year. Today, our business is stronger than ever because of our focus on delivering unique value propositions to our customers. Over the past year, we achieved many important milestones across our entire businesses. We enjoyed exceptional revenue growth in our core commerce business, while successfully activating new synergies between platforms and setting up solid foundations for next stage of growth in strategic areas, such as New Retail and globalization. We were guided and will continue to be guided by a long-term forward-looking approach to investing in new user acquisition, new technology, and the creation of New Retail experiences. As we have said from day one, we work for today, invest for tomorrow, and incubate for the future. Taobao continue to be the leading consumer media platform and the starting point of any retail journey for Chinese consumers. We achieved consistently higher user engagements due to AI enhancements that delivered greater precision and relevance in user experiences, both in merchandize selection and in the mix of digital contents. Mobile MAUs on our China retail marketplaces reached a total of 617 million, which grew by 22% year-over-year. Our successful new user acquisition campaign during Chinese New Year, which culminated during the annual televised CCTV Spring Festival Gala, contributed a net increase of 37 million annual active consumers this past quarter, largely from Tier 3/Tier 4 cities and rural areas. This was the largest user net add over the course of the last of 13 quarters. Tmall continue to experience robust growth across all categories and expand its market leadership. Physical goods GMV grew 40% year-over-year in this past quarter, mainly driven by accelerated growth in fashion and FMCG categories, as well as…

Thank you, Daniel. Hello, everyone. We delivered another strong quarter, and one of the strongest annual results since our IPO. In March 2018 quarter, major operating and financial metrics continued to record very strong results. Total revenue grew 61% year-over-year to RMB 62 billion. Revenue from core commerce grew 62% year-over-year. Mobile MAU on our China retail marketplaces reached 617 million in March, an increase of 37 million over December quarter. Annual active consumers on our China retail marketplace reached 552 million, a net increase of 37 million from the 12-month period ended December 2017, represents the largest net adds in the last 13 quarters. The revenue from cloud computing increased 103% year-over-year to RMB 404 billion. Core commerce EBITA margin was 42%. Excluding investments in New Retail, investment in Lazada and Cainiao, core commerce EBITA margin would have been similar to the previous years. Our non-GAAP free cash flow was RMB 8.6 billion for the quarter compared to RMB 8 billion in the same quarter of our last year. When we look at the quarterly revenue, for the quarter total revenue grew 61% year-on-year. This was led by robust growth in our China commerce retail business, Alibaba Cloud, and international commerce retail business. The consolidation of Cainiao and Intime also resulted in greater revenue. So if you take out the revenue growth coming from consolidation of Cainiao, our revenue would still have grown over 50% year-over-year. Cost of revenue, excluding SBC, was RMB 30.8 billion. Excluding the effects of SBC, cost of revenue as a percentage of revenue increased from 37% in the quarter ended March last year to 50% in the quarter ended this month, March quarter. The increase was primarily due to the cost of inventory in our New Retail businesses and Lazada, as well as investment…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from the line of Eddie Leung from Merrill Lynch. Go ahead. Please ask your question.

Good evening. I have questions on New Retail. Could you give us some insights on how the operating and financial metrics of some of your more mature Hema stores comparing with the best-in-class offline retailers in the same category? Thanks.

Thanks, Eddie. Let me add more color of the Hema store operation and your question about New Retail. Actually when we planned the Hema model and what we want to achieve there is that we want to build a New Retail format, which can have more efficient operation for food and fresh products and FMCG products. And so today what we have seen is that, as I said in my script, that we generated 50% of the orders in Hema store, and which are from mobile users and the products are fulfilled by Hema store and delivered to their home, which means, by this way, we extend the Hema coverage of the customers and improve the store operating efficiency. Because as you can imagine that fixed costs, operating costs for a store remain stable, while if we can have extra coverage to the consumers not only in the store, but also nearby, and we can generate orders and via this mobile reach, this essentially help us to improve the operating efficiency and improve the productivity of the stores, which we strongly believe is very good for the retail business. And the second thing is about the delivery cost. Actually today, when we build our Hema model, what we want to achieve is that we want to upgrade the e-commerce logistic from a hub-and-spoke model to a more integrated – offline/online integrated logistic fulfillment model. Today when we generate the orders from online and people expect a on-demand delivery to home, but why we can achieve that and when people may know that we can achieve that even within 30 minutes is because we can fulfill by the nearest store and people can get their product as they expected on demand. So I think that's the other advantage of these New Retail formats. Thank you.

Thank you.

Operator, next question.

Your next question comes from the line of Grace Chen from Morgan Stanley. Go ahead, please ask your question.

Yes, thank you. Thank you for taking my question. My question is about the drivers with strong growth in revenue in the coming fiscal year 2019. In the beginning of fiscal 2018, I remember that the management made it clear that Alibaba will focus on market share gains and reacceleration of GMV growth, and the result was great, because we see Tmall delivered very strong growth in GMV and also see reacceleration in user growth. But at the same time, you also spent more to improve user experience. So as we enter fiscal 2019, I'm wondering whether market share gains will continue to be on top of your priority, so we will continue to see you guys spend more aggressively. Thank you.

Okay, Grace, thank you for the question. So we guided over 60% year-on-year revenue growth for fiscal 2019. That strong growth going to come in from pretty much all the businesses, mainly our core commerce and Ali Cloud. So, of course, we're going to continue invest and to expand our B2C market leadership, and at the same time our strategic initiatives will also drive the growth. And the people may ask about the 60% seems to very high, you have newly added businesses. So that wouldn't be apples-to-apples. That's why we gave a 50% year-on-year growth if you take out Ele.me and partially Cainiao, since Cainiao was only consolidated a half-year last year. And then for New Retail initiatives, that also contribute to the revenue growth. However, if you look at the core – the China retail revenue, that New Retail only accounts for somewhere about 10% in total. So, main revenue growth is going to still come in from our core China retail commerce.

Hey, Grace. This is Joe Tsai. And your second question about whether market share gains will be a priority, I think with our New Retail initiatives, the definition of the market has expanded into $5 trillion of retail sales in China, so that's our total addressable market. So of course, we would prefer to see this as a further market penetration on a much bigger TAM. But having said that, we are going to be extremely competitive when it comes to competition and your traditional sort of perspective on market share gains.

Operator, next question.

Your next question comes from the line of Alicia Yap from Citigroup. Go ahead. Please ask your question.

Hi. Good evening, management. Thanks for taking my questions. I wanted to ask in terms of, can you remind us how much you have budgeted to spend on the various investments, for example, the amount or the percentage on the user experience improvement, your user acquisition, your globalizations, your New Retail, and even for the digital content, as well as the Cainiao logistic? In addition to that, from the consolidations of Ele.me, how much should we be expecting that you're going to invest to spend further on Ele.me? So any color that you could give us in terms of the rough dollar amount or the percentage would be helpful. And then...

Sorry, Alicia.

Yeah.

Your phone is breaking up. Maybe you can restate your questions more clearly and limited to just one question.

Yeah. So, hi. Can you hear me okay now?

Yes.

Okay. So I think my questions is regarding the budget, like if you can give us some color in terms of the areas of the investments that you guys will be planning to for fiscal 2019 in areas that you have been talking about, which is the user acquisition, globalizations, and all these New Retail, and also Ele.me. That will be helpful.

Yeah, Alicia, I think you're asking about our spending in 2019. Okay. First of all, let's take a look at the spending in 2018, where we talk about new initiatives and what we still have operating leverage on the core, of course. So when you look at our slides, where it shows the margin analysis, we have 62% margin last year and for the core of core it shows 63%, and then our investment is 10 percentage points on these new initiatives. And regarding spending in 2019, I think we're going to continue invest in these areas, because these are strategic important business areas that won't just last one year investment, so New Retail, Cainiao, Lazada, Ele.me, we're going to continue expand the business by investing. And how much, that's a question basically talking about margin. Again, like I said, our focus is to expand the business and the absolute profit growth rather than looking at the margin. Having this New Retail kicked in and becoming more important, our margin structure may shift; however, the profit growth we expect to be sustainable and healthy in the longer term.

Okay, great. Thank you.

Operator, next question.

Your next question comes from the line of Gregory Zhao from Barclays. Go ahead. Please ask your question.

Hi, management. Thanks for taking my question. Congratulations on the strong quarter and the strong guidance. So I have a quick question on the advertising business side. So the personalization algo, I think, is substantially drove your advertising revenue growth last year. So would you please give us an update of your recent progress or development of your customer management and your advertising and marketing business? And what kind of new algo or some new advertising format, like newsfeed ad, you may launch this year to utilize your user traffic or ad inventories, and especially considering the high comp of your customer management revenue growth in fiscal 2018? So can you share some outlook and growth trend of your advertising and customer management revenue growth for this year? Thank you.

Sure. For the customer management revenue growth is same as for the last fiscal year. The first two quarters shows very high growth rate. That's, we talked about, mainly driven by the algorithm changes and now that change reaches anniversary. In March quarter, we had several initiatives to improve merchant ROI. For example, we talked about choosing right, where a consumer enter into the stores without clicking on product listing. This is kind of giving back returns to merchants. This could lead to less clicks, but at the same time could help on GMV. So the customer management revenue growth may slow down a little bit, commission revenue could grow faster. So, people should look at our overall revenue growth rather than just one line of the revenue growth. And for future customer management revenue growth, we are confident about our value provision to merchants. Given the data technology and efforts, user experience, and merchants ROI, we do have reserved technology, reserves in the pipeline that we can update you later on in due course. Thank you

Thank you very much.

Next question, please.

Next question comes from the line of Piyush Mubayi from Goldman Sachs. Go ahead. Please ask your question. Piyush Mubayi - Goldman Sachs (Asia) LLC: Thank you for taking my question. Congratulations on your guidance, and I think it's very strong. I had a question on CDRs, if you could comment on CDR, any plans there. Also if you could comment on the growth you've seen in Ant as the quarter ended, if possible, now that it's a 33% owned entity, and if you could confirm that too? Thank you.

So, Piyush, you are asking for CDR progress, right? Piyush Mubayi - Goldman Sachs (Asia) LLC: Yes.

I'll just share with you that we are actively exploring possibilities of a CDR listing in China in all aspects. Right now we don't have any timetable with details to talk about. We'll update you later on. Piyush Mubayi - Goldman Sachs (Asia) LLC: Is there anything to share with us in terms of the process that it entails?

Yeah, like I said, I think we're very actively exploring the possibilities and how to implement that return to China project. Piyush Mubayi - Goldman Sachs (Asia) LLC: Thank you.

So, Piyush, on your question on the Ant Financial, we have not closed on the conversion of our equity stake into Ant Financial yet and we are currently not going to give guidance on the growth of that business. But having said that, just qualitatively speaking, we've seen very robust acquisition of users and also engagement of the users specifically on the Alipay Wallet platform over the last two quarters. Ant has been very aggressive extending into, not just the online payments, but also offline using a mobile device, in offline establishments, and we're very encouraged by those developments.

Yeah. Maybe, Piyush, adding to the CDR discussion, right now there is no – basically no detailed rules coming out, rules and regulations. The only thing came out is at the end of March State Council had the CDR deadline. But I can share on the principle of this CDR thing is that we would only come back if this is going to help our business development, expansion if our business and consumers. The other thing is that we're going to make sure that our investor interest gets projected. Thank you.

Next question.

Your next question comes from the line of Alex Yao from JPMorgan. Please ask your question. Alex Yao - JPMorgan Securities (Asia Pacific) Ltd.: Hi. Good morning and good evening, everyone. Congrats for a strong quarter and a very strong revenue guidance for FY 2019. I have a question on Southeast Asia growth strategy. Apparently this is early-stage market with a low e-commerce penetration, and already some local competitors are in the space. What does it take to be the winner in this market on a three to five years view, and what incremental resource you need to put into make that happen? Thank you.

Yeah. As you said, actually the Southeast Asia market today is in a very early stage in the e-commerce growth, but we have very strong commitment in this market. As we shared in this earning and we accomplished the technology re-platform, and basically we upgraded our entire Lagada's platform with Alibaba infrastructure, and we also send not only Lucy as CEO and Chairwoman of Lazada, but also we send our best people in Alibaba, who had a tremendous operating experience and technologies to our Southeast Asia market. And what we expect is that, again, this is all about to build a new ecosystem in new market and to build infrastructure, for example, the payment infrastructure, the logistic infrastructure and the partnership in this market. So actually, we are forward-looking and we will remain confident to grow – to achieve the high growth in the market, I mean, in the future and we will also very commitment – is very committed to invest and continue our investment in this market

Maybe, Daniel, I'll just add a little bit more color on the Southeast Asia. I think if you look at – specifically, you looked at one of the largest markets like Indonesia, total industry GMV is going to be less than $10 billion this year, and so we're really at the – probably the first pitch of the first inning of the game. It's very, very early to tell, too early to tell really. But to your question of what it takes to be successful, I think if you look at it from the user experience standpoint, also from the merchant standpoint, as Daniel referred to, we have just completed our re-architecting of the technology platform, which will enable us to very quickly launch products, user facing features and products on the mobile platform. And that will lead to better user experience and very quick response to the market-changing dynamics. On the merchant side, many of the Southeast Asian countries are not large or strong manufacturing countries. So the merchants are still looking for sourcing opportunities back to China, where there is a manufacturing base, and that's where we feel – we believe that having a connection to China, the manufacturing base here with the Alibaba relationship will be very helpful to these merchants.

Next question. Operator, next question.

Next question comes from the line of Mark Mahaney of RBC Capital Markets. Go ahead, please ask your question.

Thank you. Daniel, you mentioned artificial intelligence, AI investments. Could you, at a high level, talk about the application of AI across all of Alibaba, maybe with a 5- to 10-year perspective? And talk about the potential impact of artificial intelligence on the business, both in terms of cost efficiencies and in terms of either new revenue opportunities or greater personalization of the services? You've got such broad platforms, multiple platforms at such scale, I would think there would be enormous opportunity for AI, but it's hard sometimes to figure out what it would actually look like. So any color you have on what kind of impact you could see on both the cost side and on the revenue side from the application of AI? Thank you.

Actually we have such – with such a extensive ecosystem, we have a lot of business use cases which are relevant to AI technology. But to us, as we always said, AI is not about the future. AI, actually we have been working for this. On the applied AI technologies, maybe previously we never called this AI, but we apply these data-driven technologies to our real business for many years. And that's also the reason why we can enjoy such a robust growth in the past few years. And going forward, we will continue our investment in AI and apply the technology to many business areas, such as the user experiences, such as the advertising of products and services. But I have to say that this is not relevant to the consumer interface, but also highly relevant to many other aspects of the business. For example, the supply chains, the supply chain management, and how to enable the flow of the inventories more efficiently, and with the data and with the intelligence of the customer demand, and how to even produce the products which can not only meet the existing demand of the clients, of the customers, but also creating their new demands. So it's all relevant to AI. Having said that, actually we have the broader business cases to apply AI technology. We will fully leverage what we have today to continue to not only develop the technology, but also try to generate the real economics from the technology.

Thank you, Daniel.

Operator, next question.

Your next question comes from the line of Youssef Squali from SunTrust Robinson. Please ask your question.

Thank you very much. In terms of New Retail, can you just help us contrast and compare your strategy relative to your main competitor in the market, where you think you have sustainable competitoive advantage? And, Joe, very quickly, as a global player, what is the risk to BABA from this trend of rising protectionism worldwide, and especially with the potential of the trade war between China and the U.S., how does Alibaba protect itself? Thanks.

In terms of the New Retail strategy, actually this is one of the core strategies for Alibaba. And we strongly believe we have big advantage in structuring and executing New Retail strategy. First of all, actually we have the – during the past 19 years we have built up the largest consumer retail marketplace, which is the largest consumer interface, and which I think we have so many consumers around us. And we know their behavior, we know their preference, we know their demographics. And today, all these consumers are not people living in the air, but they are everywhere. So when we go to the offline, when we talk about New Retail, talk about integrated omni-channel operation, which the consumer data we have, the consumer interface we have, will bring us a lot of insights and possible to impact with – in that way the operation. Second is that we have been operating the retail marketplaces for so many years and we have extensive experience, not only to connect the people, but also to create the value for our merchants, as well as our customers. So today we are working very hard not only actually to develop the online platform, but also to incubate the New Retail formats and enable the existing retail formats to be upgraded. I think that's actually exactly what we do, and we strongly believe that with this technology, and together with the retail experiences we have, we can bring our retail partners a lot of space to grow.

In terms of how the trade war will impact our business, or broadly just overall economy, you could view Alibaba as a very large platform for producers from all around the world to access Chinese consumers. Now we have over 550 million annual active shoppers on our platform. That's a very attractive platform for these brands and retailers and producers, including farmers, SMEs, to come. Now, the trade war right now is really just between the United States and China, so it's really limited to that trade flow. So when Chinese consumers look abroad to buy things from overseas, they could be replacements. So, for example, if we can't import food items from the U.S., we could be importing food items from Southeast Asia, from Thailand, Malaysia, from Taiwan, where they grow a lot of fruit. And so there will always be alternative channels for us to bring in imported products to satisfy Chinese consumers. So, obviously, a trade war is not good for anybody, and in particular we feel we've already publicly communicated, been very public on that to say that the trade war actually will hurt small businesses in the United States. But our Chinese consumers are going to find alternative ways to bring imports into the country through our platform.

Great. (01:00:03).

Operator, last question.

Last question comes from the line of Jerry Liu of UBS. Go ahead. Please ask your question. Jerry Liu - UBS Securities (Asia) Ltd.: Hi. Thank you. My question is around the investment in video and payment over the next year. We've heard from your major competitor about incremental investments there. So can we think about, as you gain scale in those areas, to – investments into margins improve, or can we still see a longer period of investment? Thank you.

We have very strong commitment in digital media and entertainment sector, and we don't view this as a separate new business. We view this as a category expansion for our existing and the newly acquired customers. So this is an integral part of our ecosystem. And as we always said, for Chinese people and when their lifestyle changing and their life quality changing and upgraded, they not only need more physical products, local services, but also they need more digital contents. So that's why we entered into this area and we think this is to meet their growing demand for today's 550 million annual active shoppers, but tomorrow, I think, this will also bring a very important stickiness for our customers to stay around with us.

Okay. Operator, it's the last question. Thank you, everyone, for joining today's call. If you have any questions, please refer to our IR website and contact the IR team. Thank you.