Trevi Therapeutics Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 7, 2024

There are 12 speakers on the call.

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's December Quarter 2023 Results Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a Q and A session.

Operator

I would now like to turn the call over to Rob Lin, Head of Investor Relations of Alibaba Group. Please go ahead.

Speaker 1

Good day, everyone, and welcome to Alibaba Group's December Quarter 2023 Results Conference Call. With us are Joe Cai, Chairman Eddie Wu, Chief Executive Officer Koby Xu, Chief Financial Officer. We have also invited Jiang Fan, CEO of Alibaba International Digital Commerce Group, AIDC, to join the call. This call is also being webcasted on the IR section of our corporate website. A replay of the call will be available on our website later today.

Speaker 1

Now let me cover the safe harbor. Today's discussion may contain forward looking statements, including, without limitation, statements about our new organization and governance structure, strategies and business plans as well as our beliefs and expectations about our business prospects, such as the future growth of our revenue and return on investment. 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.

Speaker 1

SEC were announced on the website of the Hong Kong Stock Exchange. 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 EBITDA margin, adjusted EBITDA, adjusted EBITA margin, non GAAP net income, non GAAP diluted earnings per share or ADS and free cash flow are expressed on a non GAAP basis. Our GAAP results and reconciliation of GAAP to non GAAP measure can be found in earnings press release. Unless otherwise stated, growth rate of all stated metrics mentioned during this call refers to year over year growth versus the same quarter last With that, I will now turn to Eddie.

Speaker 2

Hello, everyone. Over this past quarter, we delivered steady growth while making organizational adjustments that align with our strategic focus. At the same time, we took a deep look at our core business operations and the competitive landscape. We concluded that to maintain our competitive edge, we must increase our investment in core capabilities and adopt a more aggressive approach towards competition in order to win growth. Our top priority is to reignite the growth of our 2 core businesses, e commerce and cloud computing.

Speaker 2

During the quarter, The execution of our user first and competitive pricing strategies in Taobao and Timol Group, TTG, was effective, resulting in healthy year over year GMV growth as the number of active buyers and order volume showed a robust increase. The number of merchants continued to grow at a double digit rate, And I'll elaborate on the outlook and plans for 2024 in a moment. In cloud computing, we're committed to our strategy of prioritizing public cloud. We have proactively optimized our business structure, reduced revenue from project based contracts and increased investment in public cloud products. These structural adjustments are showing results and Alibaba Cloud's overall profitability capability continues to improve.

Speaker 2

We've also upgraded Alibaba Cloud sales operations, establishing different sales and service systems to serve different types and sizes of customers by improving our customer coverage and service capabilities, we will enhance our growth rate. In the International Commerce business, we focused on expanding cross border offerings and enhancing the shopping experience. This quarter, All of AIDC's retail platforms achieved growth, resulting in international digital commerce overall revenues growing at a rapid rate of 44% Year over year, Cainiao continued to develop its global smart logistics network with cross border logistics fulfillment solutions contributing to 24% year over year revenue growth as well as realizing strong synergies with the cross border e commerce business. Next, I'd like to share the strategic priorities for TTG investing and capturing growth opportunities. TTG operates in the world's most competitive e commerce market, which is China.

Speaker 2

As we carefully evaluate TTG's competitive position within the China e commerce market, we note that TTG continues to be number 1 in GMV share is the leading platform for consumer shopping. Merchants operate on the platform as their primary place of e commerce business and TTG has the deepest and most comprehensive selection of amongst its peers. However, we must still make targeted investments and improvements in price competitiveness, service and user experience. Given that consumers use multiple platforms, returning to a user centric approach is at the heart of our strategy. We will increase investment in core user to enhance the customer shopping experience.

Speaker 2

I'm confident that by focusing on delivering the incredible Taobao or universal Taobao experience, Offering quality products at attractive prices with great service, meeting the different needs of different consumer segments, TTG will earn users' trust and return to growth. Thus, 2024 will be a year of comprehensive capability upgrades for TTG and also a year of significant investment and we'll be prioritizing investment in the following areas. One, product supply. We will increase our investments in growing the selection of branded products and direct from manufacturer products on TTG's platforms. This will further strengthen our product supply advantages to better address new consumption trends and demands.

Speaker 2

2, competitive pricing and efficiency. We'll increase investment into product sourcing capabilities and optimizing business model relationships between merchants and our platform. For different types of suppliers, we'll offer flexible business models that are best suited to improve their operational efficiency and thereby enhance Taobao's value proposition. The competitive pricing we're focused on delivering is attractive prices for quality products. This is a demand that consumers have across cycles and is fundamental to doing business.

Speaker 2

3, quality service. We will work with our merchants and logistics partners to invest in improving the entire consumer service experience, including presale, insale, post sale and logistics. For different customer segments on the platform, we will build a consumer service system that accurately identifies and meets the various needs of the different groups. 4, Increase purchase frequency. Through the above investments, we will enhance our comprehensive capabilities to offer quality products at attractive prices with great service.

Speaker 2

We believe that improving the platform's overall shopping experience and service quality will lead to increased purchase frequency and materially improve the efficiency of user growth. Today, Taobao and Tmall remain the most valuable shopping platforms and the main place for merchants to do business. With the comprehensive capability planning building plan for 2024, we're confident that TTG will return to growth. Next, I'll hand over to Jiang Fan to present on AIBC. Good evening, everybody.

Speaker 2

Over the past quarter, Despite the uncertain international environment and more intense market competition, AIBC achieved rapid growth. Total orders grew by 24% year on year, driven by strong growth across all major retail platforms. Growth in our cross border business was especially significant. 3 major growth drivers are: 1st, enhanced consumer experience as a result of our business model and supply chain services upgrade second, Product and Technology Innovation and third, our targeted expansion in priority markets. Next, I will present our business results and future development plans around these three drivers.

Speaker 2

1st is our business model and supply chain services upgrade. Last quarter, AliExpress achieved year on year order growth of over 60%. This was mainly driven by the new AE Choice model that we launched in early 2023. The AE Choice model is in essence an upgrade that we made to our original pure platform model into a hybrid business model that combines POP! On the one hand with a fully entrusted model on the other, and it's underpinned by supply chain efficiency.

Speaker 2

It optimizes supply on the platform by balancing experience with richness of offerings. By offering entrusted cross border logistics, marketing and other services, We lower the barrier for merchants to engage in cross border business, bringing more certainty to their operations and more diverse assortment to the platform. At the same time, we continue to enhance the end to end consumer experience, including by providing more stable product quality and more competitive prices by continuing to optimize delivery time and by adding value added services like local product return. As of January 2024, Choice already made up half of all AliExpress orders. It's a high quality user experience has driven significant user growth and transaction growth on the AliExpress platform and going forward, we'll continue to invest resolutely to further increase choice penetration and provide a better experience to more users.

Speaker 2

In terms of product and technology innovation, ARDC serves consumers in different countries and regions around the world. We've already optimized products in certain key countries and regions in line with local preferences. These efforts have been highly appreciated, and we'll continue to pursue that kind of innovation and upgrading. We're also actively deploying AI to enhance operating efficiency and lower barriers for Our suite of AI based digital foreign trade products have been officially launched, enabling real time language translation, AI and logistics services, rapid generation of images and videos for marketing, etcetera. 3rd, sustained growth in key markets.

Speaker 2

In the last quarter, we achieved good growth in different regional markets. And in certain key markets, AA achieved breakthrough rapid growth to become the leading platform locally. In Turkey and neighboring markets, Trendyol continued to achieve robust double digit order growth and maintained its leading position in the Turkish market. It also further expanded its business in valuable new markets in the Middle East. In Europe, alibaba.com completed its acquisition of the well known European B2B digital trade platform Visible, further expanding its supplier base in the region and further advancing alibaba.com's global expansion and dual brand strategy.

Speaker 2

There is huge potential for AIDC to increase user penetration in the majority of overseas markets. Building on our current resources and footprint, we will increase our investment in select regional markets where we see opportunities and value to achieve opportunities for high certainty and healthy growth. Going forward, we'll continue to maintain our rapid growth momentum and provide consumers with improved differentiated services. To that end, we'll continue to increase our investments in enhancing user experience and business competitiveness while expanding our business scale. Thank you.

Speaker 3

Thank you, Zhang Fan. We achieved a healthy financial performance in the past quarter driven by steady business momentum and improving operating efficiency in several major businesses. Total consolidated revenue was RMB260.3 billion, an increase of 5%. Consolidated adjusted EBITA increased by 2% to RMB52.8 billion. Our non GAAP net income was RMB48 1,000,000,000, a decrease of 4 Our GAAP net income was RMB10.7 billion, a decrease of RMB35 1,000,000,000 that was primarily attributable to change in investment values and impairments.

Speaker 3

Firstly, there was a market to market change from our equity investments of about RMB19 1,000,000,000. 2nd, amortization impairment of intangible assets was RMB14.6 billion, of which RMB12.1 billion was related to Sunnak impairment. 3rd, Impairment of goodwill was RMB8.5 billion related to Youku. The above three items were Excluded from non GAAP net income. As of December 31, 2023, we continue to maintain a strong net cash position of RMB487 1,000,000,000 or US68.6 billion dollars Free cash flow this quarter was RMB56 RMB500,000,000 a decrease of 31%.

Speaker 3

The decrease in free cash flow was attributed to increase the CapEx and several one time factors including timing of income tax payments and working capital changes related to several of our businesses. Now let's look at the segment results, starting with Taobao and Tmall Group. Revenue for Taobao and Tmall group was RMB129.1 billion, an increase of 2%. During this quarter, we made steady progress To execute our Taobao and Tmall strategies, we observed a few positive trends. As Eddie mentioned, Our online GMV achieved healthy growth with order volume growing strongly during the quarter.

Speaker 3

Notably, The order volume exhibited double digit year over year growth during the second half of the quarter. Importantly, we continued our efforts to onboard our wide range of brands and merchants. The number of operating merchants on our platform continue to grow at double digits and this trend has sustained over the past 4 quarters. Additionally, we are also seeing strong growth in paying merchants. Customer management revenue was RMB92.1 billion, relatively flat year over year.

Speaker 3

The overall take rate decreased slightly year over year, mainly because of the increase in GMV came from Taobao Merchant. The mix shift of GMV towards Taobao Merchants provide us with further monetization because the take rate from Taobao merchants has been improving, while Tmall merchants' take rate was unchanged during the quarter. Importantly, this trend also reflects increasing consumers' demand of price competitive products offered on our platform. Direct sales and others revenue increased 2% to RMB 31,600,000,000. China Commerce Wholesale Business revenue increased 23% to RMB5.3 billion, primarily due to an increase in revenue from value added services of 1.6088.com.

Speaker 3

Abo and Tmall Group adjusted EBITA increased by 1% to RMB 59,900,000,000. The increase was primarily due to the narrowing losses in certain businesses, partly offset by the increase in investment in content, user acquisition and retention of Taobao app as well as technological co innovation. We are in the process of revitalizing Taobao and Tmall Group and positioning For future growth, we are beginning to see early signs of GMV growth recovery driven in part by investment made since earlier this fiscal year. We still have a lot of work ahead. As Eddie mentioned, we will invest for future growth and strengthen Taobao and Tmall Group's market leadership.

Speaker 3

Our Cloud Intelligence Group revenue quality continues to improve as we pro actively reduced revenue from low margin project based contracts. Additionally, we recorded healthy growth of our public cloud revenue from external customers. Revenue from Cloud Intelligence Group was RMB28.1 billion in this quarter, an increase of 3%. South adjusted EBITA increased by 86 percent to RMB2.4 billion. The continuous improvement in our adjusted EBITDA reflected improving Product mix through our focus on public cloud and operating efficiency The enhanced profitability of cloud business gives us confidence to invest in technology and customers to strengthen our public cloud leadership in the future.

Speaker 3

Alibaba International Digital Commerce Group revenue was RMB28.5 billion, an increase of 44%. Revenue from international commerce retail business increased by 56% to RMB23.3 billion. The increase in revenue was primarily due to Solid revenue growth from AliExpress, especially Choice Business and Trendyoo. Revenue from our international Commerce wholesale business increased by 8% to RMB5.3 billion. The increase was primarily due to an increase in revenue generated by cross border related value added services from alibaba.com.

Speaker 3

AIDC's adjusted EBITDA was a loss of RMB 3,100,000,000. Losses increased primarily because of the increase in investment in Alibaba AliExpress' Choice, Trendyoo's international business, partly offset by improvement in monetization across all major platforms. Overall, we have seen a very rapid order and revenue growth of our AIDC cross border e commerce business over the last few quarters. To sustain this momentum and provide differentiated services to customers. We increased the investment during this quarter and will step up investments to drive further growth.

Speaker 3

Total revenue from Cainiao grew 24% to RMB 28,500,000,000, primarily contributed by the increase in revenue From cross border fulfillment solutions, Sanyou adjusted EBITDA was RMB961 1,000,000 compared to a loss of RMB12 1,000,000 in the same quarter last year. The increase reflected economies of scale that leads to cost optimization as well as optimize operating expenditure spending. In the coming quarters, as a strategic partner of AliExpress, we will increase in expanding our cross border logistics capabilities to support AE Choices growth. Local Services Group revenue in December quarter grew 13% to RMB15.2 billion, driven by healthy growth of Ele. Me and the rapid growth of AMAP.

Speaker 3

Local Service Group adjusted EBITDA was a loss of RMB2.1 billion this quarter compared to a loss of RMB2.9 billion same quarter last year, primarily due to the continued Narrowing of loss from our to home business, driven by Ele. Mex improved unit economics and increasing scale. Revenue from our DME Group was RMB5 1,000,000,000, an increase of 18%, primarily driven by the strong revenue growth of offline entertainment businesses. Adjusted EBITDA was a loss of RMB517 1,000,000 compared to a loss of RMB391 1,000,000 same quarter last year. Losses increased primarily due to the increased losses of Youku.

Speaker 3

Revenue from all other decreased 7% to RMB 47,000,000,000, mainly due to the decrease in revenue from Sunnaut. Adjusted EBITA from all other segments was a loss of RMB3.2 billion compared to a loss of RMB1.7 7,000,000,000 in the same quarter last year, primarily due to increase in year over year loss from Sunnaut due to scale down of certain of businesses. Excluding Sunnaut, Fresh Hippo and InTime Businesses that have physical retail operations. Group revenue would have grown at approximately 8% and our group consolidated adjusted EBITDA margin would have been 4 percentage points higher at approximately 24% this quarter. Lastly, we remain committed to returning cash to shareholders.

Speaker 3

We have been consistently buying back Shares. In the 12 months ended December 31, 2023, we have repurchased US9.5 billion dollars in shares and have reduced the share count by 3.3% up accounting for shares issued under our ESOP. Additionally, quarter to date until February 6, we have repurchased Another US1.4 billion dollars worth of our shares. Our Board of Directors has approved the upsize of the share repurchase program by another US25 $1,000,000,000 through March 20 27. Upsizing our share repurchase program demonstrates our strong confidence in our business fundamentals and the cash flow generation capability.

Speaker 3

Following the upside, we currently have US35.3 billion dollars available in our share repurchase program. The upsized program will allow us to achieve a net reduction in share count and achieve EPS and cash flow per share accretion. Subject to market conditions, we target to achieve At least 3% in annual reduction in total shares outstanding for the next 3 fiscal years. Thank you. That's the end of our prepared remarks.

Speaker 3

We can open up for Q and A.

Speaker 1

Everyone, for today's call, you are welcome to ask questions in Chinese or English. A third party translator will provide consecutive interpretation for the Q and A session. Please note that the translation is for convenience purpose only. In the case of any discrepancy, our management statement in the origin language will prevail. If you are unable to hear the Chinese translation, bilingual transcript of this call will be available on our website within 7 working days Operator, please connect the speaker and SI conference line now and start the Q and A session when ready.

Speaker 1

Thank you.

Operator

Thank Your first question comes from Ronald Keung with Goldman Sachs. Please go ahead.

Speaker 4

Thank you, Joe, Eddie, Fan, Toby and Rob. I want to ask about the Taobao Tmall take rate this quarter That we just mentioned, a Slide 4 and the blended take rate. And you mentioned about the different factors, the mix shift, but also Taobao take rate increase. So Want to hear what is driving the take rate increase on the specific particularly on Taobao, how is the adoption of our sales base and of our sales base and a cost per sales base shift in our ad tech upgrades. And just on the blend of this, then how should we when should we expect take rates to stabilize, I.

Speaker 4

E. The GMV and CMR was that to stabilize in the same rate? And how should we think about the long term take rate potential Given that we're still much lower than global peers and I would say lower than quite a few of our China peers, so the potential there In the near term, when to stabilize and long term potential? Thank you.

Speaker 3

Okay. Thank you, Renaud. I will take this question. For this quarter, actually, if you look at it, the Overall take rate dropped a little bit. As I was explaining in my script, actually, this job was because Of the mix shift, as we can see, consumers' appetite for relative price competitive products grow.

Speaker 3

So that's why we can see the GM shift towards the This actually is a we see the early success for Taobao and Tmall is user centric. So we need to build up the supply for all our consumers, particularly for So for the slightly drop off the Overall take rate, we are not too concerned because what we believe is, as I said, for Taobao merchants, the take rate lower compared with the other platforms, which actually shows the big potential we have in terms of increasing some of take rates via providers, so enhancing the operating efficiency on our platform as well as enable the merchants to increasing the operating efficiency, which will help us to increase our take rate.

Speaker 2

Thank you. This is Eddie. I'd like to add to that answer that Toby just gave. Talking on an overall strategic level about how we view the relationship between purchase frequency, GMV growth and take rate and what strategy is. The strategy that we're executing now is focused on increasing purchase By increasing purchase frequency, we will achieve GMV growth.

Speaker 2

On the basis of that GMV growth and once that has been then we will be developing more advertising products that are highly optimized for SME merchants. And at that point, we'll be able to leverage those new advertising products to achieve higher monetization. There's a clear strategy and a plan time wise in terms of how we're going to approach

Speaker 1

Question?

Operator

Thank you. Your next question comes from Alicia Yap with Citigroup. Please go ahead.

Speaker 5

Hi, thank you.

Speaker 2

I'm wondering if my understanding is correct and if you could confirm this for me. In my understanding, we're Going forward, focusing more on a light asset strategy for TTG. And as a result of that light asset strategy, we can expect to see an increase in EBITDA. Is that correct? And then my second question is, I'd like to know what is the biggest difference that TTG has in terms of its platform model when compared against other platforms.

Speaker 2

What's the biggest advantage that we offer to merchants? What's the way that we create more value for merchants than the other platforms We know that the short form video platforms have lots of organic traffic and they're able successfully to convert that to our purchases of goods. So how is TTG going to traffic and pull back those existing customers. Thank you. This is Eddie.

Speaker 2

I'll take that. And I think I heard a couple of different questions in there. If I understood correctly, the first question had to do with the revenue structure of the Taobao and Timol Group. Revenue comprises 2 parts really, CMR, customer management revenue and then direct sales offering. The way we look at the business, The bulk of our revenue and profits should be contributed by CMR.

Speaker 2

The purpose of having the direct sales offerings is firstly to retain customers, to help drive increased purchase frequency and also to achieve an advantage, a competitive advantage in certain categories. But fundamentally, revenue and profits should be mostly contributed by CMR. Secondly, In terms of how Taobao Tmall Group is different from its competitors, I think from the merchant perspective, certainly, TTG is the strongest platform with the most robust overall capabilities that it can offer merchants. We have live streaming and other marketing modalities on Tabata can help to quickly drive purchase volumes for new product launches. Very important for merchants also are the day to day marketing, operating tools that we offer.

Speaker 2

And fact, a lot of purchases, of course, are made via the search function on Taobao. And Of course, we also have robust private domain tools as well that are stronger than all of the other competitors. So for merchants, all of these different tools and services make it possible for them to achieve very robust marketing and high efficiency operations. So Tabak TiVo Group has the most comprehensive and fullest set of capabilities in these respects. The other question as to how to customers and drive purchase frequency on the platform.

Speaker 2

As I said in my opening remarks, this is really about precisely targeting the needs of different tiers of customers and ensuring that we have good products at good prices that we provide to them with good services, because together that makes up the core experience for customers relative to e commerce. So that's how we're going to go about driving increased purchase frequency and growing GMV.

Speaker 1

Thank you. Next question.

Operator

Thank you. Your next question comes from Zhaiyong Xiao with Barclays. Please go ahead.

Speaker 6

Thank you very much for taking my question. I have a question about shareholder It's great you increased the buyback by $25,000,000,000 But in terms of the pace of the buyback, We understand there are constraints and the limitations such as capital control. Could you talk about sort of The cash you may already have outside of China, what need to happen For you, so you may be able to pick up the pace of the buyback and related to that, Any update on the potential IPOs of Freshippo and Cainiao? Thank you very much.

Speaker 3

Okay. Thank you for your question. I will take the first one and Joe will take the second one. For the share buyback and the preparation of Offshore cash, I think for us, firstly, as you can see, we have really have a sort of very strong balance sheet in terms of cash, And a certain percentage of that cash actually is sitting offshore, which we can use to do the buyback. On the other hand, we also have a Good channel that we can dividend the cash out to offshore that we can further leverage either to make investments in our offshore businesses as well as using those sort of cash to do the And secondly, actually, we are sort of like very under leveraged.

Speaker 3

If you look at our balance sheet, actually, the debtor is only very small amount of debtor. And we can 2 cities, if we need it, We can increase the leverage also to sort of get sufficient cash for us to do the share buyback. So as I said in my script, we're targeting to reduce to have a net reduction of share count at least 3% every year in the next 3 fiscal years.

Speaker 7

I'll address the question about the IPO of Henma and Cai Niall. So last year, when we announced our reorganization, part of the goal was to Make sure that we take steps to reflect the intrinsic value of our various business units in the valuation of Alibaba Group, Okay. And there are multiple ways we could do it. And we specifically talked about spinning off companies and raising capital in business units like Hema and Cainiao so that we could put a valuation mark on these businesses. But the caveat when we made the announcement was that All these transactions were subject to market conditions.

Speaker 7

And market conditions currently are just not in a state where we believe we can really truly reflect the value, true intrinsic value of these businesses. So in the last few months, Eddie and his team have taken a very close look at our core business and we've come to the conclusion that Right now, focusing on generating synergies within the companies in our group will be the best way to reflect the value of the entire Alibaba Group. We're very excited about the potential for value creation through close collaboration among our businesses. In several areas, we have formed special project teams to ensure synergy creation, and we believe prioritizing synergies to strengthen our core business is the best value maximizing path today. Having said that, We continue to explore value creation through separate financings of our business units.

Speaker 7

But given the challenging market conditions, as I said, we're not in a hurry on the timing of these transactions.

Speaker 1

Next question?

Operator

Thank you. Your next question comes from Kenneth Fong with UBS. Please go ahead.

Speaker 8

Hi. Good evening, management. Thanks I have a question on investment and return. Recorded on one hand, we will continue to invest in TTG overseas area for growth. But on the other hand, in our last earnings call, we also aim to improve the ROIC for the group from single digit to double digit over time.

Speaker 8

So I want to ask about, let's say, on the numerator front, What are the segments that we see room for improvement in term of return and then the pace that we should expect? And on the denominated side, Being asset light, what are the progress and strategy for the disposal of non core assets? Thank you.

Speaker 3

Thank you, Kenneth. I'll take the first part of your question. As we said, I think As a listed company, I think it's important to improve the ROIC to the investors. So that's why during the last quarter's earnings call, we committed that we will improve our ROIC from single digit to double digit in the next couple of years. However, the improvement on the ROIC doesn't conflict with the investment we are going to make because making investments exactly is for the growth and for the future return of these growth eventually will also help to improve What we would be doing differently from previously is that we will be more focused on the is including the onshore and offshore e commerce business as well as cloud computing.

Speaker 3

So those are the areas, as I was emphasizing in my script, we're making investments. Okay. And Joe will cover the So how you see from some of the non core asset investments?

Speaker 7

Yes. I'll talk about the sale of noncore assets since this is A major focus of the Capital Management Committee and I chair the Capital Management Committee. We're making very good progress on non core asset sales. So during fiscal 2024 to date, so we're 9 months into this fiscal year, We have exited $1,700,000,000 in non core investments, all right? And so that's a pretty good pace.

Speaker 7

And we're very, very active in looking at our listed securities and we form a special team Now in addition, Toby has referred to this. We have a number of traditional physical retail businesses on our balance sheet. And these are not our core focus. It will make us it makes sense for us to exit these businesses, But this will take time given the challenging market conditions, but we'll continue to work on it.

Speaker 1

Next question?

Operator

Thank you. Your next question comes from Alex Yao with JPMorgan. Please go ahead.

Speaker 9

Thank you, management for taking my question. I have a couple of questions on The value return to shareholder initiatives. So first of all, you guys currently have a US35.3 billion dollars available in the buyback program, which averaged roughly US12 1,000,000,000 per fiscal year Compared to the 2023 calendar year buyback pace, this is a sizable Step up. Do you guys have the real serious intention to step up the buyback? Or put it another way, how do you determine the RMB12 1,000,000,000 buyback per year is the right number to think about?

Speaker 9

And then holistically, if we add the buyback and dividend together and call it a yield to shareholders, do you have a target yield for the next couple of years. Thank you.

Speaker 3

Okay. Thank you, Alex, for this question. I think the short version answer is yes, we are serious. Of course, if you look back at our track record, we have been in the past few years, we have A few upsizes of the share buyback program. So if you look at the sort of like track record, we are actually, If you like, sort of exceeded the original timetable, if you like.

Speaker 3

So that's why we the Board approved another upside this So that's why, as I said, we are serious. So in terms of how we decide this number, course, we need to take a few factors into consideration, including our cash generating capability and also How much cash we do, we will be able to sort of like generate to get it off So all these we consider. And of course, as I said previously, the leveraging capability we have. So altogether, I think we consider A 12,000,000,000 is the right number around the right number for us to do the buyback. So in addition to the buyback, For this upside, the RMB 25,000,000,000, that's only for the buyback.

Speaker 3

As we announced in the last quarter, we start to pay an annual dividend. So If you like, for the fiscal year 2023, including the buyback of $9,800,000,000 and the $2,500,000,000 dividend, actually, we're giving back more than US12 $1,000,000,000 back to the shareholders. And going forward, we are expecting a continue With our cash generating capability, continue to deliver to give back the shareholders the cash as we sort of like committed.

Speaker 7

Yes, I'd just like to supplement what Toby said. I'll do a little bit of math On this question, Toby has said in his prepared remarks that we are targeting A 3 percentage points per year of accretion year over the next 3 years through our buyback program. And that commitment is pretty real, because if you look at the past 12 months, We actually reduced our share count by 3.3%. So that accretion is we believe is achievable. And if you look at our share count, we bought 2,500,000,000 shares outstanding and 3% is 75,000,000 shares.

Speaker 7

If we are deploying $12,000,000,000 a year to buy back Our stock, at the current stock price, we actually would be able to buy back even more. But of course, we're anticipating that our stock will increase in price over the last three years over the next 3 years, so that we can still keep it keep our target of 3% accretion per year. So using the $12,000,000,000 a year of buyback With rising stock price, I think it is still reasonable to get to 3% accretion a year. So that's math number 1. Math number 2 is 3% accretion a year plus a dividend of $1 per ADS, the dividend yield is about 1.4% And so combined with the buyback accretion and dividend yield, you're looking at about 4.4%, 4.5%, which is actually quite close to the 10 year treasury yield.

Speaker 7

So if you buy Alibaba stock, it's like you bought a 10 year treasury bond with the upside of stock price appreciation. So that's the math we're looking at.

Speaker 1

Next question?

Operator

Thank you. Your next question comes from Gary Yu with Morgan Stanley. Please go ahead.

Speaker 10

Hi. Thank you for the opportunity to ask questions. I have a question for Jiang Zhang on international business. Just wanted to see if there is any kind of particular market that we are focusing on. And specifically, I want to ask about our strategy in the U.

Speaker 10

S. Regarding 1st quarter e commerce business, given that you have particular rates ahead of elections. And we also talked about potentially stepping up the investment on this business. How should we look at the level of settlement loss in the couple of quarters? And how are we going to fund the investment, maybe more individual financing at the AIDC level?

Speaker 10

Or are we going to tap into more of the Offshore financing capabilities have a good quarter. Thank you.

Speaker 1

Hey, Barry, because your background is quite noisy. Can you Repeat a few questions.

Speaker 7

Hi, can

Speaker 10

you hear me better?

Speaker 1

Yes, please. Go ahead.

Speaker 10

Okay. Apology for that. I'm in the middle of a Chinese New Year dinner. So my question regarding international business. And first one is any particular focus in terms of markets for the next couple of quarters?

Speaker 10

And specifically, what is our strategy in the U. S. Market, given the geopolitical risks ahead of elections? And the second question also on international is, we talked about stepping up the investment. How should we look at the segment loss in the coming quarters?

Speaker 10

And how are we going to fund the investment between individual financing at the ARDC level versus tapping into the group offshore financing at a group level? Thank you.

Speaker 2

So this is Jiang Fan and I'll take the first part of your question and we can break this out and look at the business in terms cross border versus local. So in terms of the local business over the past several quarters, we've seen very rapid improvement in efficiency and rapid narrowing of losses, we expect that to continue. The cross border business, of course, Addresses all markets everywhere. It's a generic business model. And so in determining How we will allocate investments going forward?

Speaker 2

Basically, we look at return on investment. We look at the efficiency of the investments we've made to plan our future investment. In terms of the U. S, we actually do have a business foundation there 2C and 2B on alibaba.com, in fact, lots of customers are U. S.

Speaker 2

Customers. So we certainly attach importance to the U. S. Market. And we will evaluate whether we will be increasing our investment in the U.

Speaker 2

S. On the basis looking at the value that we can bring, the innovation that we can bring. And of course, In that process, we will also take into consider the various risks that you've outlined.

Speaker 3

I will take on the second Basically, you're asking how we are going to arrange the financing for AIDC to get sufficient fundings for its Investments. So generally, as actually Joe was explaining previously, AIDC is going to do financing. However, we are in a rush to do a financing. So really depending on the market conditions, we will find the right moment to do a financing. So before that Momo is coming, actually what we will be doing is, as I said, we have sufficient offshore cash.

Speaker 3

We can use those Cash to finance the business finance the growth of our business is offshore.

Speaker 1

Thank you. Next question.

Operator

Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Speaker 11

Hi, good evening. Thanks management for taking my questions. I have a question on the cloud side. Given Eddie is now leading a TTG and cloud, What should we expect in terms of the synergies in coming quarters? And should we expect AI to be a driver to CML?

Speaker 11

And on that front, given we have a very good margin profile in the December quarter, Any color about the long term margin assumption that we should expect? Thank you.

Speaker 2

Thank And that's a really great question. Certainly, I see very strong potential for greater synergy between Alibaba Cloud and the Taobao Tmall Group, especially driven by AI. As you know, we've been developing our own large language model called Tongyiqianwen. And we're currently testing ways to leverage this model to leverage the AI capability to enhance search and to enhance advertising Well, this initiative is still in the early testing phase, but we see very strong potential to leverage AI to significantly enhance search conversion and ad monetization. So as I say, that's still in early testing, but we see excellent potential there.

Speaker 1

Next question, please.

Operator

Thank you. Your next question comes from Ellie Jang with Macquarie. Please go ahead.

Speaker 5

Thank you so much, management for taking my question. I just have a follow-up question on the AIDC International Unit. The management earlier shared some exciting developments in the overseas market. But it seems like this quarter, the international unit We saw a very big widened loss to around RMB3 1,000,000,000. So just wondering, how do we anticipate investment pace onwards, considering certain of the key kind of growing markets such as AliExpress Choice, the hybrid model as well as the trend, seems to be still in the very early development stage.

Speaker 5

So Going forward, how do we really evaluate the economics as well as the competitive landscape? Thank you.

Speaker 2

Thank you. Well, the loss in ARDC's business this quarter really came from 3 different areas. The first is that the new model, the AliExpress Choice model has grown very rapidly and now accounts for a very significant percentage of the business overall. At the same time, it's an early stage business still being developed. It's a business that has very strong scale effects.

Speaker 2

So our priority is to invest in scaling up the business. And when the business has achieved scale, Then as it grows, the loss will narrow and the business will become profitable. The second thing that contributed to the losses this quarter was significant spending on marketing and some major promotions that we did. And thirdly, some investments that we made in the Middle East and other key markets. Going forward, I think that we'll continue to be making large investments in this business, in particular around Choice, we see very clearly that Choice is delivering a better user experience and resulting in much better user retention than the previous model.

Speaker 2

So over a longer period of time, we're certain that Choice will produce very positive investment returns. But the priority right now, The number one priority is to continue to invest in scaling up the business.

Speaker 1

Next question, final question.

Operator

Thank you. Your next question comes from Jialong Shi with Nomura. Please go ahead.

Speaker 3

Thanks management for taking my question.

Speaker 2

Thank you. So a couple of quick questions for management, if I may. First of all, I'm wondering if you could respond to recent media reports saying that The Alibaba Group would be considering selling Le Mans, if you could respond to that, please. 2nd question has to do with AIDC. Can you tell us how big Lazada's business is in Southeast Asia?

Speaker 2

And the impact that you've seen in Indonesia from the team up between TikTok and its local partner. Thanks. This is Toby. I'll take that first question. I don't think there's any need for us to make further comment because we've already that rumor and have stated that that's not true.

Speaker 2

As far as Alibaba is concerned, Ulema is a very important asset for us in the hyperlocal segment. Thank you. Well, Southeast Asia continues to be a very important market for us and there remains significant potential for us to deepen our penetration in Southeast Asia. Our approach is to continue to balance efficiency against growth, to continue to work to narrow the losses in the business while maintaining growth. So going forward, our strategy will be to continue to make investments at an appropriate scale to grow in Southeast Asia.

Speaker 2

As far as the restrictions imposed by the Indonesian authorities, The impact on us is relatively limited because we always abide by regulatory

Speaker 1

Thank you for joining today's earnings call. That concludes our earnings for today. Please reach out to us If you have any questions, and we'll see you next quarter. Thank you.

Operator

That does conclude our conference for today.

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