Q3 2020 Baidu Inc Earnings Call
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Hello, and thank you for say the buyer pool Baidu was took what the Twentytwenty on these conference calls I just.
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After managements prepared remarks, there will be of question. It's the session. Today's conference is being the called the <unk>.
And your objections you may disconnect at this time.
Oh, no like to put the meeting over to your host for today's conference just the.
Baidu startup of Investor Relations.
Hello, everyone and welcome to by the third quarter 2020, and co. Please call I did he three D. What he did distribute it earlier today you can find a copy of what side as well as on the new car services on the call today. He had the building Oh, Chief Executive Officer, <unk> Oh chip.
The nature officer, and Ocean, Oh, except the vice President he tried to Baidu mobile ecosystem, the especially on the Cpgs also.
Because I do not feel code Academy session.
Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U.S. Public Securities Litigation Reform Act of Nike Nike's site.
He keeps making they are subject to risks and uncertainties that may cause actual results to differ maturity of on the or kind of looks occasion the.
Potential risks and uncertainties include but are not limited to build out non you know the public filings with the <unk>.
In our annual report on form 20-F, but he does not undertake any obligation to update anything of the can statement, except as required under of people.
And the press release and be cool include the discussions of certain unaudited non-GAAP financial measures. We have made minor adjustments to our non-GAAP measures and just the actively applied the change it. The comparison purposes of press release contains a the consideration of the unaudited non-GAAP measures to the another day.
Most directly comparable GAAP measures and he is available on our IR website at IR the up I do dotcom at the reminder.
The team the footed in addition, the webcast of this conference call the old could be available on Baidu <unk> IR website <unk>.
I will now turn the call over to all the CEO Robin.
Hello, everyone. We delivered solid results in the third quarter, we spiked <unk> total revenue, reaching RMB 28.2 billion of 1% from last year.
Baidu core revenue reached RMB 21.4 billion up 13% sequentially, which is the acceleration from the 8% sequential growth for the third quarter last year.
Trying the fault of second wave of called the liking cases in July and quick to contain the pandemic, giving us confidence that China GAAP standard operating procedures in place to prompt the deal with the new coal the outbreaks.
Many of the advertising verticals.
That's all negative growth in prior quarter upturn.
Including health care education auto lifestyle and software.
That's the Chinese economy continues to recovery, we are in the good position to for the benefit from such improvement.
In the <unk> involvement.
[noise] over the last few years, we have focused on strengthening baidu mobile ecosystem by increasing lumping user aggregating content and services on Baidu platform, and adding social engagement to our California.
Such expenses he off our mobile ecosystem of not only improved the virtue of the experience.
He also allows users to do more on Baidu from information research to social interaction to close the loop purchases.
In September and the you saw.
Reached 544 million of 12% year over year.
Moving up such players continue to grow in team and daily users lobbying on Baidu have reached 70% the.
The up from 53% year ago.
That's why the mobile ecosystem, that's the strong foundation for Baidu two of diversifying beyond advertising into non advertising services the.
The chest membership and online games.
<unk> is also proving to be a good feet for baidu users.
Non advertising consumer keeping revenue for Baidu core reached RMB 1.4, feeling.
Or U.S. 211 minutes.
That's the up 2.6% of 2.6 times from two years ago.
Then paid membership reached 31.5 billion in the third quarter.
[noise] to accelerate our efforts in growing non advertising businesses.
We announced it today, our intention to acquire white White line.
Our leading video based live streaming platform in China.
I think one of my life to Arvind or oil well allow baidu to gain immediate operational experience and the NOL of beauty a large like video community.
We are excited about the opportunity ahead by merging baidu large traffic and vibrant mobile ecosystem. That's why why expertise in video programming creator network management and social media community development.
Together with why why the team.
We hope to explore the next generation applied the view and thanks to the beyond the entertainment into every facet of our lives in the years to come.
Oh, the online marketing services, we have added live streaming and purchase functions to our platform and enabling users to seem to be moving from information to social to put her on the.
The platform.
Within the U.S their search and part of a relevant information interacted with the merchant and seamlessly complete a purchase of third party goods and services on Baidu.
By providing a platform from information to social to purchase the enlarging the time for our online Aspen.
Interest generation to purchase the conversion to loyalty marketing and advocacy.
Which allow merchants to perform user lifetime value of management.
How does he math revenue, which accounts for more than half of our mobile ecosystem revenue continues to experience double digit growth.
For the upside from non advertising revenue.
I just knew I had been the system.
Also experiencing double digit growth.
He was a baidu cloud growing 41% year over year in the third quarter.
That's the game to squeeze the discussions with our mobile ecosystem and the.
Remember I do ask the are you reached 206 million of 9% year over year.
Let me go over our progress in video verticals and communities and monetization.
First on video that's the leading internet platform for content and services I believe the attracting a tremendous amount of greater.
To all of her knowledge and English. He has been picked like you do in short the D.
For example, the.
Number of <unk> topical session, such as wonder planet and who the support life to ending the third quarter was up eight fold from the prior quarter.
And second of vertical and community.
Well, he I building blocks and the industry specific offerings, we are seeing verticals developing successful the on Baidu point.
For instance, the BDC sector, we added the enhanced commerce capabilities to our hosted marketing cloud platform that has verified merchant inflammation and the large catalog of asking you to form a beat with the marketplace that we call I'd cycle.
Our BD the community enables baidu customers well in the past only purchase of traffic to know the list the or commercial merger.
Machinery, interactively potential consumers and consume it the transition of our the transaction our platform.
The writing about the mission of Arvida's he marketplace, our marketing cloud platform. That's the resolved it he paid merchant membership surpassing 100000 in the third quarter.
[noise] Baidu health continue to follow the the fine its market position as the top health care platform in China Baidu.
I do divestment of high quality content and community if the.
Spring tell us health.
The online topped a consultation increasing 60% from a year ago.
Health care related he on me during the third quarter was up 26 fold from last year.
In the future Baidu health has the potential to offer prescription drugs and health care products, leveraging our dominant trafficking, providing health care of related information and the large scale of social engagement engagement developing our platform.
Oh, the institution side, our partnership with over 80 top hospitals nationwide puts us in a good the vision to enable the digital transformation of hospital and help them stay connected the patient.
The interim well make it more convenient for users to access all of those services and of your own helping commission.
Third of monetization, starting with marketing services side, we have continued to demonstrate scan the any of the advertising revenue growing double digit year on year.
Driven by strong in kind of search traffic.
Couple of with in EPS search CTM growth for the validating the value of Baidu was open platform in apps search strategy.
Revenue from managed page reached 32% of Baidu Court online marketing revenue in the third quarter of.
More side the whole nurse learn about the benefit of combining baidu traffic, it's our hosted the marketing cloud platform.
The leading tiny TV manufacturer switched to manage the page and when combined with Baidu Moneypak vision products saw its marketing ROI improved significantly.
The increased about 80% and the cost per lead dropped 40% from a year ago.
The floor users viewing videos of Baidu reach media as a beginning to the tight.
Okay and attraction.
In September of revenue generated from video ads of mobile search resolved.
83% from Scream of price.
The U.S. suitable for advertisers across many industries, including health care local services financial services software and the machinery.
And we continue the adoption, we do at stem to the another driver of the T. and growth in the future.
In addition, the growing Baidu AD revenue, we have the potential upside from volume non advertising revenue.
According to plan the mobile Baidu is one of the three internet companies in China that have the reach of over 1 billion Internet devices are now.
Non advertising revenue at the percentage off our total consumer facing the this is much lower than our peers. That's.
As we further develop our mobile ecosystem to enable information social and purchases we stand to benefit from the many opportunities that will arise from a deeper connection the dog users.
Moving to cloud and like I said he says.
Hi, good cloud is providing a one stop shop for cloud computing and differentiating the guy solution to enable intelligent industries.
For example, Baidu has partnered with postal savings bank of China atop the retail bank in China of 40000 branches to provide baidu <unk> path.
To help improve credit risk management, it's baidu say CGI capabilities.
Using AI to improve risk Manson for loan provision is particularly meaningful as opposed to all savings has one of the largest the consumer base of individuals and small and the prices in China.
By the way, it's also partnering with economic and technological development zone of for young the primary data center hobby in China to provide the I pass the.
The strategic partnership will allow the forehand the plus the company's placed in the comments about the building access to find a I pass and leverage our leading the i. capabilities such as the keep learning block chain and off the mended the adult recognition to make the production improvement and efficiency gains.
The 400, plus the company's span across many industries, including manufacturing electronics auto health care and the pharmaceutical industry.
How does the cloud infrastructure it differentiated the fight a comprehensive end to end stack from me I chips to of himself for him to deep learning framework to pass and fast solutions.
A key component it off I do say I is our large open platform developer community.
By opening up Baidu I told the world, we learn how he I if you and the list developers to help I do improve our AI models, which in turn helps baidu divots of unique solutions Baidu.
I'd, just say I open platform offers over 278 capabilities, which is perhaps a trillion times the per day at peak.
By a developer community of over 2 million.
Turning to Apollo eight.
August a potent one then the RMB 416 million project to help form Joel improve traffic efficiency safety and air pollution by adopting Baidu V., two ex dilution, which supports the autonomous driving and the other capability. This.
This may be the largest of smart transportation project, getting China, which reflects the public sector when they need to use technology to improve the wellbeing of 50 lives.
I do have recently opened a political GAAP a text the services to the public invasion of the first Lady following the operations in China, and Tom don't passengers. The May call I Robertex the of from Baidu maps, a portal go out.
And on the we're aware of.
According to market research firm I didn't see a.
Strategy analytics, and the kind of Alice shall do smart display was ranked the number one in shipments globally and shall do smart meters was ranked the number one in shipments in China for the second quarter of 2020.
In September we introduced the cell do smart your phone.
Which allow users to search the call and now the could do or Alaska skills.
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The initial feedback on shall do smart feature phone.
With.
We held for approximately U.S. $35 up here has been quite positive.
With that let me turn the call of or to Herman to go through our financial highlights.
[laughter] Kofi Robin.
Hello, everyone welcome to by the third quarter 2020 call Walmart.
All monetary amounts use of my discussion or any of that indeed unless stated otherwise.
Hi. This is total revenues reached 28.2 billion or 4.2 billing U.S. dollars increasing 1%.
Over the years, you don't even some of the talk to what our business improvement mainly came from Baidu core whose revenue is 21.42 in the $2.1 billion in the third quarter of 2% year over the this is down 13% of the first quarter and down 2% in the second quarter actually.
The revenue grew 7.2 billion down 3% year over year.
He membership revenue was up 7% offset by the 11% decline ice yu advertising.
Right you advertising did not perform at school bus. He has he had hope on a sequential basis as he advertising.
Gradually it's the coding but.
The 16% for the quarter.
Non-GAAP cost of revenues Rose 12.7 billion down 22% year over year, primarily due to a decrease in content costs traffic acquisition costs and cost of goods. So non.
Non-GAAP EPS DNA expenses the.
The 4.2 billion the 1% real he did.
Non-GAAP R&D expenses were 2.6 billion. So just because that's the overview.
The non-GAAP operating income for Baidu, the 7.6 billion of walking the and 7% growth.
Non-GAAP operating income for Baidu core was 8.5 below the the $1.2 billion of 37% year over year non.
Non-GAAP operating margin for Baidu quote of was 40% of 10.2 of last year.
Total other income this quarter was 8.3 billion or 1.3 billion U.S. all of which include the fair value of game of night building the moving from long term investments.
Adjusted EBITDA was 9.1 billion of 77% year over year.
Adjusted EBITDA of four by the core of with 9.8, the EUR one point, what the U.S. dollars, 51% year over year.
And adjusted EBITDA margin for part of the quote was 46% also of 10 point the last year.
As of the tender.
38.
Our cash and short term investments were 146, so in in the cash and short term investments put by the quote the 438.5 billion worth of $20.4 billion.
Free cash flow in the third quarter was 6.3 billion of free cash flow. Excluding I cheese was 8.3 billion. The 1.2 billion worth of all those.
During the third quarter between approximately 600 million U.S. all its true shareholders, bringing the cumulative repurchase for this year you have two day to approximately $1.3 billion by.
I do core had approximately 31003 from the full time employees as of September thirtyth of 3% from last year.
Moving let me give you more color on the target.
So I do of course.
The previously discussed I do of course business into the quotes mobile system and use the i. initiatives.
On today's call I will provide further information or new I. initiative to price provides you with the better understanding.
Of our progress and help you better value of business.
Pardon me I initiative consists of two parts of the I call. It kind of depends dragon plus or the growth initiatives, which will call 80, plus the G. I, let me briefly explain the each part of our core business.
The first mobile ecosystem in the advertising is the growing the majority of our advertising business you know the legacy business Union put the PC advertising is a small part of mobile.
Mobile ecosystem also includes non advertising services, such as live streaming and online games.
Second the I call or how often so I just a couple of sector in consumers, while or the I call office cloud computing such as the in.
Which is the the most of our peers are playing in.
It was a one stop shop, the differentiating emphasis on providing the EIS solution such as the I pass the in price customers in between the platform solution to the public sector.
Lastly, atomic struggling because of the growth initiatives.
The plus JPY includes the comms driving to a lesson or the growth initiatives the.
The clarity Apollo encompasses the monetization models smart transportation I O V or.
Connected vehicles in the comics driving.
The revenue classification purposes, the first true dope quite small in the past or included in cloud, whereas the last items is included in a D plus all the.
Let me now give you more information on the topic of Baidu quote.
Our mobile equal to the many of our advertising the verticals of 20, well into the core the including health care education auto lifestyle and software.
In the advertising, which is the growth majority of Baidu mobile ecosystem revenue continue to see healthy double digit growth in the city of from you know the search queries and CPM growth.
We announced earlier.
The we have entered into definitive agreements the joy to acquire the Lightstream business in China for an aggregate purchase price of approximately 2.6, the U.S. dollars payable in cash.
On 2019, and the other two numbers why why he lives revenue with the Trust me 10 buildings and the B and non-GAAP net margin was over 30%.
We expect to close the transaction, which is subject to certain conditions. The first half with 2021.
With the acquisition of why why like non advertising will become a meaningful piece of Oh ecosystem in our legacy business, which has been dragging our mobile ecosystems growth will become the either smaller piece of our business.
Yeah, I call saw solid revenue growth in the third quarter, reaching 2.2 billion of 41% from last year driven by customers from the Internet transportation financial services and health care in the.
Well I do call revenue is seeing accelerated revenue growth the the Chinese economy opening up now so sports able to make more the type of with the potential customers.
Oh 80, plus the old yard.
We entered into definitive agreement to lease financings the dual Wes.
At the post money valuation of approximately 2.9 the U.S.
With all this in September.
I do would be kind of continued to become the ideal will continue to be a super majority shareholder at closing, we expect the transaction to close in the fourth quarter.
Based on the industry news the type of market has value leading economists driving companies.
So in the World to 5.4 billion U.S. always true $30 billion, we're reviewing business metrics. This growth by the construction companies and we will share with them moving.
Moving to a data to measure apollo's progress the.
Example, the cumulative pets smiles for polar constraining used 2.5 million miles in September of 150% year over year.
Turning to work what are the guidance.
We expect total revenue to the between 28.6 billion in the 1.3 day.
Representing growth of negative 1% to 8% year over year.
The guidance assumes by the court will go between negative, 1% and 10% year over year. He.
We forecast sort of current and preliminary view, which is subject to substantial uncertainty.
Before I turn the call back to the operating let me summarize the third quarter issue.
Of the Chinese economy, the rebalancing by the business has the accelerated.
The accelerated sequential growth in the last two quarters, we expect fourth quarter is the continued batch of sequential growth of.
The attitude the go in and of Oakland, California ecosystem coal by surgery is bearing fruit so owners of joining by the Minister page and App developers are moving the company services offered by the smart equal that with more landing pages, let the of Baidu platform.
The experience is improving the.
Daily logged in users of 17 point to 70%.
Income platform in the services held by our marketing cloud platform, the serving our merchants better. Consequently in EFT revenue continues to grow double digits driven by the growth in EPS search queries and enhanced search superior.
Our new the initiatives are also seeing healthy double digit growth and with the even greater contribution next year.
The Cobrand IP and the can go in China. Our sales force is traveling more clearly a lot of China, we're right on a wave of intelligent transformation the cost issues in China is promoting the new infrastructure initiatives to boost in economics do though.
[noise] baidu stands to benefit from the intelligent transformation across industry sectors with our own ways lien investment in the eye or 2 million strong the developer community.
So I do course, adjusted EBITDA reached $1.45 billion in the quarter of 31% year over year Majestic EBITDA margin the historical high of 46%.
For the past two decades Baidu has successfully weathered many economic crisis and market changes by building price points with leading technologies, we continue to grow our future with doable business models like you know the search with the building blocks and marketing cloud platform like cloud services.
Hi, Susan likes more transportation would be two ex solution like voice the system the do it on the west.
Our platform based business models will allow baidu to better weather difficult time, and provide sustainable long term growth to our shareholders.
With the acquisition of why why like we are kind of coal.
Kind of pull the to become a leader in like season. The purchase of why why lives will be an all cash transaction, which is putting the cash on by the balance sheet to good use.
We have a great opportunity to leverage by the tremendous user base to grow rise to me the non advertising revenue.
In addition to purchase two businesses that strengthen our ecosystem.
Our profitability he had news the cash or.
Balance sheet to execute on our share buyback program and consistent return cash to our shareholders.
In summary, our business stands to benefit from photos of the.
Turning to economy.
We now have an opportunity to optimize by these large traffic and vibrant mobile ecosystem, where the focus on growing the non advertising revenue.
And the price cloud, it's more transportation or two huge revenue opportunities ahead of us.
Autonomous driving is also progressing well in our peers are being valued between $5.4 billion and $30 billion.
Operator with that let's now open the call the question [noise].
Ladies and gentlemen of and now begin the question and answer session. If you wish to ask a question. Please press star one I don't have the food and wait for the to be unknowns. If you wish you can still be Chris Please press the pound or hash key.
Your first question comes from Alicia Yap from Citigroup. Please ask your question.
Hi, Thank you good morning, Robin Harman Dol and Jan Thanks for taking my questions and also congrats on solid results. So my question is related to these rationale behind the acquisition soft you know why domestic life. You mean, the first so could you on the I could you help us understand.
Net the intention the hiring you mentioned about the spending into non advertising business, but I think you know given live streaming piece of testing more saturating and maturing. So maybe you could help us understand what.
What are the strategies or I think the high that I do.
Of course, how why why to revise the growth and then second east of Keven live streaming of technology, It's also becoming a.
More and more as the advertising true or would that be common interest awful baidu to actually expand the app monetization opportunities. When you fly streaming go beyond the commerce, a you know Weve you know becomes more like the marketing net right for a lot of the industry.
Vertical our true build the branding enough for the price compression. So any color you could share what the appreciate it. Thank you.
Hi on the shows the assist Robin has any a glass lot of question first if you look at the you know why wife, one off the pioneers he.
Lastly, anything.
You probably noticed that I think the early players hop off of mature artwork and the being after by the larger or mobile or digital platforms.
That demonstrate that the live streaming ER.
ER independent finished the it's a it's kind of tough when when you are scaling its not a large enough of the other hand or for a large California like I do we have one advocate all.
About 300 million daily active user or it's only natural for us to.
Integrated with the life during the such asked my wife and Ah Ah.
And the first the money at high rates of our existing user base and the traffic like I mentioned during the prepared remarks. The if you look at the.
Revenue.
No the streaming Oh, baidu and the other comparable mobile ecosystem of the advertising revenue for us represent a much larger percentage than any other.
Mobile platform you can think off on the understand the we have been very focused on providing the the best and marketing solutions to our customers, but on the other hand to a we we should really explore and the.
The diversify our our explore and you will.
Initiatives and diversify our.
Revenue source of.
So a part of my pass up very sizeable of business in in terms of bastion of we have lot of experience in terms of operating section.
Eco system.
Awful lot of performers.
And the the so called the Art school, who pay the tips on two of those a lot of former.
And Oh does that kind of operating all experience and stakeholders in the live streaming ecosystem.
We we think it's very valuable for the overall baidu ecosystem.
About a lot of screening at the at Sun New form of media you start off of the nation to that the if it can be used for other purposes or non not just of for the show bins day. It can be used for for such as the which is the already.
Very popular among others.
Mobile ecosystems, a it can also be very effective tool for online marketing.
In my mind live streaming as a comparable to a short video and text and interest. It's just the unusually warm off of media, we where he can and the we should the leverage the new form of media to.
Further enhance our mobile ecosystem provides a better user experience and per pad by pad of values for the team effort I sort of end customer so the Viking ecosystem.
Thank you Robin.
Your next question comes from a D. the Yong from Bank of America Merrill Lynch. Please ask your question.
Hi, Good morning, guys I guess, just a follow up on the Alisha question.
On the rationale up the high I.
Acquisitions are far why like I guess.
We understand that I do have hot items trough, which.
Ken how far off are monetized station part of my life, but I'm just curious on the two things one he is oh why are not thinking of our doing lifepoint hospitals by yourself, just south of the power of picking up he says okay and the Kelly.
And then secondly in terms of time, moving I think alisha upon the like of corn that I like what kind of thing is our multi family of having the thesis of China. So why now why not GAAP yeah. Thank you.
Oh, hi, I'd be interested to clarify Uh huh.
We have been doing like a screening of.
A series of Baidu apps in into the vitamin C.P.T. the bar, how kind of and Shawn I mean, what we have seen is that as the revenue from live streaming have been growing very very quickly I guess, he he mentioned that over two years, our non advertising revenue of role of 2.6.
Six of Pine and or if you could talk about the last mile Black training revenue, while the baidu platform growth more than 80% year on year, so that give us the confidence that the the baidu ecosystem. He is actually very suitable for a lack of training when you can see the.
The last thing at the asset.
Way off of monetize the where the Youre.
The more or user base.
And.
Well why not earlier tell us I I told you would be doing those and the Y knot organically are basically.
Like you said this new <unk>.
It's not new assa or interest or as a way of money I think.
User traffic.
Traffic a lot of lie at the pioneer in the space. They have accumulated a lot of off all of which non experience I have Ah you heard from Herman its of sizable bins and I got you know.
The good margin.
So there are lot of of things that we can learn and see how the very good a very long haul a user base and Tom in the creator community that the it that it's hard for us to to catch the you know very short of pure at all the time.
Some of that filing we decided to make this acquisition.
Okay understood and then just a quick follow up on non Herman's I command our non.
Our mobile ecosystem of those is on the line because he pieces. So just wondering if you guys can share a bit more color on the growth trends are the especially the differences I think he.
Growth range between the mobile ecosystem, especially on a percentage of the legacy pieces of thanks.
Yeah, Hi, Eddie the yeah actually in our prepared remarks, we talked about that when you think of our mobile ecosystem. The talk about the that services. So what we said was EUR four enough services enough.
Advertising growth.
Who are double digits, this quarter and weve been able to grow double digits for the last three quarters. Despite Kobe 19, so loved.
Leveraging our capabilities or the I. building blocks and marketing services platform.
We're able to do much better on the of the hand or legacy business, we've been seeing a true.
He has dropped part of it is a you know that there's less traffic. The by you know handsets or not selling as well. This year. So you have a less new phone day and best profit device and secondly of for this area as we've mentioned many times, it's we're focusing on maximizing profit rather than the revenue that's why you're.
Moving as we're pulling back on some of the of a discrepancy more of margin actually include number one is focusing on profitability growth rather than just absolute revenue growth and then be true as we switch over as the proportion of ready to switch over from the legacy business into the in Oh, We're able to you know have better profitability.
We don't have to pay for heart attacks.
Understood. Thank you.
Your next question comes from huge but he from Goldman Sachs. Please ask your question.
Thank you for the opportunity I have three questions. The first is with regard to the core business were.
We're trying to better understand the drivers of where the business sits today and in particular on the pricing side, where where are we.
Looking at the numbers on a year on year basis. If you could you just take us through that dynamic and if possible through industries or would be very helpful.
The second is on the cost side, where the margins continue to improve just wanted to understand how much of that came through the.
The change in the accounting estimates of future viewership consumption patterns of we've seen on the I kind of side.
And how much of this trend of continuing margin improvement can be built into the way, we think of the rest of the a and potentially 2021.
And the Thirtys of congratulations on the force 60 million Reminbi wins for Apollo just want to understand how that's gonna get booked and also your perspective on when we can expect Apollo to start to penetrate the the China domestic manufacturing automotive automobile manufacturing base. If that's the way we should be thinking about it or should we be thinking about how it.
All of the penetrates the transportation network across China. The government the government side of the fence. Thank you very much.
Okay Herman will answer the first two and I answer the third one.
Yeah, Hi, dish, so what's the go sort of pricing.
You know the door I building blocks the into our marketing.
Uh huh.
Services platform as he demonstrated a specific cases in our call. This time in past few quarters, you can see actually as advertisers a switch over the you know the two tour of.
Managed page leveraging our capabilities and so forth, we're able to actually get the CPM to turn around so in the quarter, we actually saw a positive growth on a year over year.
The sequential basis, your non workers to see a CPM or because of that.
With regards to all of our margins of ER I think Q3, what was the you know of free high with an EBITDA margin of 46% the.
Some of that was non recurring so I think when you go into a true Q4, I would just estimate that.
You should see a or the cost of sales plus operating expenses or.
Going probably in the mid teens on a sequential basis part of it is.
Because the.
The we've been trying to hire the sure and it's been a very hard to interview everyone doesn't want where the covance absence of wood and second is are some of our marketing spend that we could try and ER. The span the as I mentioned earlier. The you don't have a lot of and instead of selling in that part of the year is very hard to spend the money.
The we anticipate you know the economy coming back in the.
Interest state that will be the true, having an environment, where we can spend more of what the knowledge and hopefully that would help or try to get in future quarters.
[noise] IPO Shawn the Apollo a question of when can basically consists of for the last of full.
Full stack solution for smart Transportations.
A war, it's and it's the vibrate of vibrant ecosystem of.
Got a into the.
Many of the stake holders in the interim thoughtful and the that the municipal governments the.
The the technology provider and the other you know Q.
Tier one players.
From a business model point of view or a whole of basically has we directions. The first one is the the technology provider for the Oems we sell during the last four auto we sell on striking technologies two of the OEM.
Yes.
And there's the second one is the smart transportation infrastructure projects. The forehand of 16 million on project, where he was a in Guam Joel the losses. The we we fundamentally believe that the by building a day a smart infrastructure.
For transportation.
China of the Chinese cities can in true the efficiency of of mobility significantly and the things transportation represent a large percentage off the towards domestic non crop.
Ah crop protection.
It has a huge value not only from the point of view of but also from the social point of view of people well the.
Except the from the congested of traffic.
And the the third part of it the the level of four and 545, you know self driving vehicles. Eventually the 12, the money tied to its true Robin Ethington and the like I talked about during the prepared remarks, we have been deploying the all the Texas everything.
A number of four of Chinese cities and the we expect the.
On the man testing as well as the commercial deployment of sometime.
In near future.
Thank you.
Your next question comes from James the.
From Mizuho. Please ask your question.
Great. Thanks for taking my question to of two questions here to one autonomous driving I. Just curious are the any new government policy the supporting the adoption maybe among the Oems here and how important is kind of OEM partnerships to help you.
To each of your business model here and also the secondly, a follow up question. A couple of follow up question on why why specifically and maybe if you could do in the obvious. He just made the announcement the a little bit more specific talking about the content strategy post the integration of kind of how do you plan to differentiate verse.
[noise] peers, and maybe talk about the synergy of little bit between Baidu and why why and how do you plan to integrate baidu for content into why why thanks.
[noise] Oh.
And the Oh I'm trying question for well into the integration of.
Question.
From the government the point of view of many local governments really excited Oh.
About working with the off to provide.
Their infrastructure for this kind of of our technological.
Innovation.
That's why we we we have been working with or a dozen more than seven cities are all kinds of smart infrastructure transportation infrastructure.
Contacts and the on the Oh Yan side, we partner with many of the Ole Yan. So we provide the technology, a true them and day well of work with the local government to get whatever.
You know he.
The tax benefit or or others are knocking lessons from the standard off a initiative. The so from that point of view.
We are and interactive a beneficiary.
And the fishery off all of the government policies.
Let me attitude.
Thanks, Robin just said the so so the the assumption here is that when you think about tons driving the in the U.S. its a standalone car or assumptions here in China is with the so called the public sector. We can install for example, the two ex platform that would help for example of power or you know.
The traffic lights, you know in the future of perhaps parking lots and so forth, but I would hope you know consists of traffic better air pollution.
A more of try the safety at the same time leverage he got to be two ex infrastructure true for example have connected or integrate a car and go communication, so that way or the times driving will be dependent on the infrastructure the what hoping the.
Couple of sectors of Bill So I think that gives us the in advantage. So as we were trying to expand on small transportation market at the same time, that's the plus Russia for us to go or Tom the striving and would make the vehicle cheaper because of the ability to communicate between of old cars.
The James you go actually Oh, he has already mentioned a few points about of the positions or about the steel I.
On the adding them at a few more so first of all you know we have been doing this a that screening business on our platform for a while and reduce the the non rapid growth and in terms of both of the user interactions and the the revenue wise. So I'm concerned you know why why has like a two times more.
Commerce, then what we have now and you know on the user side, we have like the 100 times more than what why why has now. So this is the growth much you know it seems we have the demands from the users and then are well ahead of the strong man supply for the of performers I think is the very much the second lien.
Baidu as the platform you know short videos is becoming also a very important media and the users come to consume the short videos and largely so that Sun you know the performance. They can create some videos and then it just gives you our time zone to attract more sense of track more.
I use this for their kind of for the performers in the we have been doing this for the treatment of the business. We have conducted and it was the it is pretty effective and what's more you know the lack of screening is the especial on media and the latest media developed you know it.
Applies to manage the Navios. So we already kind of sold you know the users and the the lawyers they communicate through like a streaming of.
On our platform and horse day, the doctors and many other types of the professionals. So that spending is going to be a very important media. So by the was platform to happen the users and horse of how the professionals to access them together.
Clearly you know the operational experience and are so the.
Oh lets the new technology.
Yeah. So on the why why will significantly in the the up the and this experience and what's more you know when I talk to the of team. The my wife, and I didn't know the old pretty eager to get out of the traffic from Baidu. The this the in the mining respect from the users.
Because they have been working on this I think the stocking for traffic for a long while you know given what we have on the users. The we're pretty excited the the Meanwhile, you know the teams in Baidu. We're also excited to kind of the help from the west team because because of their excellent of personal experience on the nice thing on the performers.
So when you put all those things together I think the steel will be of where one in the we're looking forward to it.
Yes, So just let me of suffice the with both the in it and what we had in her remarks.
The I think several things to consider the number one is as we mentioned on the call earlier GAAP or this is all.
All cash of purchase so I think as you guys know we have of I do quite has a 20.4 billion U.S. almost on the books are true.
We'll be able to use the which we're not seeing the value of being reflected on the stock being able to buy of property. The it's generally a lot of kind of shifting that I would hope that gives us the end of the extra boost in cash the and then from a synergy perspective, as though a mention I think just being.
He able you know in this day and age he spent well into the to have a large of content a network of especially of content network of of creators. So so I do already we already have a lot of experience in terms of the publisher accounts by the whole and so forth that gives us now.
You know better management and he goes to expand or overall, a trader that with so I think that's a very powerful and if it becomes the synergies. When you think about all of the offerings that we have a baidu you know that the the news the that we have the short video now you have the Lightstream. So I think from the user perspective and also from Avatar.
The perspective of we can use of these properties to help them monetize better and as we also Robin said on on the on the call earlier that we hope to have you know the.
Growth like streaming beyond entertainment I think everyone sees lightering the as it is actually on the interest in inside but on Baidu platform, we have content across many many different verticals and what we hope is that the the knowledge that we can acquire the immediate growth live streaming to go across different verticals, because we think that.
Going forward or on content on the Internet a lot of the it's going to be rich media, so having the ability to the short video as well as having my streaming across different information knowledge that will be very critical.
And do the I think ultimately.
The as user behaviors are trained to watch like watching on our platform. He Dan can use of live streaming as a way for advertisers to be able to connect better with the our users and overall increased conversion. That's why we believe or early testing of the commission to social too.
Purchase the cycle is working on by the probably today, but of the constraints in that social part.
People to a watch like streaming and so forth. So we can now or in the future of useless flashing the as a tool for advertisers true to better reach and manage.
Managed the lifetime value of our country.
Great. Thanks, so much.
Okay.
Your next question comes from Gregory Zhao from Barclays. Please ask your question.
Oh, Hi management, congratulations on the Howdy.
Hi, Thanks for taking my question.
So first question is the very our fundamental question about the only a part of your product design kind of the algo give out of them and I think in my theoretically the old question for a new car into your feet per Doctor short of you do.
Based on the recommendation Alco crack of Patriot users increased kind of hobbies and I assume going forward Youre acquired the worldwide. The streaming services should also be found these kind of sort of.
Probably packs the concept.
The new pre versus how search service expression, maybe relying on users true proactively approach you before the surgery count [laughter].
Sure the here any difficulty hearing the past the several years, where the R&D when your R&D team a change of the mindset from the search engine product to the.
The recommendation of framework.
The second one of the for a creek or for the option of do you have on the visibility of the marketing revenue growth. He trying to attract you want some true.
Oh, that's the pick the the first one the Gregory so or use.
You see and search actually day or two different type of the products, but the were strong the connected of actually I mentioned before I mean, the type of course.
He users the or is for the situation as they come to Baidu.
Proactively with certain you know task I need their money.
So sort itself. It's just the single point for the whole decision June So we can't do much more to help of the users achieved what they want and well for nuisances. The users of being fed you know, possibly this launch of the hot for them to junk Sun pest of behaviors true.
I took the behaviors in terms of the the you the behaviors so.
It is relatively easier for such you know.
The engineers and the change their mind the to expand the there. So the is to cover more user need you know that's why you can see the news the gross like in the past few years like this actually probably Uh huh quickly on the other side in the other players the bulk of switch from used the two search lots of live the hotter actually.
I'm sure you know the Ah why why do I, so which brings the blood screening ecosystem and most of the technology.
Into Baidu he is significantly improve our capability to serve the use of better you know not only through fees, but also supersearch because as I mentioned earlier, you know because on the.
Last thing he is also becoming the probably the true to help you know hers to.
Satisfy the you just need of eating in the search the scenario.
Okay, so moving on to.
Much of the like one or two.
The.
Marketing revenue all the put 2021 I think the right now as you have seen a we've been achieving higher growth in things sequentially over the last two last two quarters and we see the into a fourth quarter, but I think it's fair to say that are you know the assuming that the you have a you know.
COVID-19 continued to be under control of that as we go into Q1 Q2 of which you see a pretty good Uh huh.
The first half of next year. So I think right now we don't have the.
Visibility what we do know is that when you look at the top or you know doesn't so industries that we have a lot of you know half of them have turned positive and we think that the is a more legs to go at the economy of recovery. So I think what work at a good point, where as all these industries the or.
You know the growing faster.
And some of those that going negative by 20 around where the good point true to the benefit from from that true, though so we'll see how the thing you know goes in the quarter and won't be able to give you up the ER.
The next call.
Okay. Thank you very much.
Your next question comes from Ken Hall from T.H. capital.
The question.
Hi, Thank you management of congratulations on the quarter I true questions why it should relate to chew up back to core search so easily look under the the type of course church received the management of page the revenue from that growth.
He really rapidly and yet on the stuff that you have 100% year on year basis. So what is the one thing I do the lives of corn of Iran. Even though I think that makes the great deal in China advertising market. However, the really pushing the additional interest from Oh on the line.
The two a up to the cloud the Oh I used the already past tense to the comp if he can the new thing. So many of the page it's in that I feel like the one in that direction. So I'd of longer in the future income Yeah. You know the under the Baidu core how much of will come from a managed the page and.
How much will kind of from traditional of search that he said you know how the company our planning he worked for other out all of the study of managed the page and yeah, I know I didn't I can't I like it a lot I feel like it's the one I suppose the solution for of for merchants of for the company.
The second question he should really true the why why are the left screening in China market. If he has already reached the peak.
Secondly in the why why ex the leisure has a lot to uniqueness. However, the growth lies is that it's not that kind of great. So I wonder how baidu, it's going to want me to be nice. This unique why why the make take much bigger than today's why white and some of what you're utilized the.
The the.
Synergy between the two so that's the two questions. Thank you.
Hi, Dan This is the I'll take the first one second one of the and doubling the and the head of <unk> and more uh-huh. So for the many pages.
It is part of the moving blogs that the the whole eco system. So.
In the very first beginning we hope the men's pages can improve the user experience by future of ouch, they fit in inflammation and the or other potential that experience for the users and later on we add more and more functions to manage the pages to help.
The customers to manage their users to do business with the users directly over the many pages and the later on none of the pages, it's becoming one important component of the whole.
Cloud service and to help the customers to do the you know the you know the food a cycle of the user life values.
So that's the one you know kid of working to improve the percentage of the many pages as high as possible in the up to 100%. The test this will those benefit of the users and of the customers and our.
A small business owners.
So for the White part for sure you know it isn't the tour of the.
Business, if we see the skill as of today, but actually we all think he you know the different ways and it wasn't a lot of spinning. It's just the new start for as the new media type and especially for Baidu. This like the 300 million users in Baidu.
Actually the the other day. So we are using non stimulant that's the very strong two or by the the such of two to help them to connect the users and of course. The is end of the precise the Morris I means of just the start so.
Also you know as we mentioned he knows the penetration of reach for the users of watching the upstream and by this platform is not high at all yet it's all from being in the same level of other platform. So that's why we think you know we kind of hung bridge.
Not a lot of users today from text and the Shelbyville users to the lasting users will.
With the list of the.
Still you know for the last thing.
Yeah, Let me just to reiterate conduct rationale the pipeline acquisition I think of many of you will have pointed the out correctly why why is a pioneer in like streaming but of the roughly half of a significant though.
Wow.
In the past couple of years of.
The <unk>, if you notice that the ER the larger mobile.
He took half warrants or a startup of life training mm mm feature of function. Much later than why why has the we're able to grow that business much larger that that basically demonstrated that a lot of skinny or at the standalone in 16.
Not going to have a lot of growth going forward, but as a part of a much larger ecosystem its feet. It just fits naturally and the can have a lot of the energy like a lot of Dol and I pointed out during the already got.
Conversation.
Yeah, and let me supplement a few points or just to clarify on hosted of our Manish page or what the talk about the.
When people buy a advertising for the managed page they still buy sort of traffic. The difference is that in the past they buy search traffic in directed to the old website, whereas the managed page of its own it don't have to maintain the website anymore. They can just move the content and services onto managed page to a host of marketing platform and he just log in with.
An account and Dan when you buy sort of traffic it wouldn't plan on that account. So therefore, we will see what the users do after the landing page and because of that because it's the plenty on our platform.
The leverage to help the of a merchant or be able to improve the ROI and do you know the lifetime value management the.
And the second thing about you know what the Robin talks about the lights from the I think one is the synergy that we have because we are a large platform would have you know and Mei yu of just by the way the pure going up and the yours.
Half of going in and the we haven't I mean, the other property I think that's one of the things that we have to look upon as you know the as you know seems on the core of out of your analyst day said the of why.
Why is something that has been existing for many years, but we think the all in three to five years, where do we think of media is going but if you think about over the last night. The 10 months of what could the Nike Zoom is one of the more popular of products that have just skyrocketed, that's really stream true. So all we're saying is that we think that having a.
Good or know, how and by streaming which I'm sure. It's in entertainment.
I do a you know have such a strong verticals in all different day, we think that the future is all going into the stream and then if we learn how to do rise from here or how to.
Manish creators of livestream, he and so forth and use the cost isn't of sort of course, and so forth are we think it's gonna floors and and make our us even.
EBIT stronger with in terms of the information and knowledge. So I think the the.
Short term is trying to get the upside from the synergy in the long term is to leverage the know how did the content management of the of the.
Network of providers, and so forth and true to have just the rich media across different verticals. Our platform. So I hope you guys. The understanding of our strategy is true go not just the livestream as is that of my wife or the potential of the we have like streaming across the platform of the different type of though for the.
The content.
Okay, that's great interest so much of the answers.
Your next question comes from Eleanor the only from C O S.
Ask your question.
Hi, Thank you very much of congratulation on the solid corridor and the thanks for the opportunities. The ask question Hi. My first question is that can you help me and give us an update regarding the because of freight progress after each of the advertising for it of course, which has been already we can't possibly young aircraft, which were.
He is still a lack of <unk>, yeah, and why do you think the progress going forward and the second is that when we integrate with why why is by my management style state or were going to change the management of the town team. Thank you.
[noise] [noise].
The so the question on Sun or the industry.
The ones that we see or the.
The wells are true from negative to a positive as we mentioned on the of the call earlier is.
Health care, it's ER education.
It's it's auto the software is a lifestyle. So those that the have done well and the ones that the you know we think that there has been potential did the could be potential port for doing well he.
He will be things in addition to the ones I mentioned the things like for example of you know real estate and a few of the and then we continue to see for example of E commerce and retail or the the two wells.
Okay.
Okay.
I met with the management team and the other a few other members of the wall by team. This is the one of the the glitches team I have the might actually so they have very good experience for the school.
Let's be mean population [noise].
They will stay intact the units to continue to operate this business in the Meanwhile, the wheel, adding more resources and including our team members into this new team to help them better exploited the opportunities within baidu and to integrate.
On the servicing to buy this platform. So I'm sure you know the team is great and the with the Oh the days.
Thank you.
Ladies and gentlemen that does conclude our conference for today. Thank you for participating you may all disconnect your lines.
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