Q4 2021 Baidu Inc Earnings Call

Hello, and thank you for standing by for Baidu as fourth quarter, and <unk> 21 earnings Conference call.

At this time all participants are in a listen only mode.

After managements prepared remarks, there will be a question and answer session.

Today's conference is being recorded if you have any objections you may disconnect at this time.

To turn the meeting over to your host for today's conference Jim is Baidu as director of investors relations.

Hello, everyone and welcome to Baidu <unk> fourth quarter and fiscal year 2021 earnings Conference call earnings release was distributed earlier today and you can find a copy on our website as well as on newswire services on the call today, we have Robin me, Oh, cofounder and CEO Joe Moore.

CFO the ocean, our EVP in charge of Baidu mobile ecosystem, and John Eudy, our SVP in charge offs by intelligent driving after our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S private security.

This litigation Reform Act of 1995.

Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations for detailed discussions of these risks and uncertainties. Please refer to our latest annual report and other documents filed with the ICC and Hong Kong exchange, but I do it does not.

Not undertake any obligation to update any forward looking statements.

Except as required under applicable law, our earnings press release and this call includes discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures and is available.

On our IR website at IR.

Baidu Dot Com as a reminder, this conference is being recorded in addition, a webcast of this conference call will be available on Baidu IR website.

I will now turn the call over to our CEO Robin.

Hello, everyone.

We delivered a solid result in 2020 one.

Revenue from Baidu core were up 21% year over year in 2021 driven by.

71% increase in non AD revenue.

<unk> accounted for 22% of Baidu core revenue upfront.

Up from 16% in 2020.

With me no.

Our cloud revenues consistently show outstanding growth throughout the year.

Our estimates outgrow the cloud market in China.

Furthermore, our polo goal scaled up its operations and delivered on key milestones to drive the long term commercialization, our autonomous ride hailing services.

Today I'll review, our operations by walking through our AI cloud intelligent driving door and mobile ecosystem in 2020 , one and after that I'll discuss our priorities in 2022.

Yeah.

Starting with AI cloud, we achieved strong revenue growth in 2021, the gross rate of Baidu AI cloud has accelerated from 2020, all and we believe it has been meaningfully higher than its peers.

We made great strides in several industries, notably transportation manufacturing public service sector.

Energy and utilities.

Total revenue was from this industry more than doubled in the year driving our cloud bookings growth.

I'll share with you some of our latest development.

All verticals.

In the energy and utility sector.

Fifth grade has being utilized in the RFP I called 2020 to perform early detection of malfunctioning equipment and estimate utility demand to ensure a consistent electricity supply.

Right now we have covered almost 90%.

Its branches nationwide.

And in the manufacturing industry Baidu AI cloud.

And it <unk>, a major manufacturing hub in China, enabling automated workflow processes and helping to improve operation efficiency.

In <unk>, we certainly young new area, which host thousands of enterprises, including some automakers and electronic companies.

More broadly we observed an increasing adoption in.

In China.

According to IDC pedal pedal Baidu open source deep learning platform continues to gain market share our internal data show that by the end of last year pedal pedal developer community has grown to $4 1 million and served 150.

7000 businesses.

And the same timeframe developers have created for.

76000 models.

Thanks to all of the platform.

Meanwhile, in AC <unk> Smart transportation, we continue to expand our footprint geographically.

By year end of last year.

Baidu AC has been adopted by 35 cities.

Up from <unk> 14, a year ago based on contract.

Over RMB 10 million.

94% of that is.

That have purchased our solutions in 2020 expanded VR collaboration with us in 2021.

Revenues from smart transportation have been growing rapidly and more than doubled in 2021 versus the prior year.

Next intelligent driving.

<unk> continued to take big steps toward scalable operation.

Eponymous ride hailing services.

We believe that large scale operations allows us to identify the problems that are not visible during testing stage and also push the level four autonomous driving technology advancement.

In the fourth quarter last year, our polo go at that.

Our Pogo provided 213000 wise and once again almost doubled its rise quarter over quarter.

Reaffirming our leadership position in the global autonomous ride hailing market.

Apollo is now available.

Eight cities.

Beijing, Shanghai, Guangzhou, Shenzhen, Chongqing, Tangshan, Hangzhou and Yung Kim.

Meanwhile, we have begun to charge fees for the autonomous ride hailing service.

November 25th 2021 in Beijing, and February 18th 2022 in Chongqing and February 'twenty, seven 2022 in Ghansham.

Baidu has been working hard to improve the safety performance and maximize the efficiency of autonomous driving.

<unk>, our <unk> smart transportation solution autonomy.

<unk> maps and cloud services.

Our <unk> project is a case in point.

About one year ago, we viewed <unk> smart transportation and introduced Apollo go and eat RNG region operating.

Currently almost 100 vehicles are providing autonomous ride hailing services in drunk.

Daily basis, and we have started charging passengers.

At the same time, our Acu Smart transportation solution has expanded its coverage almost tenfold in terms of intersections in the.

Area over the past year, providing.

Providing extra support for Apollo gold.

We believe that the Beijing project serves as a showcase for other cities to follow and replicate.

As intelligent and connected vehicles are taking the center stage of autos felt baidu autonomous driving solutions have one increasing acceptance.

Automakers.

We believe that we will gain further traction as more automakers recognize that partnering baidu is better than investing extensively in developing their in house solution.

Recently, we received a nomination letter from BYD, one of China's largest automotive and technology companies intending to adopt.

In particular.

And EVP for multiple popular models.

Enduro S shall do again was ranked number one in smart display globally and number one in smart speaker in China based on the first nine months shipment data last year According to strategy.

Analytics panelists and IDC.

So I'll do revenues continue to.

Grow rapidly at the same time, we are pleased to note that our services revenue already surpassed 10% of total revenue last year.

Finally in mobile ecosystem.

Solid user growth demonstrated continuous expansion of our mobile ecosystem aimed.

In December Baidu, <unk> Mou accelerated year over year.

Growth rate to 14%, reaching $622 million.

Daily locked in users on Baidu app already surpassed 80%.

Users are not only coming to baidu to search information, but increasingly to enjoy diversified formats of content and closed loop services accessible using baidu app.

Through <unk>, our building block users now can enjoy a full service cycle from information search to fact checking to interaction with industry participants and to purchasing products and services without leaving Baidu app.

In services, our instant replies to search queries cover over 40000 industry participants from 19 vertical in the fourth quarter.

Total daily instant reply increased about 60% from December two.

From September to December .

In particular daily Telehealth consultations on Baidu health grow 221.

<unk> million dollars in the fourth quarter 2021.

About 60%, 62% last year.

Monthly orders for local services, such as well being services and home repair services.

Using baidu app multiplied five fold year over year in December .

E Commerce <unk> facilitated by Baidu low still small grew about five fold in the fourth quarter compared to the first quarter.

Last year.

Furthermore, in 2021, we further diversified the format of video content offerings within Baidu App.

In 2021, we introduced a fully immersive video experience that combines horizontal and vertical short video.

Entities flow.

And other enhancements have significantly improved short video viewership and driven up as conversion moving Baidu app.

In monetization managed page continue to make progress.

Revenue from managed page growth by 52% in 2021.

And reached to 40% of Baidu core advertising.

Well, if I do core AD revenues increased by 12% in 2021 macro weakness and COVID-19, with surgeons have impacted the industry in late 2021.

In the fourth quarter, our AD revenue declined by 2% quarter on quarter with year over year growth slowing down two 1%.

Going into 2022.

I know you've determined to promote technology.

Innovation and upgrade the traditional industry.

Such strategic goals were promoted during China's fourteens five year plan and re emphasized by the general office of State Council.

Early January of this year.

In addition, the Beijing Municipal government recently released its 2021 works report.

Emphasizing the target to accelerate the construction of a holistic transportation system containing intelligent vehicles.

Our transportation cloud and map as well as leading that.

Government of high level of autonomous driving nationally in 2022.

Navigating this favorable operating environment.

Baidu will continue to leverage our world class AI capabilities to grow our non at.

Which is a clear growth engine for our overall revenue.

For the coming year, we have set the floor.

The following operational priorities.

For AI cloud, we aim to sustain above industry level revenue growth, we will continue to bring our innovation.

Two wherewith traditional industry and the public service sector.

Enabling our customers to improve efficiency and boost productivity.

We believe we will be able to make further breakthroughs in more vertical.

For intelligent driving we will further scale up the Apollo go operation to provide ripe to more passengers. We are steadily work towards the goal of removing the safety driver and providing fully autonomous ride hailing services in China.

We will continue to expand our partnership with more automakers in ASD in particular, A&P and AVP to enable them to be better positioned in the evolving.

Though industry.

As a result, we expect to further drive up our pipeline.

<unk> plans to take orders in the second half of 2022.

After launching its first concept production car in Beijing Auto show April of this year.

And aim to deliver mass production in 2023.

For us at all we will seek quality revenue growth and margin improvement shall do we have already completed two rounds of financing.

And for mobile ecosystem, we will continue to leverage AI to improve the user experience in search and feed and further build close loop services.

In Baidu app to fulfill user needs.

In addition, we focused on healthy and sustainable business model in order to consistently generate strong cash flow to power our investment in new AI businesses.

With that let me turn the call over to long to go through our financial highlights.

Robin.

Now, let me walk you through the details of our fourth quarter and the full year 2000 Q1 financial results.

With close to <unk> 21, with solid financial results.

Baidu cost Cobra revenue was RMB 26 billion.

Crazy truck per se.

In 2021, Baidu core generated RMB.

95%.

U S dollar 15, one five per day.

Revenue up 21%.

Now business gross water plus.

Age, 26% of Baidu core revenues in the fourth quarter rose 18%.

A year ago.

Demonstrating how our previous investments in AI.

A new growth engine for Baidu no.

For the mid and long term.

Got it.

For the full year 2021 now.

Business accounting for 22% of Baidu core revenues up from 16% one six in 2020.

Whereas in the AD business Baidu AI cloud is a clear revenue growth driver.

Revenues from Baidu AI call increased by 16% six still year over year to RMB five 2 billion in Q4 and was up by 60% year over.

Year to RMB 15, 1 billion 2021 now.

US accounting for more than half of Baidu AI cloud revenues, our Aspen is benefiting from our multi cross gestures.

By many of our customers.

Our non us business.

Property from Baidu, AI capabilities and upgrades of China's traditional industries.

Robin mentioned earlier.

Make great strides in several industries total revenues growing transportation manufacturing the public space and energy.

Energy and utilities industries more than doubled in the year.

Looking ahead, we are interest expense, we're enters a pen above industry revenue growth for Baidu AI cloud.

Excluding baidu AI call Baidu core no opinions and cross intelligent driving.

Our growth initiatives.

Intelligent driving mainly composed of revenue.

Including HD maps.

Automated valet parking AVP autonomous navigation Pilar A&P.

Our Alzheimers rocked hailing fleet.

So I'll do is an important component other gross new shapes.

We'll continue to achieve solid revenue growth.

Revenue grew by 12% year over year 2021.

So for US revenue was up 1% year over year, yet decreased by 2% quarter over quarter due to softness in the macro.

Environment, and our COVID-19, great service.

Our opportunities was impacted by significant headwinds in sectors such as application.

Franchising healthcare and travel and we remain challenged in the near term.

With that say are tightening business should remain relatively resilient and should recover once the macro environment starts to improve.

In addition, what you.

Is that revenue diversification to continue with no options exhibiting strong growth.

Revenue was RMB seven 4 billion in Q4, decreasing 1% year over year.

<unk> revenue was RMB slip key six pillar in 2021.

Increasing 3% year over year.

Cost of revenue.

<unk> 3 billion in Q4 up 19% one that year over year.

Primarily due to an increase in truck acquisition causes bandwidth causes cost of Corso other causes related to the new AI businesses.

Cost of revenue was RMB $64 3 billion in 2021.

Increasing 17% one seven year over year, primarily due to an increase in common causes Chuck acquisition causes bandwidth coffee cost of goods sold other causes relates to the new AI business.

Operating expenses was RMB 13, 8 billion in Q4 up 29% year over year, which was primarily due to an increase in channel spending promotional marketing and personnel related expenses.

<unk> expenses were RMB 49, 7 billion in 2021 up 32% year over year, which was primarily due to an increase in channel spending promotional marketing and personnel.

<unk> expenses now.

non-GAAP operating income was RMB four 3 billion in Q4 and non-GAAP operating margin was looking for San Juan Street non-GAAP Baidu core operating income was RMB four 8 billion and operating margin was 19% one nine.

non-GAAP operating income was RMB 19 billion in 2021, non-GAAP Baidu core operating income was RMB two 2 billion.

And non-GAAP Baidu core operating margin was 23% in 'twenty one.

Our adjusted EBITDA was RMB five 8 billion adjusted EBITDA margin was 17% in Q4.

Adjusted EBITDA for Baidu core was RMB, six 2 billion or U S dollar $974 million adjusted EBITDA margin for Baidu core was 24%.

Adjusted EBITDA was RMB, two 4 billion or U S dollar <unk> 1 billion.

Our margin was 22020, while adjusted EBITDA for Baidu core was RMB $27 7 billion or U S dollar through co op plan.

The EBITDA margin for Baidu core was 29%.

In 2021, when continuously invest in new AI businesses.

Including AI call intelligent driving.

While our non-GAAP operating margin for Baidu core decrease from 2020, our investment result in the rapid growth of revenue.

Overall, where you start.

To continue generating cash flow to support the rapid growth of our <unk>.

AI business.

For Baidu AI call, we're trying to return rapid revenue growth for 2020 for 2022 and beyond.

Cash and short term investments for Baidu call Us. After December 31st 2021 were RMB $186 5 billion, our solid 2000.

Two 7 billion.

Free cash flow for Baidu, excluding IC was RMB 15, 4 billion are you a solid floor.

In 2021.

Baidu call approximately 39000.

600 policies.

As of December 31, 2021.

A few words on unlocking value.

Although new businesses a number of our younger businesses are seeing the size of the development in 2021 wave completed raising pushout or <unk> equivalent.

In late January 2022, T to close if there is a financing and raise nearly USD $400 million.

Update on our share repurchase program.

Return U S dollars $650 million to shareholders in Q4, bringing the cumulative repurchase up approximate to the U S. Dollar $1 2 billion in 2021.

As of year end 2021 will have return approximately USD 2 billion to shareholders under our 2020 share repurchase program.

Which authorized a total of USD five.

Taking into account the practice of other U S listed company.

Hong Kong Exchange the company has decided not to provide guidance on our company's revenues going forward.

Operator with that let's now open the call for questions.

Thank you ladies and gentlemen, we will now begin the question and answer session.

If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press the pound husky.

Vince are requested to restrict to one question each time.

Our first question comes from Nishu.

<unk> from Citigroup. Please ask your question.

Hi, Thank you good evening management, Thanks for taking my questions and also congrats on solid results.

I wanted to us.

Robbins on these questions I guess.

Management has been talking about different business transitions in 2019 and seems that Baidu is steel.

<unk> a transition period.

Would you assess your achievement and progress during this transition period.

And remember if I recall I think management mentioned, a few times in the past the tailwind of China's transformations in the tradition the industry. So I wonder as we.

We enter into 2022, how would you quantify some of these opportunities. Thank you.

Thank you Alicia.

You can see we close to 2021 with now.

Since accounting for 26% of Baidu core.

In Q4 last year and a year ago.

18%.

Our new business have been growing at a pace faster than industry average.

2021 was a year with many challenges and opportunities.

Despite the uncertainties caused by macro.

Geopolitical tensions and other factors there is one thing for sure that is the world is moving towards AI.

As I mentioned in my prepared remarks, Baidu has brock AI to wherewith traditional industries and.

The public service sector too.

Helps them improve efficiency and strengthen their competitiveness.

Our enterprise customers increasingly recognize the value.

We can add to that happens and we have.

Made breakthroughs in illustrates like transportation manufacturing.

Energy and utilities.

As more automakers recognize the importance of AI.

They have indicated to us that.

They wanted to use the ASD and two are less for auto for more and more popular models.

That accounts for potentially billions in sales and we expect that trend to continue this year.

But what is more important is our autonomous driving technology and.

Robo taxi service.

Our political has scaled up.

Operation significantly.

You happen to be in any of the cities. We just mentioned during the prepared remark.

Youre welcome to try out our survey via Baidu, App or Apollo go App.

It sounds like.

Experienced and attentive driver, but.

In fact, it's powered by AI.

We believe providing more arrived to passengers on the open road will help.

Further improve our level four autonomous driving technology.

Further improve the safety performance and.

User experience.

And therefore further solidify our leadership position.

And.

Going into 2022 ensured the backdrop.

Policy tailwind.

We will continue to expand our AI cloud and make further breakthroughs in intelligent driving.

At the same time, we will.

We focus on healthy and sustainable development for.

The mobile ecosystem.

And AI generated content could be a big differentiator for us in the years to come.

So overall I think AI its contribution to our growth will.

We will become more apparent in 2022.

Alright. Thank you. Our next question comes from Piyush <unk> from Goldman Sachs. Please ask your question.

Thank you for taking my questions Robin remove Trump.

Gratulation on another solid quarter could you share your thoughts on the business outlook for 2022 and Gen growth.

In Q1 in particular also how should we be thinking of margins for the business. In 2022. My second question is on your cloud business, which has grown very nicely outgrowing the pace of the industry.

What are the drivers that you see for this business for the rest of the calendar year and also if you could comment on the margin outlook with the cloud business, because thinking about gross margin and operating margin. Thank.

Thank you very much.

Thank you so much Chris.

I think that's where quick question when we're doing two rfps in last year and looking forward.

In the year 2021, the revenue from Baidu call were increased by 21% to RMB 19, 5 billion, particularly driven by led by the AD cloud.

By the Air Cloud grew by 64% to RMB 15, 1 billion last year and contributed to over 70% of AD revenues.

As we mentioned in the prepared remarks, Eric call based breakthrough in several important verticals as Robin just mentioned.

Revenues coming from transportation.

Factory and <unk>.

Activities and the purpose of sectors is more than double last year.

And customers realize that by being equipped with our air capabilities that are stronger I think that's part of the reason why we have seen repeated purchase coming from our state customers last year.

And deepen the penetration in various industries I think in particular, one thing we need to draw attention is our Acs muscles for patients.

Which start from scratch only few years ago and it has been.

Maintained strong growth momentum ever since.

In year two.

2021, Acs patients revenue achieved triple digit revenue growth.

Our breakthroughs in this rich coast half hour.

Our confidence to maintain a solid growth momentum for Ed Kroll and were above industry level growth in 2022.

One thing I would like to remind you is actually our revenues fluctuate quarter over quarter and we would suggest you focus on annual revenue growth, which makes more sense.

And the margin wise.

I have to say that as Baidu AI cloud input costs, the personal cloud services enterprise and public sector cloud services.

Revenue from personal cloud services contributed to a small portion.

Has been growing more slowly than overall revenues.

Enjoys a relatively healthy margins.

Revenue coming from enterprise and the public sector.

<unk> Transportation's has been consistently outgrowing the overall cloud business.

From a long term perspective, we believe that.

Our solutions become more mature and more standardize our margins will improve.

Baidu core revenue grew by 12% in 2021, and the margins that we need to know that.

That industry has been facing challenges in the near term due to the macro environment and the risk.

Such as COVID-19.

See baidu core revenue growth slowdown in Q1 from Q4 2021 .

Having said that if the Carbonite insurance don't get worse post Q1.

The first quarter show Macula Broughton.

Absolutely.

Overall, we believe that our advertising business recover once the macro environment to improve.

I think going forward, we will maintain a disciplined approach to balanced investments and returns to ensure Harrison development at business managing healthy growth as always output.

Our priorities were.

Zealand now at.

AI cloud business.

I'll do it so important component in 2021, starting with revenue growth by where and we're talking to sustained solid revenue growth momentum in 2022 within them.

No not copying us.

Titan driving was also.

Achieving some breakthroughs as Robin mentioned <unk> baidu as a partner to provide a pull us up Jordan solutions with partnership covered by these multiple hot models across several years.

That is one of the example of the promising development for <unk> and Baidu.

While the revenue all such punishes there will be recognized over the few years alongside.

The shipment of each model, we're encouraged about the progress made in a relatively optimistic about <unk> future outlook.

In summary, I think we will continue to invest.

AI enabled business, especially in that you've had in driving a clock.

Which has been developing rapidly and we believe that.

All of this will generate a huge growth potential over the long term.

Thank you Chris.

Thank you. Our next question comes from Alex Yao from Jpmorgan. Please ask your question.

Thank you management for taking my question and congratulations.

Apollo achieving another record breaking.

For the quarter.

My question is a follow upon achieved large scale autonomous feeding accretions in Chinese cities.

Even extremely complicated road conditions.

And also what are your strategies polo go to accelerate.

<unk> and the technology roadmap. Thank.

Thank you.

I'll have changed to answer your question Okay.

Okay.

Thanks.

Adobe mentioned in 2021 we forget what op local operation.

It hit by all honeymoon what advantage.

Autonomous technology team.

Today, we believe that we're already the largest autonomous ride hailing service provider in the world.

I witnessed the buyers the number of Orion how do we how completed.

Based on our experience.

Forget about public obligations.

Contender at a larger number.

Lung data.

With better quality and better match with actual reorder demand.

Which is different from small scale passenger Gary.

By combining paper with our stimulation system.

We offer.

Flattened will in fact, thank you Jeff.

Establishing technology integration.

Hence improving safety performance.

And the consumer experience.

And lowering cost.

I think you mentioned.

Complicated road conditions in China.

Our total alcohol Matilda chatting.

On the provider autonomous eradicating services.

I think.

115 per feature is our business is all Hollis.

Approach.

Which plans against our AP commodity transportation solution.

Carmax vehicles.

Matt.

On the cloud services.

To improve the safety performance.

China complicated Rubin roadway.

Our equal Beijing protect if a case in point.

Each one.

The economic technology development IRA <unk>.

Typical Chinese urban growth.

No.

Our portal began autonomous driving testing E com.

In 2018.

So for 2020.

Okay.

Collaborated with basic comment to construct a high lower autonomous driving and Tom institutions.

Within four years.

Local has grown from our forecasting tour.

Offering larger scale operations.

And Karim passengers in each one.

Lots of them in November .

We are starting up two collapses.

Nowadays.

Most of the 100 vehicles are providing autonomous ride hailing services.

On a daily basis.

Orange.

<unk> auto may provide hitting recall had provided about plenty derived daily.

No.

Wow.

At the same time.

Our AP is the modest transportation solution has expanded its coverage almost tenfold.

From covering certain sections to 300.

What is even more exciting.

Does that Apollo ethanol conducting fully autonomous driving testing with.

With no one has the cover page.

You're right.

Exactly busier.

We are working steadily towards growth.

<unk> was 50 drivers.

And providing fully autonomous.

The ride hailing service.

In the near future.

Yes.

We believe that.

We have a number of 50 drivers will allow us to significantly reduce our costs.

And the expenses.

And it will help the business to generate profit in the future.

Lastly, I want to highlight that.

Our autonomous <unk> business is on navigating a favorable operating environment.

The Beijing government has announced plans to expanded archon, what's the drilling region to a lack of ore in 2022.

Several large cities.

Right.

Joe.

And the Shanghai has proactively adopted our Acs the market transportation solutions.

And the facility Capex obligation for Apollo autonomous eradicating.

We believe that in the short future.

<unk> will follow a gauntlet towards embrace our solution using our holistic approach to system.

We also recently expanded the commercial.

Operation.

In Beijing, Chongqing and Amgen.

We believe that we will continue benefit from China ambition.

Published autonomous drilling.

National product.

The home grown technology.

Okay.

Alright. Thank you. Our next question comes from Gary You from Morgan Stanley .

Jim.

Hi, Good evening management and thank you for the opportunity congratulations on the strong progress you've made on AI.

And intelligent driving.

Most of the questions around these areas have been asked.

<unk>.

My question is more related to your <unk>.

Marketing and advertising business.

I think you mentioned earlier that we think first quarter will see slower growth.

But <unk> so.

How should we look at the impact on your.

Advertising and marketing revenue from macro for profit from regulations set when do you think about potentially slower growth in the first quarter that we cover afterwards.

How bad the first quarter B, how should we look at recovery trend for the remaining of the year.

I think my second question also related to satisfy our longer term so as other policy.

<unk> that I think baidu as basic as with more open ecosystem.

<unk>.

Potential opportunity.

Platform being more kind of.

Operational.

So video search or e-commerce .

What kind of progress have we made so far and how should we look at the long tail to the fees that thank you.

Hi, Gary.

Thanks for your question this is adult.

So for your first question.

Our ad business.

He is highly correlated with the macro developments.

So actually as the Judas has already mentioned.

Macro economy, and the COVID-19.

Impacting the whole industry and clearly our business as well in the Q4.

This challenges or likely to continue in Q1.

So the factors that underperformed in Q4, such as education.

Real estate, franchising and travel or likely to be soft as.

As well.

In Q1.

But in the Meanwhile, we are cautiously optimistic about the mitral developments, because we already see many macro.

Economic regulations or being put into places and likely to have positive influence on the.

Economy.

So we already witnessed some early signs that the.

Recovery and good momentum momentum for us in industries like healthcare.

So we believe once the micro environments.

<unk> to improve in our AD business starts to normalize and along the way.

Economic recovery in our <unk>.

One could be the trough for our business.

In this year.

So in the long run our strategy to build a stronger user base.

Commercialization of capabilities and is also making our AD business and mobile ecosystem Mora.

Zealand's than before.

First as Robin already mentioned right. So we made a straight to enrich both the content and the closed loop services within Baidu App.

Our <unk> Smart mini program.

Managed pages by Jojo.

The building blocks, we have talked about a lot before.

So in <unk> the user experience for both the content and the service consumption and also the commercial conversion both op and non op.

So we are being enhanced.

Accordingly.

Our mobile ecosystem.

Then from the mid to long term perspective, and it will become a platform.

Our users.

Hi, one stop satisfaction for majority of their needs.

So with that note.

As the pace and we believe the monetization approaches such as live streaming rewards the commission subscription membership in the sector.

We will grow.

Theory.

So therefore, well we are still investing in the many initiatives in our mobile.

System now we believe our capability will continue to.

And make our margin a healthy and sustainable.

Moving forward.

For your second question about the inter a proposal.

We feel this is very very important for the whole internet and will lead to a fundamental open ecosystem, which which will benefiting in every single user.

Of your Internet.

As we all know search by an interest in.

<unk> has been making efforts to strengthen the open nature of our mobile ecosystem.

So we haven't made a.

Minimal progress and believe there are many more to come.

Let me show you a few examples.

Content wise.

In addition to figure how we have leveraged the HQ edge five and the smart mini program to make our users' able to access a vast amounts of content from China's top.

Well as belonged to apps covering long form video platforms.

From video platforms like <unk>.

And the lifestyle platforms like <unk>, <unk> <unk> and <unk>.

A lot.

Much more long tail comic book apps with the native App experience.

And as you just mentioned for the shopping site.

As we mentioned earlier, we have made more than 1 billion as close.

Our major partner platforms available for our users.

And for services again with the smart mini programs.

We now can fulfill a variety to view their requests spanning over.

Almost 300 service categories.

Top platforms, such as made one website.

And in many vertical platforms like to Maya wildly low service.

Last but not list, we open source, our smart mini program framework in the very beginning to empower our partners.

So that the smart mini programs can actually run seamlessly.

At <unk>.

Recently, the leading smartphone makers, such as Grupo vivo Xiaomi.

Have adopted Baidu Smart mini program framework in their in house products.

Which resulted in more than 20 million more daily active users for our smart mini programs and we already see this has been encouraging more and more developers to embrace the ecosystem.

So we believe that inter operability.

<unk> bring more market opportunities for not only baidu, but also for the entire industry.

So we will continue to closely monitor the dynamics.

Our parse too.

Make move them faster.

Thank you Gary.

Thank you. Our next question comes from Eddie Leung from Bank of America Merrill Lynch. Please ask your question.

Good evening most of my questions have been Gnostic just curious on your use of cash including investment plan as far as.

And the.

Potentially increasing your buyback program as for investment that we noticed that some of major peers talking about a more disciplined going forward in terms of investment so I'm wondering.

You will have a similar strategy coming to <unk> 2002. Thank you.

Thanks for question.

I think in terms of our corporate strategy I would like to emphasize that the most important investment always investing ourselves if youre into rfps today, our growth is clearly driven by AD business, which is already 26% of the total revenue.

And now add mainly composed of.

Claw intelligent driving software AI.

Related growth initiatives. All of these are kind of new wins for us which requires more investment.

I think these represent different stage of growth and they are very important.

In Peru for a long term revenue growth.

Our investments are pretty much packed with gross of course.

Gross potential.

We will continue to invest dedicated AI.

A assess and particularly intelligent driving call to lay a solid foundation for our future growth.

Meanwhile, we will remain open but also work, particularly in <unk>.

<unk> business.

May complement our new business initiatives.

In terms of capital allocation.

Yes, some of our new business have completed Fundraisings.

And which have created.

Capital cost they are future developments.

As such a regimen, which better aligns our manager and price increase I think going forward, we're maintaining an open attitude.

And we are open to bring in more diverse investors, including our structure investors to Harrison the companies to grow.

In addition.

You mentioned the share repurchase program I think we believe that.

Our AI business has been undervalued by the market.

<unk> not place sufficient values on our intelligent driving businesses.

That's the reason why were key.

Of a shares.

As of the end of 'twenty to 'twenty, one we'll have to return approximate to the U S. Dollar to pardon my plan to the shareholders under 2020 share repurchase program.

<unk> plus the convention that we have and the direction of our business. Thank you for your question.

Thank you next question comes from Jerry Liu from UBS. Please ask your question.

Hi, Thank you management, yes, one of them co pack.

Apollo topic.

Maybe just from a different perspective.

On this call you guys mentioned.

Some more wins with <unk>.

Although makers, especially the new <unk>.

Ship agreement with BYD. So I just wanted to ask what are some of the operating metrics that you can provide to help us quantify how big can this opportunity can this business be.

How will these partnerships.

Benefits the avs business going forward, how will it benefit overall revenues. Thank you.

Hi, Jerry this is robin.

In connected vehicles that are becoming the new attraction for auto sales.

Many automakers have come to realize that adopting baidu solution is better than investing.

In their in House solutions.

Lots of automaker has chosen to partner with us.

Art.

In vehicle informing taming system to our auto has been on market for quite a few years.

But our ASP.

<unk>.

Namely, both A&P and EVP.

Being gaining traction.

Action.

Over the past year also.

<unk> seen strong acceptance from the automakers.

You mentioned BYD is a very good example.

One of the large ASC EV automaker in China, It probably accounts for close to 20% of China New.

New EV market last year.

And they are Dallas volume.

Row four.

For new EV.

Grow by over 200% last year.

They have selected us to be a partner to supply the autonomous driving solutions, especially A&P and EVP for.

Multiple popular EV models across <unk>.

Multiple years.

With the increasing adoption of <unk>.

Smart EV in China, we believe.

Strong <unk> driving capability put us in.

Very strong position to win more business.

As the.

At the end of last year.

According to our internal estimates.

Total projected the accumulated sales.

ESPN do are left for auto.

From new wins should be about RMB.

8 billion.

And Thats unrealized revenue.

Hunt.

Following.

Very fast over the past two to three years, especially.

The contribution from Ft ethylene being.

Very strong.

Yes.

I tried to make it clear about our numbers were.

<unk> seen a very promising numbers of our latest status of <unk>.

During the past few years that grow the growth is quite promising above this number which includes the contract side and a nomination letters from customers I think the auto industries a nomination lesser means.

Our supplier is successfully accepted by OEM, while certain projects following the elimination of <unk> OEM typically with our contracts with our suppliers. Our estimates made based on the <unk>.

Our assumption of the timing of new models, and the pricing and the total sales volume caught into a discussion with our customers and some projections also coming from the professional societies.

These projects usually last for three to five years during which time, we will recognize the revenue based on the actual installations I hope. This can give you a better understanding of our ASD business. Thank you.

Sure.

Thank you next question comes from James Lee from Mizuho. Please ask your question.

Great. Thanks for taking my questions a couple of follow up questions autonomous driving I recently read.

Recently published book on Smart Transportation and disposal, specifically you guys elaborated.

A number of detailed about the industry landscape, including the two X traffic management.

Martin.

And autonomous driving and just looking at the various yields that you mentioned the book here, what does Baidu mid term.

Our strategy and long term.

Element golf.

Hi.

Let me start this.

<unk> book.

The application of AI technology has given them new ideas and new solution to.

Digital transformation many industries.

I think transportation and auto is probably the best example.

In this book I demonstrate how AI is going to reshape.

This industry and create enormous value for all of the stakeholders.

The Ics or intelligent transportation system has two building blocks, one is the intelligent and connected vehicles.

Sure.

The Dow side infrastructure.

This to work well independently.

It's much more effectively together.

The system deeply integrate.

Wide range of technologies, including AI <unk>.

Cloud computing into the transportation and auto industry.

It is dedicated.

Dedicated.

Solving three major issues.

First to minimize.

Joe safety accident.

94% of the adult accident caused by human error in driving.

And at home driving well be much safer.

Second.

Domestically reduced congestion.

Based on our experience at certain Chinese cities.

V to X or vehicle to road infrastructure.

Helped reduce traffic congestion during peak hours.

A 20% to 30%.

Thirdly reduce the carbon emission.

Transportation accounts for over 80% of the carbon emissions from transportation sector.

Therefore, improving the efficiency of transportation system is critical.

For sustainability.

AIA is reshaping the porting and mobility industry.

Creating trillion dollar industry opportunities.

In China.

More than 300000 gold.

Intersection.

In urban roads, and about 150000 kilometers off highways.

And tens of millions of parking lots.

There has been all in the process of upgrading with AI technology.

Not to mention the ride.

Right hailing and.

Our smart EV market opportunity.

As I mentioned in the prepared remarks, Baidu has made significant progress in intelligent driving.

So in the medium and long term, we aim to expand the <unk> radar Apollo goal.

265 cities in 2025, and 100 cities in 2030.

And expand our smart transportation into more cities and deepen our penetration in.

In each city.

From a more macro point of view it is a.

Microcosm of future digital city operation.

Think that.

Digital CD operating mode.

Assisted by AI technology.

<unk> solution.

Through AI new infrastructure.

Confident to further.

Tribute innovative solutions to the digital transformation of <unk>.

Industry and city.

Yeah.

Thank you.

Alright. Thank you we have reached the end of the question and answer session and with that ladies and gentlemen, we conclude the conference for today. Thank you for participating you may all disconnect.

Okay.

Okay.

[music].

Okay.

[music].

[music].

Hello, and thank you for standing by for Baidu as fourth quarter, and <unk> 21 earnings Conference call.

At this time all participants are in a listen only mode.

After managements prepared remarks, there will be a question and answer session.

Today's conference is being recorded if you have any objections you may disconnect at this time.

Like to turn the meeting over to your host for today's conference John The Baidu as director of investors relations.

Hello, everyone and welcome to Baidu fourth quarter and fiscal year 2021 earnings conference call, but I do see the earnings release was distributed earlier today and you can find a copy on our website as well as on newswire services on the call today, we have Robin me, Oh, cofounder and CEO galore.

Our CFO <unk>.

<unk>, our EVP in charge of Baidu mobile ecosystem and the Kennedy our SVP in charge of Baidu intelligent driving.

After our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.

Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations for detailed discussions of these risks and uncertainties. Please refer to our latest annual report and other documents filed with the ICC in Hong Kong exchange, but I do it does not.

Not undertake any obligation to update any forward looking statement expect except as required under applicable law. Our earnings press release and this call include discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to.

The unaudited most directly comparable GAAP measures and is available on our IR website at IR Baidu Dot Com as a reminder, this conference is being recorded in addition, a webcast of this conference call will be available on Baidu IR website.

I will now turn the call over to our CEO Robin.

Hello, everyone.

We delivered a solid result in 2020 one.

Revenue from Baidu core were up 21% year over year in 2021, driven by <unk>.

71% increase in AD revenue.

<unk> accounted for 22% of Baidu core revenue upfront.

Up from 16% in 2020.

With me.

Our cloud revenues consistently show outstanding growth throughout the year.

Our estimates outgrow the cloud market in China.

Furthermore, Apollo goal scaled up its operations and delivered on key milestones to drive the long term commercialization, our autonomous drive hailing services.

Today I'll review, our operations by walking through our AI cloud intelligent driving duer OS and mobile ecosystem in 'twenty to 'twenty, one and after that I'll discuss our priorities in 2022.

Yeah.

Starting with AI cloud, we achieved strong revenue growth in 2021, the growth rate of Baidu AI cloud has accelerated from 2020, all and we believe it has been meaningfully higher than its peers.

We made great strides in several industries, notably transportation manufacturing public service sector and.

Energy and utilities.

Total revenue was from this industry more than doubled in the year driving our cloud business growth.

I will share with you on some of our latest developments.

All verticals.

In the energy and utility sector.

<unk> grade has been utilizing RPI called 2022 warm early detection of malfunctioning equipment and estimate the utility demand to ensure a consistent electricity supply.

Right now we have covered almost 90%.

Its branches nationwide.

In the manufacturing industry Baidu AI cloud.

And it <unk>, a major manufacturing hub in China, enabling automated workflow processes and helping to improve operation efficiency.

In <unk>, we serve new area, which host thousands of enterprises, including some top automakers and electronic companies.

More broadly we observed an increasing adoption in.

In China.

According to IDC pedal pedal Baidu open source deep learning platform continues to gain market share our internal data show that by the end of last year pedal pedal developer community has grown to $4 1 million and served 150 <unk>.

<unk> thousand businesses.

And in the same timeframe developers have created 476000 models.

Just on the platform.

Meanwhile, in <unk> Smart transportation, we continue to expand our footprint geographically.

By year end last year.

Baidu AC has been adopted by 35 cities up from <unk> 14, a year ago based on contact them all over RMB 10 million.

94% of cities that have purchased our solutions in 2020 expanded their collaboration with us in 2021.

Revenues from smart transportation have been growing rapidly and more than doubled in 2021 versus the prior year.

Next a intelligent driving.

A puddle gold continued to take big steps toward scalable operation.

Autonomous ride hailing services.

We believe that large scale operations allows us to identify the problems that are not visible during testing stage and also push the level four autonomous driving technology advancement.

In the fourth quarter last year Apollo go at that.

Paul go provided 213000 rides and once again almost doubled its rise quarter over quarter.

Reaffirming our leadership position in the global autonomous ride hailing market.

Apollo is now available in eight cities.

Beijing, Shanghai, Guangzhou, Shenzhen, Chongqing, Tangshan tongue, Joel and Yung Chen.

Meanwhile, we have begun to charge fees for the autonomous ride hailing service.

Opening Youll think November 25th 2021 in Beijing and February 18th 2022 in Chongqing and February 27, 2022 in Ghansham.

Baidu has been working hard to improve the safety performance and maximize the efficiency autonomous driving by standardizing, our Acu Smart transportation solution autonomous.

<unk> maps and cloud services.

Our <unk> project is a case in point.

About one year ago, we viewed Acte's smart transportation and introduced Apollo goal in each one region operating.

Currently almost 100 vehicles are providing autonomous ride hailing services in drunk.

Daily basis, and we have started charging passengers.

At the same time, our Acu Smart transportation solution has expanded its coverage almost 10 fold in terms of intersections in the growing area over the past year.

Providing extra support for Apollo.

We believe that the Beijing project serves as a showcase for other cities to follow and replicate.

As intelligent and connected vehicles are taking the center stage of auto sales Baidu autonomous driving solutions have one increasing acceptance among.

Automakers.

We believe that we will gain further traction as more automakers recognize that partnering baidu is better than investing extensively in developing their in house solution.

Recently, we received a nomination letter from BYD, one of China's largest automotive and technology companies intending to adopt ASC in particular A&P.

A&P and AVP for multiple popular models.

Endure O S shall do again was ranked number one in smart display globally and number one in smart speaker in China.

The first nine months shipment data last year according to strategy.

Analytics Cornelis and IDC.

So I'll do revenues continue to.

Grow rapidly at the same time, we are pleased to note that our services revenue already surpassed 10% of sell through revenue last year.

Finally in mobile ecosystem.

Solid user growth demonstrated continuous expansion of our mobile ecosystem, Inc.

In December Baidu, Avp's, miu accelerated year over year.

Growth rate to 14%, reaching $622 million.

Daily logged in users on Baidu app already surpassed 80%.

Users are not only coming to baidu to search information, but increasingly to enjoy diversified formats of content and closed loop services accessible amazing Baidu app.

Through <unk>, our building block users now can enjoy a full service cycle from information search to affect checking to interaction with industry participants and to purchasing products and services without leaving Baidu app.

In services, our instant replies to search queries cover over 40000 industry participants from 19 vertical in the fourth quarter.

Total daily instant replies increased about 60% from December two.

<unk> September to December .

In particular daily Telehealth consultations on Baidu health grow 221.

<unk> million in the fourth quarter 2021, that's up 60%, 62% from last year.

Monthly orders for local services, such as well being services and home repair services.

Using baidu app multiplied five fold year over year in December .

E Commerce DMV facilitated by Baidu low still small grew about five fold in the fourth quarter compared to the first quarter of <unk>.

Last year.

Yeah.

Furthermore, in 2021, we further diversified the format of video content offerings within Baidu App.

In 2021, we introduced a fully immersive video experience that combines horizontal and vertical short video.

Entities flow.

And other enhancements have significantly improved short video viewership and driven up at conversion, leaving Baidu app.

In monetization managed page continue to make progress.

Revenue from managed page growth by 52% in 2021.

And reached to 40% of Baidu core advertising.

While baidu core AD revenues increased by 12% in 2021 macro weakness and COVID-19 resurgence have impacted the industry in late 2021.

In the fourth quarter, our AD revenue declined by 2% quarter on quarter with year over year growth slowing down two 1%.

Going into 2022.

China is determined to promote technology vehicle innovation and upgrade the traditional industries.

Such strategic goals were promoted during China's fourteens five year plan and re emphasized by the general office of State Council.

Early January of this year.

In addition, the Beijing Municipal government recently released its 2021 work report.

Emphasizing the target to accelerate the construction of a holistic transportation system containing intelligent vehicles, smart transportation cloud and map as well as leading the advancement of high level of autonomous driving nationally in 2022.

Navigating in this favorable operating environment Baidu will continue to leverage our world class AI capabilities to grow our non asset.

Which is a clear growth engine for our overall revenue.

For the coming year, we have set the floor.

Following operational priorities.

For AI cloud, we aim to sustain above industry level revenue growth, we will continue to bring our innovation to wherewith traditional industry and the public service sector.

Enabling our customers to improve efficiency and boost productivity.

We believe we will be able to make further breakthroughs in more vertical.

For intelligent driving we will further scale up the Apollo go operation to provide ripe to more passengers. We are steadily work towards the goal of removing the safety driver and providing fully autonomous ride hailing services in China.

We will continue to expand our partnership with more automakers in ASD in particular, A&P and AVP to enable them to be better positioned in the evolving although industry.

As a result, we expect to further drive up our pipeline.

<unk> plans to take order in the second half of 2022.

After launching its first concept production car in Beijing Auto show April of this year and aim to deliver mass production in 2023.

For our sell through we will seek quality revenue growth and margin improvement shall dwell has already completed two rounds of financing.

And for mobile ecosystem, we will continue to leverage AI to improve the user experience in search and feed and further build close loop services within Baidu app to fulfill user.

In addition, we focused on a healthy and sustainable business model in order to consistently generate strong cash flow to power our investment in new AI businesses.

With that let me turn the call over to long to go through our financial highlights.

Thank you Robyn.

Now, let me walk you through the details of our fourth quarter and the full year 2000 and through our financial results.

With close to <unk> 21, with solid financial results further.

Baidu cost Cobra revenue was RMB 26 billion.

12%.

In 2021, Baidu core generated RMB.

95 billion.

U S dollar 15, one 5 billion.

The revenue up 21% year over year.

Now <unk> gross water crops.

Reached 26% of Baidu core revenues in the fourth quarter off rose, 18%, one eight a year ago.

Demonstrating how our previous investments in AI have built a new growth engine for Baidu.

No.

For the mid and long term.

For the full year 2021 now at business accounting for 22% of Baidu core revenues are from 16% one six in 2020.

Whereas in the AD business Baidu AI cloud.

Clear revenue growth driver.

Revenues from Baidu AI call increased by 60% six zero year over year to RMB five 2 billion in Q4 and was up by 60% year over year to RMB 15, 1 billion 2021 now.

Now us accounting for more than half of Baidu AI cloud revenues, our us business benefited from a multi cross strategies adopted by many of our customers.

Our non us business property from Baidu activities and upgrades of China's traditional industries.

As Robin mentioned earlier.

<unk> made.

Make great strides in several industries.

It'll revenues growing transportation manufacturing, the topics that investors and energy and utilities industries more than doubled in a year.

Looking ahead, we are interest expense, we're enters of pen above industry revenue growth for Baidu AI cloud.

Excluding baidu AI call Baidu core activities and cross imperative driving as well as other.

Our growth initiatives.

<unk> been driving mainly composed of revenue including.

Including HD maps.

<unk> Valley parking AVP autonomy navigation pilot A&P.

Our auto numbers.

Please.

So I'll do is an important component other gross new shapes.

<unk> continued to achieve solid revenue growth.

Revenue grew by 12% year over year 2021.

In Q4 AD revenue was up 1% year over year decrease by 2% quarter over quarter due to softness in the macro.

The environment in a COVID-19 risks.

Our opportunities in <unk>.

By significant headwinds in sectors such as applications.

Acetate franchising healthcare and travel and we remain challenged in the near term.

With say, our advertising business should remain relatively resilient and should recover once the macro environment starts to improve.

In addition, we're.

Is that revenue diversification to continue with no options exhibiting strong growth.

<unk> revenue was RMB seven 4 billion in Q4, decreasing 1% year over year.

<unk> revenue was RMB 36 billion in 2021.

Increasing 3% year over year.

Cost of revenue.

$19 3 billion in Q4 up 19%, while not year over year, primarily due to an increase in truck acquisition causes bandwidth causes cause of corso other causes related to the new AI businesses.

Cost of revenue was RMB $64 3 billion in 2021.

Increasing 17% one seven year over year, primarily due to an increase in common causes Chuck acquisition causes bandwidth coffee cost of goods. So auto causes relates to the new AI business.

Operating expenses was RMB 13, 8 billion in Q4 up 29% year over year.

It was primarily due to an increase in channel spending promotional marketing and personnel related expenses.

<unk> expenses were RMB 49, 7 billion in 2021 up 32% year over year, which was primarily due to an increase in channel spending promotional marketing and personnel related expenses.

non-GAAP operating income was RMB four 3 billion in Q4, and non-GAAP operating margin was 13% one three non-GAAP Baidu core operating income was RMB four 8 billion and operating margin was 19% one nine.

non-GAAP operating income was RMB 19 billion in 2021, non-GAAP Baidu core operating income was RMB two 2 billion.

And non-GAAP Baidu core operating margin was 23% in 2021 .

Adjusted EBITDA was RMB five 8 billion adjusted EBITDA margin was 17% in Q4.

Adjusted EBITDA for Baidu core was RMB six 2 billion all U S dollar $974 million adjusted EBITDA margin for Baidu core was 24%.

Adjusted EBITDA was RMB, two 4 billion or U S dollar <unk> 1 billion.

Our margin was 22020, while adjusted EBITDA for Baidu core was RMB 27, 7 billion, our solid three 4 billion.

The EBITDA margin for Baidu core was 29%.

In 2021, when continuously invest in new AI businesses.

Including AI cloud intelligent driving.

While the non-GAAP operating margin for Baidu core decrease from 2020, our investment result in the rapid growth of our revenue.

Overall, we expect our business to continue generating cash flow to support the rapid growth of our advertising AI business.

For Baidu AI cloud, we're trying to return rapid revenue growth for 2020 for 2022 and beyond.

Cash and short term investments for Baidu call Us. After December 31st 2021 were RMB $186 5 billion are you a solid 'twenty.

<unk> 7 billion.

Free cash flow for Baidu, excluding IC was RMB 15, 4 billion almost dollar for dollar.

2021.

Baidu call approximately 39000.

600 policies.

As of December 31, 2021.

<unk> unlocking value of <unk>.

New businesses, a number of our younger businesses as soon as <unk> development in 2021 wave completed raising pushout or <unk> equivalent.

In late January 2020 to do to close the series, a financing and raise nearly USD $400 million.

Update on our share repurchase program.

Our return U S dollars $650 million to shareholders in Q4, bringing the accumulative repurchased approximate to the U S dollar $1 2 billion in 2021.

As of year end 2021 will have return approximately <unk> dollars 2 billion to shareholders under our 2020 share repurchase program.

Which authorized a total of USD five.

Great.

Taking into account the practice of other U S listed company.

Hong Kong Exchange the company has decided not to provide guidance on our company's revenues going forward.

Operator with that let's now open the call for questions.

Thank you ladies and gentlemen, we will now begin the question and answer session.

You wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press the pound key.

Distance are requested to restrict to one question each time.

Our first question comes from.

<unk> from Citigroup. Please ask your question.

Hi, Thank you good evening management, Thanks for taking my questions and also congrats on solid results.

I wanted to ask us.

Robbins on these questions I guess.

Management has been talking about different business transition in 2019 and since that Baidu is still on.

<unk> a transition period.

Would you assess your achievement and progress during this transition period.

Remember if I recall I think management mentioned, a few times in the past the tailwind of China's transformations in their traditional industry. So I wonder as we.

Enter into 2022, how would you quantify some of these opportunities. Thank you.

Thank you Alicia.

We can see we close to 2021 with now.

Since accounting for 26% of Baidu core.

In Q4 last year.

A year ago.

18%.

Our new AI businesses have been growing at a pace faster than industry average.

2021 was a year with many challenges and opportunities.

Despite the uncertainties caused by macro.

Geopolitical tensions and other factors there is one thing for sure that is the world is moving towards AI.

As I mentioned in my prepared remarks, Baidu has brought AI to wherewith traditional industries and the public service sector too.

Help them improve efficiency and strengthen their competitiveness.

Our enterprise customers increasingly recognize the value.

We can add to that happens and we have.

Made breakthroughs in industries like transportation manufacturing.

Energy and utilities.

As more automakers recognize the importance of AI.

They have indicated to us that.

They wanted to use ASD and two are less for auto for more and more popular models.

That accounts for potentially billions in sales and we expect that trend to continue this year.

But what is more important is our accounts driving technology and.

Robert Texas Servings.

Upon logo has scaled up.

Operation significantly.

You happen to be in any of the studies, we just mentioned during the prepared remark.

Youre welcome to try out our services via Baidu App or Apollo go App.

It sounds like.

Experienced and attentive driver, but.

In fact, it's powered by AI.

We believe providing more arrived to passengers on the open road will help us further improve our level four autonomous driving technology.

Further improve the safety performance and.

User experience.

And therefore further solidify our leadership position.

And going into 2022 insured.

Backdrop of policy tailwind.

We will continue to expand our AI cloud and make further breakthroughs in intelligent driving.

At the same time we.

We focus on healthy and sustainable development for.

The mobile ecosystem.

And AI generated content could become a big differentiator for us in the <unk>.

Year to come.

So overall I think AI is contribution to our growth.

I'll become more apparent in 2022.

Alright. Thank you. Our next question comes from Piyush <unk> from Goldman Sachs. Please ask your question.

Thank you for taking my questions Robin RNG move Trump congratulations on another solid quarter could you share your thoughts on the business outlook for 2022 and Gen growth.

In Q1 in particular also how should we be thinking of margins for the business. In 2022. My second question is on your cloud business, which has grown very nicely outgrowing the pace of the industry.

What are the drivers that you see for this business for the rest of the calendar year and also if you could comment on the margin outlook for the cloud business, if youre thinking about gross margin and operating margin.

Thank you very much.

Thank you so much Chris.

I think that's a very quick question when we're doing two rfps you last year and looking forward.

In the year 2021, the revenue from Baidu call were increased by 21% to RMB 19, 5 billion, particularly driven by led by the AD cloud.

By the Air Cloud grew by 64% to RMB 15, 1 billion last year and contributed to over 70% of load.

AD revenues.

As we mentioned in our prepared remarks, Eric call based breakthrough is several important verticals as Robin just mentioned total revenues coming from transportation.

Factories, <unk> and <unk>.

Utilities and the purpose of the sectors is more than double last year.

When customers realize that by being equipped with our air capabilities that are stronger I think that's part of the reason why we have seen repeated purchases coming from customers last year.

And deepen the penetration in various industries I think in particular, one thing we need to draw attention is our Acs modules per patient.

Which start from scratch only few years ago and it has been.

Maintained strong growth momentum ever since.

In year towards 2021, Acs patients revenue achieved triple digit revenue growth.

Our breakthroughs in these verticals have payroll hour.

Our confidence to maintain a solid growth momentum for <unk> and with <unk>.

Above industry level growth in 2022.

One thing I would like to remind you is actually our revenues fluctuate quarter over quarter and we would suggest you focus on the annual revenue growth, which makes sense.

I mean the margin wise.

Have to say that as Baidu AI cloud input costs, the personal cloud services enterprise and public sector cloud services.

Revenue from personal cloud services contributed to a small portion.

Has been growing more slowly.

Cloud revenues by enjoys a relatively harrison modules.

Revenue coming from enterprise and the public sector.

<unk> Smart transportation has been consistently outgrowing the overall cloud business.

From a long term perspective, we believe that.

Our solutions become more mature and more standardized our margins will improve.

Baidu core revenue grew by 12% in 2021, and the margins that we need to know that.

AD industry has been facing challenges in the near term due to the macro environment and the resurgence of the COVID-19, we may see.

At Baidu core revenue growth slowdown in Q1 from Q4 2021.

Having said that if the COVID-19 trends don't get.

Louis Post Q1.

The first quarter show Macula Broughton.

Absolutely.

Overall, we believe that our advertising business recover once the macro environment that to improve.

Going forward, we will maintain.

<unk> approach to balanced investments and returns to ensure Harrison development for the App business managing healthy growth as always our.

One of our priorities.

We're Zealand now at AIG cloudiness.

So I'll do is so important component in 2021 sell through revenue growth by rare and we're talking to sustain solid revenue growth momentum in 2022, whereas in the north.

Im not.

<unk> cloud business intelligent driving was also.

Shifting some breakthroughs as Robin mentioned BR.

<unk> chose baidu as a partner to provide a polo self driving solutions with partnership covers varieties multiple hot models across several years.

As one example.

The promising development for <unk> and Baidu, while the revenue all such policies that will be recognized over the few years alongside.

The Shimmer of each model, we're encouraged about the progress made in a relatively optimistic about <unk> future events outlook.

In summary, I think we will continue to invest.

AI enabled business, especially in the intelligent driving cloud, which has been developing rapidly and we believe that all.

All of this will generate a huge growth potential over the long term. Thank.

Thank you Paresh.

Thank you. Our next question comes from Alex Yao from Jpmorgan. Please ask your question.

Thank you management for taking my question and congratulations.

Apollo achieving another record breaking number of prior to this quarter.

My question is a hall upon to achieve large scale autonomous ride hailing accretions in Chinese cities.

Even extremely complicated road conditions.

Also what are your strategies polo go to <unk>.

Salary.

And the technology roadmap.

Thank you.

Hi, Jamie to answer your question.

Okay.

After Adobe mentioned in 2020 , one we forget what op local operation.

Got hit by all honeymoon what advantage.

Autonomous technology.

Today, we believe that we're already the largest autonomous ride is hitting her with provider in the world.

I witnessed the buyers the number of Orion how do we compete.

Great.

Based on our experience.

Forget about public obligations.

Generate a larger number.

Lung payout date huddle with.

With better quality and better match with actual reorder demand.

Which is different from small scale past recovery.

By combining paper with our stimulation system.

In.

<unk> will in fact go.

Thank you Joe.

Ablation technology integration.

Improving safety performance.

On the consumer experience and lowering costs.

I think you mentioned.

Complicate either go to conditions in China, HOKA, Apollo, Oklahoma those occurring.

On the provider autonomous ride hailing services.

I think.

115 per feature if our business is a holistic approach.

With Canada.

As commodity transportation solution.

Autonomous vehicles.

Matt.

On the cloud services.

To improve the safety performance.

And cannot communicate it.

Roadway.

Our ego Beijing protect if a case in point.

Islam.

The economic technology development, the IRA or Beijing.

As a typical Chinese urban growth, let's say renal.

Our portal began autonomous.

Growing testing E com.

In 2018.

So that's the 2020.

We are.

Collaborated with patient enrollment to construct a high lower autonomous driving and dominant positions.

Right.

Within four years.

<unk> has grown from our forecasting to offer offering larger scale operations.

And Karim passengers in E com.

Lots of them in November .

We're starting up two collapses.

Nowadays.

Most of the 100 vehicles are providing autonomous ride hailing services.

On a daily basis.

Orange.

<unk> auto may provide hitting recall had provided about plenty right Terry.

No.

Sure.

Yes.

At the same time.

Or is the modest transportation solution has expanded its coverage almost tenfold.

From covering 13, if protections to 300.

What is even more effective.

Does that Apollo ethanol conducting fully autonomous driving testing with.

With no one at the graphic.

You're right.

Our regular busier.

We are working steadily toward growth.

Wins of 50 drivers.

And providing fully autonomous.

The ride hailing service in the near future.

We believe that we will have the number of <unk> 50 per hour.

Allow us to significantly reduce our cost.

On the expenses.

And it will help the business to generate profit in the future.

Lastly, I want to highlight that.

Mr Darling business.

Navigating a favorable operating environment.

The Beijing government clients.

<unk> plans to expanded autonomous drilling region to a lack of IRA in 'twenty to 'twenty two.

Several large cities.

Okay.

Joe.

And the Shanghai has proactively adopted our Acs the market transportation solutions.

And the facility Capex obligation for Apple, Google Autonomous ride hailing.

We believe that in the short future.

<unk> will follow he translated to embrace our solution using our holistic approach to system.

We also recently expanded the commercial.

Operation.

Political in Beijing, Chongqing and Amgen.

We believe that we will continue benefit from China's ambition is.

Published autonomous driving.

National print and the home grown technology.

Yeah.

Alright. Thank you. Our next question comes from Gary You from Morgan Stanley .

<unk>.

Hi, Good evening management. Thank you for the opportunity congratulations on the strong progress you've made on AI.

And intelligent driving.

Most of the questions around these areas have been asked.

So my question is more related to your.

Marketing and advertising business.

I think you mentioned earlier that we think first quarter will see slower growth.

The <unk> of October .

How should we look at the impact of your.

Advertising and marketing revenue from macro for profit from regulations set when you think about potentially slower growth in first quarter that we cover afterwards.

How bad the first quarter B, how should we look at recovery trend for the remaining of the year.

I think my second question also related to satisfy our longer term so as other policy.

<unk> that I think baidu as basic as with more open ecosystem we may.

AC Moore.

Potential opportunity.

Platform being more kind of into operational.

So.

Oh surge in e-commerce .

What kind of progress have we baked so far and how should we look at the long tail to the C. Stan Thank you.

Hi, Gary.

Thanks for your questions. This is adult.

So for your first question.

Our ad business.

He is highly correlated with micro developments.

So actually as the Julius has already mentioned.

Micro economy, and the COVID-19.

Impacting the whole industry and clearly our business as well in the Q4.

This challenges or likely to continue in Q1.

So the factors that underperformed in Q4, such as education, real estate, franchising and travel or likely to be soft as.

As well.

In Q1.

But in the Meanwhile, we are cautiously optimistic about the mitral developments, because we already see many micro.

Economic regulations or being put into place and likely to have positive influence on the.

Economy.

So we already witnessed some early signs of the recovery and good momentum momentum for us in industries like healthcare.

So we're building unless the macro environments.

<unk> to improve in our AD business starts to normalize along the way.

Economic recovery in the Q1 and it could be the trough for our business in this year.

Yeah.

So in the long run our strategy to build a stronger user base and.

Commercialization of capabilities, and it's also making our AD business and mobile ecosystem Mora.

Zealand's than before.

So as Robin already mentioned right. So we made a straight to enrich both the content and the <unk>.

Closed loop services within Baidu App.

Our <unk> Smart mini program.

Managed pages by Jojo.

The building blocks, we have talked about a lot before.

So you can change the user experience for both the content and the service consumption and also the commercial conversion both op and non ice so are being enhanced.

Accordingly.

Our mobile ecosystem.

From the mid to long term perspective, and it will become a platform.

Our users.

Had one stop satisfaction a majority of their needs.

So with that besides the pace and we believe the monetization approaches such as live streaming rewards the commission.

Subscription membership in the sector.

Jeremy.

So therefore.

We are still investing in many initiatives in our mobile X system now we believe our capability will continue to.

And make our margin a healthy and sustainable move.

Moving forward.

As for your second question about the injured a proposal.

We feel this is very very important for the whole internet and will lead to a fundamental.

Open ecosystem, which which will benefit and in every single user.

<unk>.

As we all know search by nature its open end.

Baidu has been making efforts to strengthen the open nature of our mobile ecosystem.

So we haven't made a meaningful progress and we believe there are many more to come.

Let me show you a few examples.

So content wise.

In addition to Baidu or how should we have leveraged the HCR.

Page five and the smart mini program to make our user is able to access a vast amounts of content from China's top.

As well as the long tail apps covering long form video platforms in the shop.

<unk> video platforms like <unk>.

And the lifestyle platforms like shelving to custom apps and.

A lot.

Much more long tail coming book apps with the native App experience.

And as you just mentioned for the shopping site.

As we mentioned earlier, we have made more than 1 billion as close from our major partner platforms available for our users.

And for services again with the smart mini programs.

We now can fulfill a variety to view their requests spanning over.

Almost 300 service categories.

Our top platforms, such as made one one night, a ctrip and in many vertical platforms like the <unk> quality low service.

Last but not list, we open source, our smart mini program framework in the very beginning to empower our partners.

So the smart mini programs can actually run seamlessly.

Their apps.

Recently, the leading smartphone makers, such as Grupo vivo Xiaomi.

Have adopted Baidu Smart mini program framework in their in house products.

Which resulted in more than 20 million more daily active users for our smart mini programs and we already see this has been encouraging more and more developers to embrace the ecosystem.

So we believe that.

The inter operability.

<unk> bring more market opportunities for not only baidu, but also for the entire industry.

So we will continue to closely monitor the dynamics.

Do our course.

Make move them faster.

Thank you Terry.

<unk>.

Thank you. Our next question comes from Eddie Leung from Bank of America Merrill Lynch. Please ask your question.

Good evening most of my questions have been Gnostic just curious on your use of cash including investment plan as far as.

And the.

Sure.

Potentially increasing your buyback program.

The investment that we noticed that some of your major peers talking about a more disciplined.

Four eight turns on.

So I'm wondering.

You will have a similar strategy coming to <unk> 2002. Thank you.

Thank you for question.

I think in terms of our corporate strategy I would like to emphasize that the most important investments are always investing in ourselves.

If youre going to Rfps today, our growth is clearly driven by the business, which is already 26% of the total revenue.

And now add mainly composed of Roundup AI cloud intelligent driving software AI.

Related growth initiatives, all of which are kind of new wins for us which requires more investment.

AIP is represent different stage of growth and they are very important increase in Peru for a loan and revenue growth.

Our investments are pretty much packed with gross.

With the cost potential. So we will continue to invest dedicated AI osf's in particularly intelligent driving.

To lay a solid foundation for our future growth.

Meanwhile, we will remain open but also work typically.

And shoe business.

<unk> may complement our new business initiatives.

In terms of capital allocation.

Yes, south our new business have completed Fundraisings and which have created.

Morton capital quote their future dividend.

On the other has such a regimen, which better aligns our manager and price increase I think going forward, we'll maintain an open attitude.

And we are open to bring in more diverse investors, including our structure investors to Harrison the companies to grow.

In addition.

You mentioned the share repurchase program I think we believe that.

Our <unk> business has been undervalued by the market for example in March has not placed sufficient values on our intelligent driving businesses.

That's the reason why were key buying back shares.

As of the end of 2021 we'll have the return approximate to the U S dollar to pardon my plan.

Our shareholders under the 2020 share repurchase program.

I think these requests the convention that we have and the direction of our business. Thank you for your question.

Thank you next question comes from Jerry Liu from UBS. Please ask your question.

Hi, Thank you management.

To go back to <unk>.

Apollo topic, maybe just from a different perspective.

On this call you guys mentioned, some more wins with automakers and especially the new.

A partnership agreement with BYD. So I just wanted to ask what are some of the operating metrics that you can provide to help us quantify how big can this opportunity.

Pete.

How will these partnerships.

The avs business going forward, how will it benefit overall revenues. Thank you.

Hi, Jerry this is robin.

Inflation connected vehicles, they are becoming the new attraction for auto sales.

Many automakers have come to realize that adopting baidu solution.

Better than investing.

In their in house solution.

That's why a lot of automakers have chosen to partner with us.

Our.

In vehicle informing timing system <unk> for auto has been on market for quite a few years.

But our.

FTE.

Namely, both A&P and EVP.

<unk> been gaining traction.

Over the past year or so.

We've seen strong acceptance from the automakers.

You mentioned it'd be one idea is a very good example.

One of the largest EV automaker in China.

Accounts for close to 20% of China.

New EV market last year.

They are down volume.

Row, four four new EV.

By over 200% last year.

They have selected us to be a partner to supply the autonomous driving solutions, especially A&P and AVP for multiple popular EV models across.

Multiple years.

With the increasing adoption of.

Smart EV in China, we believe.

Strong <unk> driving capability put us in.

Very strong position to win more business.

As a.

At the end of last year.

According to our internal estimates the total projected the accumulative sales.

ESPN do are left for auto.

From new wins should be about RMB.

8 billion.

And thats the unrealized revenue.

Mt.

Rowing.

Very fast over the past two to three years, especially.

The contribution from <unk> has been being.

Very strong.

Yes.

I tried to make it clear about our numbers were.

We're seeing a very promising numbers of our latest sales of <unk>.

Also in the past few years that grow the growth is quite promising above this number which you cross the contract side and a nomination letters from customers I think the auto industries a nomination letter means.

Our supplier is successfully accepted by OEM or certain projects. Following the elimination of <unk> OEM typically with our contracts with the suppliers. Our estimates made based on the <unk>.

Our assumption of the timing of new models and the pricing in the future sales volume caught into a discussion with our customers and some projections also coming from the professionals the parties.

These projects usually last for three to five years during which time, we will recognize that revenue based on the actual installations I hope. This can give you a better understanding of our ASD business. Thank you.

Sure.

Thank you next question comes from James Lee from Mizuho. Please ask your question.

Yes.

Great. Thanks for taking my questions a couple of follow up questions autonomous driving I recently read.

Recently published broke on smart transportation and disposal, specifically you guys elaborated.

A number of detailed about the industry landscape, including the two X traffic management.

Martin.

I don't have a thriving and just looking at the various yields that you mentioned the book here what is Baidu is mid term.

Our strategy and goals.

Element Gulf.

Hi.

Let me start.

Why <unk> book.

The application of AI technology has given them new ideas and new solution to.

Digital transformation of many industries.

I think transportation and auto is probably the best example.

So.

In this book I demonstrates how AI is going to reshape the.

This industry and create enormous value for all of the stakeholders.

The Ics or intelligent transportation system has two building blocks one is the intelligent and connected vehicles the other.

The Doe site infrastructure.

This to work well.

Lipa is much more effective together.

The system deeply integrate.

Wide range of technologies, including AI <unk>.

Cloud computing into the transportation and auto industry.

It is dedicated.

Solving three major issues.

First to minimize.

Joe safety accidents.

94% of the adult accidents are caused by human error in driving.

Hans driving well be much safer.

Second.

Systematically reduced congestion.

Based on our experience at certain Chinese cities Apollo B, two X four vehicle to road infrastructure has helped reduce traffic congestion during peak hours.

By 20% to 30%.

Thirdly reduce the carbon emission.

Transportation accounts for over 80% of the carbon emissions from transportation sector.

Therefore, improving the efficiency of transportation system is critical for sustainability.

AI is reshaping the porting in the mobility industry.

Creating trillion dollar industry opportunities.

In China.

More than 300000 built.

Intersection.

Yeah.

In urban roads, and about 150000 kilometers off highways.

And tens of millions of parking lots.

There has been all in the process of upgrading with AI technology.

Not to mention the <unk>.

Right hailing and.

Smart EV market opportunity.

As I mentioned in the prepared remarks, Baidu has made significant progress in intelligent driving.

So in the medium and long term, we aim to expand the comm radar Apollo goal.

265 cities in 2025, and 100 cities in 2030.

And expand our smart transportation into more cities and deepen our penetration.

In each city.

From a more macro point of view it is a.

Microcosm of future digital city operation.

I think the digital theme you operate them mode.

Assisted by AI technology.

<unk> solution.

Through AI new infrastructure.

Confident to further.

Tribute innovative solutions to the digital transformation of <unk>.

Industry and city.

Yeah.

Thank you.

Alright. Thank you we have reached the end of the question and answer session and with that ladies and gentlemen, we conclude the conference for today. Thank you for participating you may all disconnect.