Q2 2022 Baidu Inc Earnings Call
Thank you for standing by and welcome to the biodiesel.
Second quarter.
Earnings Conference call.
All participants are in a listen only mode there.
It will be a presentation, followed by question and answer session.
I wish to ask a question.
Archie followed by the number one on your telephone keypad.
I would now like to hand the conference over.
Lee head of Investor Relations for Baidu. Please go ahead.
Hello, everyone and welcome to Baidu second quarter 2022 earnings Conference call Baidu as the earnings release, what's it was distributed earlier today and you can find a copy on our website as well as newswire services on the call today, we have Robin Li co founder and CEO .
Our Seattle the Ocean, our EVP in charge of Baidu AI cloud I'm, Jay <unk>, our SVP in charge of Baidu intelligent driving.
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 provision 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 maturity.
Our current expectations for detailed discussions of these risks and uncertainties. Please refer to our latest annual report and other documents filed with the SEC in Hong Kong with Baidu.
Baidu does not undertake any obligation to update any forward looking statements, except as required under applicable law. Our earnings press release and this call include discussions of certain unaudited non-GAAP financial measures <unk> press.
Really.
Cause nation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measure 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.
While our CEO Robin.
Hello, everyone.
Or or in RMB, 21, 2 billion in revenues and a $5 1 billion and non-GAAP .
Profit in the second quarter.
The resurgence of COVID-19, led to an unfavorable macro environment in the quarter.
I can tell you I called and intelligent driving business maintained rapid growth momentum.
The align well with the governments repeated call or technology innovation.
Especially Q2 revenues from Baidu AI cloud increased by 31% year over year alcohol in many of our peers.
Contributed 18% of Baidu core revenues in the quarter, that's up from nine that's up from 14% in the same period last year.
Further the operating margin for Baidu AI call improved on both.
Year over year and quarter over quarter basis.
Upon our goal of completing the 287000 devices in Q2.
Increasing by almost 500% year over year.
On July 20th Apollo goes accumulated flight reached 1 million.
And in July we unveiled a portal Archie six the sixth generation Apollo Robo taxi vehicles, bringing the cot robo taxi to the price range all mass market electric vehicles for the first time in China and globally.
We aim to put a sizable amount of hockey sticks vehicles into operation in the year 2024.
What about import AD revenue decreased by 10%.
Here in second quarter due to a challenging macro environment, our mobile ecosystem continued to generate strong cash flow absolutely full christa.
Operational excellence and efficiency.
It's early to them, we have seen signs of recovery.
The control Mega well gradually lifted.
For example, the year over year decline of our AD revenue in June and July .
In particular and revenues from retail customers resumed year over year rose during the 618 shopping festival.
Project implementation for Baidu AI cloud has also been improving thanks to the gradual removal.
Travel restrictions.
While the recovery is likely to be at a gradual pace.
You could still be some uncertainties about the baton of COVID-19, our long term goals.
Thanks, Heath and capabilities for shareholder value creation remains intact.
We have viewed our disciplined long term thinking.
We believe it's a strong asset in this fast evolving innovative and highly competitive business environment.
Cost optimization and operational efficiency are always top of mind for us.
Our mobile ecosystem.
Should continue to generate strong cash flow to fuel and fund our investments in <unk> and intelligent driving over the long term.
Now, let's review the second quarter operational highlights.
Revenues from Baidu AI call to grow back 31% year over year in the corner once again Australian our peers. Despite the macro challenges brought by COVID-19 research.
Our growth was driven by the strong performance in cloud.
They're using enterprise space and the public sector.
Notably, we managed to improve our operating margin both on a year over year and quarter over quarter basis in Q2.
As we focus on healthier and more sustainable revenue growth.
We aim to achieve profitability as we scale our partner.
I don't really I cloud continued to benefit from the growth opportunity in China digital and intelligent transformation.
We believe this transformation is still at the early stage and organizations are eager to leverage technology to improve efficiency and productivity.
Over the past year, we have made tremendous advances in AI technology.
Our AI capabilities widely available to enterprises and developers.
Our open platforms.
Gained valuable industry expertise, so significant improvements in productivity.
Areas like manufacturing transportation energy and utilities and the public sector.
By the way I cloud differentiating strengths are our AI capabilities and deep understanding of industry specific pain points to help our customers to accelerate their transformation.
In short our competitiveness.
Oh gosh to take.
Ditch off the tailwind offered by the new secular trend.
Revenues from AC Smart transportation increased by about 40% in Q2.
During the second quarter, we won several new projects for off highway and urban goals, both from our new and existing customers.
By the end of second quarter Baidu Acte's Smart transportation has been adopted by 51 cities up from 20 cities a year ago, and 41 cities a quarter ago based on the contract amount over RMB 10 billion.
Going forward, we will continue to focus on key industries and enable cross industry reputation for similar use cases by utilizing AI innovation.
By doing so we believe we will be able to reduce the operating losses and achieve profitability overtime.
In the Meanwhile, we will continue to focus on quality and sustainable revenue growth and aim to continue outgrowing.
Our peers.
Yeah.
Moving to intelligent driving.
We'll go continues to take a big step towards scaling up operation.
Listening a lead position.
The worlds largest autonomous ride hailing service provider.
In Q2, Oh logo provided 287000 rides to the public.
<unk> problem.
Almost 500% year over year, and 50% quarter over quarter.
On July 20th 2022 Apollo goes accumulated right speech.
1 million.
In the Utah region, North Beijing, According to our estimate of Pogo has obtained.
And the market share for ride hailing services with pickup and drop off both in Ito.
Our political already becomes an important supplement or daily commuting. After we launched the service is less than two years ago.
No more than 100 political vehicle a therapy that you can call them rather than on a daily basis and each vehicle on average can be more than 20 right per day.
In July our political branched out to coffee and come due and is now operating in more than 10 cities.
Talking fees incentive cities across China.
We believe large scale operation allows us to improve our level four autonomous driving technologies further.
With data generated from everything operation, we can identify problems that are not visible during the testing phase.
The number of corner cases incurred during operation has far exceeded the one bond by vehicles in testing.
In addition, our funnel, though has made some exciting progress.
Our last earnings call Martha by receiving the Greenlight to provide fully got released ride hailing services.
And launching of the sixth generation Gaba taxi vehicle hockey sticks.
Earlier this month, we obtained the regulatory permits in Chongqing and one.
To provide fully driverless like Hayden.
I'm, hoping you all we will also authorized to collect fees on those subjects.
We are proud to be the first and only company in China now to offer fully comedy spiked heating services to the public helping out and Cardi b adult human drivers in the car.
Hutch achievements validate our superior level, four autonomous driving technology and endorse our strategy of utilizing large scale operation to boost further technological advancement.
To like 21st at Baidu World, We World Apollo argued six the sixth Gen always kind of put on call protected vehicle with a targeted mass production cost at RMB 250000.
This is significantly lower than the mass production cost off the picture and then we shouldn't vehicle and its ease of prime.
In the price range.
Mass market electric vehicle.
Hockey sticks is designed to offer large scale fully fiber leased light heating services and launched at a time at both our technology, our both our technological and operational capabilities already.
We believe that China's smart EV value chain has already being well established some of the auto parts and components for level four autonomous driving solutions are already being produced in China at a much lower price than a few years ago.
Moreover, RK.
Passenger centric vehicle. So we have removed some components, especially designed for Tyler.
For example hockey sticks at the detachable theory will which could unlock space for extra seats luggage, it's death and even.
Entertainment equipment in reaching the game Clark Spirit.
The passengers.
Such a key plan have set a strong foundation for Apollo goal to significantly reduce the two largest cost items for a calculation labour cost and.
In the Gulf of tactical vehicle cost.
This is a critical task for our final goal to build a revolutionary business model and accelerate its expansion.
Over the long term, we I, we aim to make our polo golf and alternative mobility option for millions of people, creating tremendous economic and social matters.
Baidu, Apollo, although solutions, including ASD and Dor O F for auto continue to gain popularity among automakers.
As an increasing number of auto OEM have publicly committed their brand to autonomy and connected vehicles.
We're pleased to see that many have chosen to form alliances with baidu to expedite their timeline and plan.
Recently, the total protected accumulated Dallas off our auto solutions have grown to RMB 10 sleep billion part our internal estimate.
Moving to the mobile ecosystem they use a base off of our mobile ecosystem continued to grow steadily we once again delivered strong margins in the second quarter. Despite the negative impact on our admin cost of bank macro weakness.
On the user side Baidu apps and they you increased it by 8% year over year to 628 million in June .
Daily search queries and the content is distributed through Baidu app.
Double digit year over year in Q2.
Our innovations and effort in delivering a close loop experience have made banks are increasingly valuable to users.
In addition to searching for information and knowledge people come to Baidu to look for ways to fulfill their needs.
We have enabled them to older subject to purchase products and interact with industry experts and others without leaving Baidu app.
There are some metrics to share 84% of our D. A U in June or logged in users that's up from 76%.
A year ago.
People have discovered that their user experience within Baidu App continues to improve once they are locked in.
Quarterly G M D facility the affiliated.
Yeah.
Baidu search.
They'll still small grow.
Buying about 127% yoga again.
In particular during the 618 shopping festival gently increased by about 260% year over again.
Thank you about 130000 industry expert actively signed up for our infant replace future.
Up from about 100000 in March total daily insulin, we price increased by about 190% year over year.
Up about 30% from March.
Another highlight our progress in short videos currently about 85% of the content distributed spitting Baidu app.
Short videos.
During the quarter, we expanded the fully immersive video experience the English search result page to all the users.
This feature is now available on both search and feed them, helping drive short video consumption on Baidu App.
In Q2 short videos distributed through search and feed increased by double digits year over year.
In addition, we are also using AI to expand our content and port Accordingly, we.
We gave content creators AI tool, which they can use to produce video content more efficiently.
You got it generated content works, particularly well for long tail content and breaking news.
While using our close loop experience.
More and more users.
Their footprint within our mobile ecosystem.
Our capability to understand user need and enabling strong conversion optimization and each step of their journey.
Together with our continuous effort to optimize the advertising technology.
It helped us to significantly improve the app conversion rate for our customers.
Looking ahead here are some key takeaways I'd like to give you.
Operationally, we have viewed strong new growth engines for Baidu core was.
We believe well boosted baidu core revenue growth in the coming years.
Baidu AI cloud its uniqueness in AI capabilities continues to outgrow most of our peers.
Our political continues to solidify its position as the largest autonomous ride hailing service provider in the world are.
Our political has entered a new chapter with fully family stride hitting Oh appeal.
Well, it's a long haul fiber purpose viewed argued six robo taxi vehicles for ride hailing at really low cost.
Apollo is set to accelerate to get calibration further differentiating.
Our peers in both technology and operations.
And second.
And the second takeaway financially if the mobile ecosystem will continue to generate strong cash flow to fund our investments in cloud and intelligent driving.
On a separate note. We are also excited about ickes continuous effort in improving operational efficiency.
I see once again generated operating profit in Q2, the second consecutive quarter to report positive operating profit on both GAAP and non-GAAP financial measures.
Furthermore, I see you've generated positive net operating cash flow in the quarter for the first time.
Before I turn the call to Ron I'd like to highlight that we will be added to the Hudson index.
From September 5th we believe with the inclusion of pension index went off the best known into sits in Asia, The Hong Kong shares off Baidu well receive more chancellor.
Overall, I'm very proud of the team's strong execution in the quarter and remain excited about our future.
With that let me turn the call over to Don to go through our financial highlights. Thank you Robby.
Now, let me walk you through the details of our second quarter two results.
Total revenue was RMB 29, 6 billion decreasing 5% year over year revenue from Baidu core was RMB 22 billion decreasing 4% year over year Baidu call online marketing revenue was RMB 17, 1 billion decreasing 10% year over year Baidu call non online marketing revenue.
And the $6 1 billion up 22% year over year, driven by Claude all the AI part.
Hey, I power.
And it is equal to Baidu AI call increased by 31% three one year over year to RMB four 3 billion revenue for IC was RMB six 7 billion decreasing 13% one three year over year.
<unk> revenue was RMB 15, 2 billion decreasing 5% year over year, primarily due to a decrease in content causes partially offset by the increase in personnel.
With 80 expenses olive causes related to new AI businesses.
Crazy expenses were RMB, 11, 1 billion decreasing 8% year over year, primarily due to an increase in channel spending and promotional marketing expenses.
Trading income was RMB three 4 billion Baidu core operating income was RMB, three 2 billion and Baidu core operating margin was 14% one four non-GAAP operating income was RMB five 5 billion now Ken Baidu core operating income was RMB five one for that and non cat baidu.
Operating margin was 22%.
Other income net was RMB 151 million compared to a total other loss of RMB. Two 1 billion last year, which included a fair value loss of RMB, three 1 billion from a loan to any investments in the second quarter of 2022, we'd recognize a fair rate again.
RMB 536 million a significant portion of long term investments, including but not limited to investments you're accurate securities all public and private companies private equity funds and digital access is Saatchi Chew quarterly fair value adjustments.
While she may contribute to a net income volatility in future periods.
Income tax expenses was RMB 25 million decreasing 19, 9% year over year, primarily due to the reversal of certain tax expenses accrued for 2021 based on what 2021 tax return filing in the second quarter off to you to get to.
In deduction.
There's expenses that were considered not deductible in our second quarter opportunities can do well.
Net income attributable to Baidu was RMB, three 6 billion and diluted earnings per ads was RMB 997, net income attributable to Baidu core was RMB three 7 billion non-GAAP net income attributable to Baidu was RMB five points faster than non-GAAP diluted.
Earnings per ads were RMB 15.79.
non-GAAP net income attributable to Baidu core was RMB five pung swapped by then and non-GAAP net margin for Baidu call was 24% or so.
Adjusted EBITDA was RMB, seven 1 billion and adjusted EBITDA margin was 24% our adjusted EBITDA for Baidu core was RMB six 6 billion and adjusted EBITDA margin for Baidu core was 28%.
As of June 32022, cache caching credits a.
Restricted cash and short term investments were RMB $189 4 billion in cash cash equivalents restricted cash and short term investments, excluding I see well RMB 180 453.
Free cash flow was RMB, five 5 billion and free cash flow, excluding Archie was RMB five 5 billion.
Baidu call approximately 36000 employees as of June 32022.
With that operator, let's now open the call to classrooms.
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Your first question will come from Alex Yao of Jpmorgan. Please go ahead.
Oh, Hi management, so good evening and thank you folks taking my question.
You guys mentioned that you see that's fine.
Hum.
Hmm.
Could announcement just share more color on the recovery and I'm. So.
Out of a bunch of categories.
Looking into the second half of 2022, how do you keep it up.
And Oh in the medium to longer term.
Hum.
Kobe.
You could see the other two.
Thank you.
Hi, Alex This is Robin as you know Baidu core revenues decreased about 10% year over year last quarter.
Because of the challenging macro environment.
In a poor in May our AD revenue has experienced a significant year over year decrease because of the COVID-19 impacted some uh huh.
China's major cities, especially Shanghai, and mature and lesser extent in Beijing.
In two of our AD revenue started to recover.
When the situation gradually improved.
July was better than June .
In terms of and.
At verticals some of the AD verticals got hit really hard in April and May that's being towards the retail sector travel.
Local services and health care.
AD spending from this vertical has been picking up quickly. Thanks June .
Looking into the second half of the year.
Or are we still facing macro uncertainties. It is hard for us to predict the development in tough KOL date at this stage.
For example, the resurgence in some of the hot travel destinations like Sun Yeah.
<unk> cost by.
Cost Oh, they they already ending off the summer travel season.
Our search AD is highly correlated.
With China's GDP growth and the performance of China S N E.
So.
We believe our AD revenues should recover when mcelwain pools.
We are also seeing some opportunities for our mobile ecosystem.
Around e-commerce and short videos.
For example, integrating e-commerce and in short PD with suites dollar search and feed.
In fact, more and more of a short videos are available in.
In our search result.
This should help us to improve the user experience.
I'd say in the mid to long term are.
And he reached a content in key verticals.
Our capabilities in facilitating.
Facilitating transactions within Baidu App.
As well as our close loop experience for users will help us to create a.
More user insights for our customers.
This impact will help us drive at conversion and generally advertise their value.
Putting the long term growth of our online advertising businesses.
Okay.
Yeah.
Next question please.
Our next question comes from Kenneth Fong of Credit Suisse. Please go ahead.
Hi could you speak alright, thank you for taking my questions.
Congratulation on another quarter with a strong cloud revenue roof can.
Can you help us understand the underlying drivers that help baidu AI cloud to outperform your peers, what's your outlook for the core business with the second half of the year and I'm wondering if you can also help us understand your strategy as far as timeline for accomplishes two quick to reach breakeven. Thank you.
Thank you Dennis for a question this is dough.
I'll address the revenue part and leave the second part to us too long.
As Robin just mentioned Red Baidu cloud continue to grow pretty well in Q2. Despite of the challenging micro environment is it revenue was up 31% year over year and they are cloud now contributed to almost 20 explain it but the total of Baidu.
Baidu core revenue.
We believe what differentiates baidu AI call from our peers.
We have been dedicated to integrate cloud computing with AI, so that our AI capabilities can help our customers to improve efficiency.
To be more specific you know, it's a cloud vendor, we have swung air capabilities well.
Well on the other side as an AI solution provider, we have strong cloud computing capabilities a couple of villages.
So also this wasn't mentioned right so the enterprises and the public sector or the main growth driver for our cloud computing worse. So it's believed that in China.
The traditional enterprises and the public sector or steel at the early stage of digital intelligence to transformation.
So clarity, though this transformation news organization, no matter big or small they want to use AI to improve their efficiency and their competitiveness, so which will further drive the demand for high performance computing.
So as a result, right that the combined revenues for from manufacturing and.
In energy <unk> utilities, and the public service sector almost doubled.
Q2.
You know smart transportation, we keeps needed to library, our leading AI technologies and the understanding is autonomous driving to grow our business. So we see smart transportation has already become one of the largest verticals for Baidu cloud.
So was that we are confident that revenue was from enterprises and the public sector. We will continue to drive the gross baidu AI cloudy in the future.
Or so you know since early June we have seen some go.
Gradual improvement in our projects implementation, but for sure you know there were still some uncertainties around COVID-19 in the near term.
The hunger, we believe this growing need and of the 24 E in China remain unchanged.
And it was that we aim to continue growing faster than our peers.
Yeah, Hi, Kenny So I'll answer the question about <unk>.
But the AI cloud continuing to generate positive gross margins in the second quarter, you're saying, that's what it looked like the quarter on top of that we managed to improve our operating margin.
Two our strategy to focus on quality and sustainable revenue growth. So we have a tool passing of AI cloud. The first pass of the personal personal cloud contribute a small portion of the overall cloud revenue you should continue to generate pizza operating profit I think you said revenue is growing a little bit slower than <unk>.
World class, but the second part, which is the majority of parts and a price a puck set a clock, which continue to generate positive gross profit in the second quarter.
We improved operating margins, both on a year over year and quarter over quarter basis.
This was because we proactively focus on high quality revenue growth.
Actually we'll reduce the unhealthy projects I think the future water hard to narrow the loss margins, whereas you know enterprises and public sector call. The Acs Marsha Smith, Haitian, which justice mentioned buys, though just not already enjoys a water heresy gross margin because of law.
Higher portion of the software components.
Well I think.
These margins both patients may achieve break even earlier than.
Once you close in the coming quarters.
Because we would have folks who own to provide most of their life solutions and the protests to fall a key use cases for example, the open roads highways.
Secondly, I think we are also working very hard to replicate the stimulus scenarios.
Use cases across different industries crossing industrial replication required the AI technology to find all the connections across many different scenarios, we believe that our AI technologies such as the loss models were hurt us to a chip that goes overall, we will continue to focus.
So quality and sustainable revenue growth to improve margins had reached profitability in the next few years. Thank you so much Kenny.
Yes.
Thank you.
Our next question comes from Richard <unk>.
Of Goldman Sachs. Please go ahead.
Thank you management. So my question is about the robo taxi. So a client that's ought to fix is targeting a cost of 250000 not be per car.
That's significantly lower than the first generation of the Arab taxi models. So can management help us understand what's the main driver for this cost reduction and what's our outlook for the future cost trend and how should we think about our robotics economical mechanics under this cost and any timeline.
When do you expect major commercial contribution from Robo taxi business. Thanks.
Mhm Kiley can this is robin.
I think their sleep.
We got her for the cost reduction.
First it's our deep knowledge.
In the autonomous driving technology and operations.
Over the past nine years Baidu has viewed strong level for technology and gained industrial industry No hall on the auto industry and Oh, how do all played out for a ride hailing services.
Also we have become the largest all homes Bryan they'll hitting service provider in the world. So we fully understand the at home stride heating market and understand our passengers need.
We know where we can simplify our in car features and are where we should allocate more resources.
For example argues 60, it's a passing interest interest vehicle at monarch driver centric vehicle.
So on one hand, we have reduced some in car feature your line before the driver to reduce the cost like I mentioned during the prepared remark Archie fix can.
<unk> removes the steering wheel and exclude some.
Other access accessories, such as widescreen why why display screen for driver.
On the other hand, we put more effort 60 performance and the passenger experience to make argue six passenger centric.
For example, we have used the.
Safety redundancy in seven parts off argue exciting.
Having an industry standard.
This include a redundancy for computing unit.
Sensors.
Steering system.
Braking system.
Communication system power supply.
And.
Ottawa Auto architecture.
Also argue six it's defined more in car space and the better.
And our in car parent.
I also wanted to highlight that are about 60% about six bombs for intelligent features.
Like al for autonomous driving capabilities.
The second driver is scale.
We plan to leverage third party automaker to produce argue fix for us so.
So August six well not retrofit a passenger vehicle.
This is a key differentiator of artistic.
We will pay for the ball off already fixed instead off the retail price like what we did in the past.
One baidu able to move away from completing vehicles to use third party auto makers to produce argued six.
That's because we have the capability to offer larger scale well protect the operation supported by our leading autonomous driving technology and operational capabilities.
And I think the third driver is the divestment of the off the value chain for China's intelligent EV industry.
Archie fixed was launched at a time when China's intelligent even industries, well built up as many new EV companies and autopart.
Users are in the market in particular, many autonomous driving related auto parts are now being produced locally so intelligence evs are becoming more affordable than before.
For the Hum timing related auto parts, it's costs, it's also much lower than before.
For example, Lidar lidar.
The most important component for autonomous driving solutions.
It was charged to hundreds of thousands of U S dollars in the beginning but now it only cost like $1000.
So in the future we believe the bomb well for our Robo taxi will continue to decrease because China's intelligent E V industry will continue to develop.
And Apollo dull well continue to scale.
Our approach is a gradual approach.
We will continue.
Continued rollout regions in different cities.
Therefore scale up are a robo taxi therapies as we gain scale.
As we improve continuously on technology I think.
The cost for operating such a study as well continue to drop and we certainly have the first mover advantage and the barrier to entry for this well become higher and higher.
Yeah.
The next question please.
The next question comes from Alicia Yap of Citigroup.
Go ahead.
Thank you good evening management. Thanks for taking my questions I have a follow up a question on Apollo goes so congratulations on some off the solid achievement recently can management provide some update on regulatory environment for all kinds of us driving and blah blah blah.
<unk> in China, and how Baidu will capture these trends and then can management also provide updates on baidu skull and strategy forties fully driverless operation. Thank you.
Yeah.
And so therefore this is Jamie.
That's what I have to go against that local is alright at the largest autonomous try to hit them with either evoke.
In called the tool applicable has completed 200 and the 87 installed in their lives.
And the accumulated right past one meeting now.
This number is much higher than our peers.
<unk> got today is collaborate with your large scale operations will improve our core technology.
And the growth even faster and larger.
This is the one quarter in the in China, because if they vote topic that condition why are we communicated a kit.
And the data generated from larger scale operation wheel hub hospital pull all lower call technology on Oakland So powerful.
Today.
It's already well I bought more than 10 feet.
Including all of the tier one cities in China.
All operations Iris, how many phases.
Including copper based stations.
Office building on the hospitals each city.
Offhand, while also expanding operate each state.
Whereas along so obviously at a pace to mass production caused oh pardon.
Be handled on this since we sold it we will be able to further grow off late idle phosphorus spirit.
And so feel short we will continue to improve all long haul technology.
And the girl Operation also we will try to push on the make law influenced China regulation Autonomous Italia.
I will tell them. Okay. We started out autonomous ride hailing services Olten goes ill hop on May 10.
In less than three months.
It will allow us to provide fully probably has a lot of Hayden. So it's also open doors.
I'll take a protest this fall a leading technology and its ability.
Well obligation into EQM regional abating at Adobe missions.
Alright acquired about templates and the Berkshire Alrighty Kitting services in the region.
Orange atrial pets, a week, how can this more than once or twice a day.
As a pioneer in the industry.
I just have to work closely with the regulator clip that hopper regulations on the industry.
Recently, the Chinese the midstream transport issued a draft.
Atlanta, well, that's exactly weak or transportation 50 use of it.
But that's what I intend to push it to commercial operations autonomous ride hailing service in China.
This is the forces of regulation on this ride hailing services as the central government level globally.
Eight miles of China's efforts in promoting Sheidlower autonomous a drought.
We are proud to be the first and only company in China to offer 40 gravity instead eradicating services.
In early August .
Baidu was allowed to provide 40 gravity, if they're glad to heating services and the class C in content on their behalf.
China is a major cities in the middle East.
In the future, we will continue to scale up our all region and they tried to close hopefully in jeopardy, instead of graduating to market.
Thank you.
Yes.
Thank you.
The next question comes from.
Bank of America Merrill Lynch. Please go ahead.
Good evening guys. Thank you for taking my questions I have a question about your autonomous driving solution for Oems. So you mentioned that the contract a land deal. After the second quarter was just over 10 deviant it doesn't seem to be in.
Fees are increasing much from the last quarterly result could you probably a little bit about the reason behind that and then could you also remind us some of the automakers are top half beaten out working with you guys I E not using your autonomous driving solutions. Thank you.
Hi, Eddie let.
Let me answer your question I think as Robin mentioned in the remarks, yes. The total the.
Total Peshek T cumulative sales of our all solutions has been a RMB 10 parts per billion probable in our estimates.
I think what you could talk about the numbers, so we need to keep in mind.
He is a trend that is reversible for costs, we believe that over the long term electric.
Electrification is just a part of the play and the intelligence and the game changer.
In the future E V. We saw intelligent driving capabilities will now be competitive and many automakers like some leading domestic or even international automakers theyre interested in using our solutions for their models to capture this kind of new market opportunities.
Based on our conversations with them.
We understand the automakers like our AI capabilities are rigging size after the autonomous driving and I have a strong brand name and we're talking with many of the automakers are.
Both.
Both locally and globally and some are very large names in the industry I want to emphasize that each automaker has its always scheduled for setting up the country's waste to the suppliers. This could result in a deeper and pace of our backlog. This is absolutely normal and auto industry.
Today, I would have to partner with many automakers, including some leading names like B I D. A bump of motto and so on.
In addition to our in car infotainment solutions are more and more customers adopting our uphold self driving a part us recruiting the ugly.
A M P Protos Apollo navigation pilot for highways urban Ross.
The automated valet parking AVP potash and HD maps progress I think in the future, we'll continue to expand our partnership to waterways more automakers.
More and more at home models equipped with our ultra solution set to be launched into the marquee coming two years.
Auto solutions should start generating meaningful revenues things so much Eddie.
Yeah.
Yeah.
Our next question comes from Gary You are from Morgan Stanley . Please go ahead.
Yeah.
Hi, Thank you for the opportunity to ask question and congratulation on the solid results Mike.
My question is about our margin and cost control and optimization.
We saw that you are cheaper that has shrunk, Florida research with a much better than expected.
Could you. Please elaborate the efforts you're talking about for such a encouraging result, and what is the margin outlook for just kind of have the thank you.
Yeah. Thanks, so much Gary and I believe his question I think this buyout from a large challenge in macro environment and killed too Baidu cost knockout pretty margin was 22%, which is up five percentage points quarter over quarter.
Over the past few months is I think we have made a lot of efforts to improve our operational efficiencies.
For example, like Baidu costs SG&A was down by truck per se yeah over here in a second question.
I think our business.
At different stage of development. So we have different strategies often investment for each business.
Although mobile ecosystem, which is relatively mature business I recall is to keep as profit margins are solid.
So there are multiple system continued to generate very strong cash flow to support our investments in new initiatives.
For our new AI businesses, we will be focused so hey, I call intelligent driving.
Both of them go to wildfires in the past few quarters, which you can see that so we will continue to make necessary investments as needed.
<unk> stated just knowledge will remain full service.
Heresy and sustainable revenue growth.
And to continue improving our operating margins in the future. Thank you so much Gary.
Okay.
Thank you.
The next question comes from James Lee of Mizuho. Please go ahead.
Great. Thanks for taking my questions My.
My question is regarding Chi due and congratulations by the way on your launch in June and at the same time you guys also launch our T. Six.
I'm just curious about maybe the positioning.
Chico and Archie six can you guys talk about the customer segmentation strategy of the Chi autonomous driving vehicles, just curious how much overlap in demand between the two thanks.
Yeah. This is robin on the position for Oh, Gee do and argued six time very different.
Before I talk about Gee do let me first talk about our strategy for intelligent driving.
Our goal is to provide large scale fully driverless ride hailing services Oh pangels.
This is powered by our out for autonomous driving technology.
And at the same time, we use some of our al four capabilities to put them into a assisted driving features to support automakers intelligent driving needs and Gee do it's just a perfect example of such auto makers.
So if you look on our Vince part of Palio for intelligent driving we have argued six.
Artistic represents baidu.
Best Autonomous driving technology.
Artistically is for larger scale fully properties rock heating services I'm, hoping all of them.
That is not.
Consumer facing.
Vehicle.
It's not selling to the consumers.
He does a global one it's a consumer facing product.
We put all our level four technology into level three or level, two plus if you will.
T mobile one well be equipped with E&ps 3.0.
Our most advanced autonomous driving solution.
<unk> 3.0 can handle end to end intelligent driving and.
And parking.
Urban roads and highways.
Also our smart cabin will be installed in the car.
If all you do to provide voice.
Traction inside and outside the clock.
We believe this new features will help us to expand our bins.
Or the timeline.
We could see everything is well on track.
We could see the first to mass produce the rubble one finished them very soon.
This car world demonstrating <unk> capability from design to mass production.
Do you do plan to take orders for mobile one later this year and deliberate that vehicles are starting a 'twenty.
'twenty 'twenty swing.
And you do have the second model.
We do plan to launch at the end of.
This year, then start taking orders in 'twenty 'twenty screen and deliver in 2024 for our second model.
Yeah, that's it.
Okay.
Great. Thank you.
Yes.
Yes.
Sure.
Our last question will come from Wang of UBS.
Hi.
Thank you good even imagine Matt and thank you for taking my questions.
First I'm wondering if management can share some updates on your capital allocation could management talk a bit more on the implementation of your share buyback program and how do you balance the investments into new businesses versus doing more buybacks or dividend and second as we recently saw that.
Development between the U S and Chinese regulators regarding the audit inspections of a D. Ours could management also share your thoughts on this progress and give them. Some of your peers have started the process to convert into do primary listing I was wondering what baidu also cause SEDAR, such a U S. Hong Kong.
Primary listing status. Thank you.
Yeah. Thank you for your questions, let me Taro questions.
As of today, we would have to return about you started to put in my opinion to shareholders under the 220 share repurchase program.
It also is a U S dollar fulltime 5 billion cat and which means we still have a U S dollar $1 6 billion lapping the program.
Baidu will continue to buyback our shares from the open market.
Since away quite strongly believe in our long term developments.
If you Louie Louie into our balance sheet as of Q2, our cash cash equivalents restricted cash and short term investments were U S. Dollar $28 3 billion and we also have the other 11 1 billion in our long term investments.
If you are alluding to our beans today stopped there was mentioned.
Hum.
Our previous remarks, I think for mobile ecosystem continues to generate wider heresy properties of magics for Baidu AI cloud revenue has been growing very fast.
Faster to our peers you see industry.
Well up local it's already the largest autonomous ride hailing service provider in the world.
So I received pretty much on track. So we believe that well on the right right direction, and we will continue to invest in ourselves.
About your second question about the delisting and the primary in Hong Kong I think the most recent statement after the project called Psi.
Hearing that you say it will be in the Chinese authorities.
The very important first step to us opening access for let me say it will be to inspect and investigate completed to the rest are partly a consequence in China.
I think this is a very important milestone for both countries and China based ECR, which the ADR trading in the U S.
So we can feel that the two governments are practically seeking solutions.
For Baidu, we have already happened Hong Kong secondary listing and we have some major shareholders, who converted into ordinary shares in Hong Kong also we're also very glad to be included in the Hunton Index you would pay if that also timber fits with belief wasted the inclusion into the hunting deck.
Our Hong Kong shares will receive from what's on flow.
Followed your primary listing.
US Huawei Huawei has been a law.
Process all are switching from the secondary to primary listing in Hong Kong.
Soup is straightforward and we're dosing any kind of hurdles for us to achieve that.
I think a wasp.
Pausing for US is to remain focus on Pes fundamentals and drive long term shareholder values.
Also baidu will continue to comply with applicable laws in both China, and the United States and tried to maintain listing closing NASDAQ and Hong Kong exchange. Thank you so much.
Okay.
Thank you.
Yeah.
Yeah.
Yeah.
That will conclude today's question and answer session and that does conclude our conference for today. We thank you for participating and you may now disconnect.
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