Baidu, Inc.

Ladies and gentlemen, and thank you for standing by for Baidu's fourth quarter and full year 2020 earnings conference call. At this time, all participants are in a listen-only mode. After management's 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. And I'd like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations.

Hello, everyone, and welcome to Baidu's fourth quarter and full year 2020 conference call. Baidu's earnings release was interviewed earlier today, and you can find a copy on our website as well as on the website. And for today, we have Robin Li, our co-founder and chief executive. Chief Financial Officer, Ann Dolshan, Executive Vice President, in charge of Search and Feed. After our prepared remarks, we will hold our 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 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. Potential risks and uncertainties include, but are not limited, to those outlined in our public filing with ICC, including our annual report on Form 20-F. Baidu does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Our earnings press release and this call include discussions between unaudited non-GAAP financial experts. We have made minor adjustments to our . Our press release to the most directly comparable gap measures and is available on our website at ir.baidu.com. As a reminder, this conference will be recorded. In addition, a webcast of this conference call will also be available on Baidu's IR website. I will now turn the call over to .

Good morning, everyone. Baidu delivered another solid quarter in Q4. despite the core revenue reaching RMB 23.1 billion, that's 3.5 billion U.S. dollars, which is up 6% year-over-year and up 8% quarter-on-quarter. The latter was much higher than our historical flattish or low single-digit growth from Q3 to Q4. In addition to the improvement of macroeconomic conditions in China, we are benefiting from the digitalization of industrial internet. I think for non advertising revenue in the fourth quarter grow 52% year over year to an annualized run rate of US dollar 2.6 billion, driven by the convergence of AI solution, cloud services, and consumer internet. Such convergence is expected to accelerate into the next decade, and Baidu stands to benefit from it. Let me elaborate on the trend that we are seeing, starting from smart transportation. China aims to reap its global competitiveness in the transport sector through aggressive infrastructure building. The Chinese government is promoting a multi-year plan to install smart transportation networks in cities with sensors and cameras on public roads, connecting vehicles with roadside units to foster safer driving, improve throughput, and reduce carbon emissions. Such government initiative encourages municipal governments to shift their budget toward a more software-defined transportation network. Apollo's strong brand in intelligent driving and our holistic approach to smart transportation makes us well-suited to capture the opportunities in smart transportation infrastructure development. For example, Baidu signed a strategic partnership with Guangzhou in southern China to deploy the world's first multi-model autonomous driving mobility as a service, or MAP, platform. Utilizing Apollo robot taxi and robot bus, Guangzhou begins this month to allow commuters in the Huangpu District to call up public transport services on demand in lieu of taxes, ride-hailing, and other traditional gasoline-powered public transport services. The Guangzhou Smart Transportation Project takes advantage of Baidu's leading autonomous driving technologies and Baidu Cloud's strong technology infrastructure, as well as leveraging the reach of Baidu ADP and Baidu Maps to enable locals easy access to Apollo Maps. For Enterprise Cloud, we are seeing ad customers subscribing to Baidu Cloud due to our strong internet foundation. For example, a major e-commerce company and existing ad customer began using our cloud services a year ago. In the past year, the ad customer saw its business grow to massive scale. When the customer realized that Baidu AI Cloud was able to support businesses with over 100 million daily users and enabled them to expand rapidly, the app customers increased its purchase of Baidu Cloud services by 82 fold from a year ago. Over time, we believe Baidu AI Cloud stands to benefit from our existing advertiser base of hundreds of thousands of enterprises, as well as our provider neutrality status. In the face of enterprise customers adopting multi-cloud provider strategies. From this example, we see strategic advantage of concurrently operating in the AI solution, cloud services, and internet market. As enterprises and the public sector embrace digital transformation to strengthen and expand their relationships with their customers and constituent online. As we enter the next decade, Baidu is well positioned as a leading AI company with a strong internet foundation to seize the huge market opportunities in cloud services, autonomous driving, smart transportation, and other AI-powered areas. Turning to Q4, operating highlights. Let me start with AI Cloud. Baidu Cloud continues to be number one in China's AI public cloud market, per IDC's latest report, marking the third time that Baidu has topped the list. Baidu AI Cloud offers a full suite of cloud services and solutions, and is differentiated in the market with our use of AI to our cloud solutions and improve our customers' operational efficiency, and service level. Our AI solutions are demonstrating scalability and replicability across multiple industry sectors. For example, our AI call center solution, which uses Baidu's brain to handle customer calls with conversational AI, is going repeat purchases. Our first key customer, a major telecom operator have followed up with two more purchases of our AI call center and installed them in their customer service centers nationwide. As we strive for customer satisfaction and best-in-class solutions, our AI call center solution has successfully expanded from telecom into other sectors, including airlines, financial services, energy, and automobiles. Through greater industry adoption, model training time has dropped by more than 50%, and the project implementation has been shortened to one month. In the area of vertical cloud, the smart transportation project with Guangzhou serves as a lighthouse project for other cities to follow. The deployment of ApolloMath allowed commuters to order global taxi and global bus in place of taxi rides or other public transportation. The implementation of B2X smart road infrastructure equips 102 intersections and the streets in the knowledge city district of Guangzhou with cameras and sensors, enabling better traffic management. Commercial vehicles entering the vicinity are installing dual-OS-powered rear-view mirrors to enable traffic violation enforcement, even if the license plate of a violating vehicle is covered by mud. The Guangzhou project uses Apollo ACE transportation engine, which, in essence, is a transportation cloud solution. It processes traffic information from ApolloMAS and B2S, dual OS connected vehicles, and Baidu Maps. It provides traffic agencies better information to improve traffic management and transportation services, and it enables Apollo and other compatible vehicles better understanding of surrounding traffic conditions. Similarly, we recently signed a second contract with the city of Baoding, to expand coverage of Apollo smart transportation in their city. Our strategic partnership with Beijing, Guangzhou, Shanghai, and Chongqing, to name a few, to provide smart transportation is becoming an important milestone in the development of modern cities, serving as a means for the public sector to use AI to improve metropolitan traffic, public transportation, and air quality. Turning to intelligent driving, we continue to invest aggressively in self-driving technology for passenger vehicles and robot taxi fleet management. Apollo was once again ranked number one in China for autonomous driving, according to the 2020 Beijing Autonomous Vehicle Road Tester Report. The report is highly respected in the industry as Beijing Traffic Authority closely monitors autonomous driving test miles. Apollo accumulated test miles reached 4.3 million in December. Apollo has been granted China's first driverless testing permit and is the only Chinese company to be granted driverless testing permit from both California and China. In terms of autonomous driving operational experience, Apollo robot taxi and robot bus fleet have provided over 210,000 rides to the public as of December 2020. We are proud that dual OS for auto, our operating system-powered auto infotainment, has been installed in over 1 million new vehicles just last year. pointing to two market trends. One, mobile, home, and in-vehicle internet are converted. Baidu's internet platform, designed to draw synergy across usage platforms, enables dual OS for auto to leverage the large developer community for Baidu smart mini program to populate the skill store. And at the same time, Consumers benefit from the consistency and familiarity of dual-OS skills developed from mobile and home environment. Two, new car buyers are turning to best-in-class self-driving capabilities so that they can do more and enjoy their ride in cars. The race toward building new vehicles with better self-driving capabilities through AI creates a big opportunity for buyers. Let me talk about the progress of Apollo Self-Driving, or ASD, which includes HDMAPS, AVP, and AMP. To date, we have signed strategic partnerships with 10 leading automakers to power their new vehicle models with Apollo Self-Driving services. FIDO is uniquely positioned to offer high-definition maps, or HDMAPS, a critical component for self-driving to top automakers in China. We have invested in Baidu Maps for many years and are one of the very few companies in China offering HD maps. Last month, WM Motor, a leading Chinese eBay maker, announced the mass production of their new W6 SUV due to release in the first half of this year. with Apollo Automated Valid Parking, or AVP, a Level 4 service option. We are excited to announce that we will be taking orders of Apollo Autonomous Navigation Pilots, or A&P, which is based on Apollo's leading autonomous driving technology. This comes timely as MIIT China's transport agency released this draft regulation to allow highway testing of autonomous driving. We believe end-to-end integration of hardware and software will make the best vehicle. That's why we are in the process of setting up an intelligent EV company, and we have entered into strategic partnership with multinational automaker Zhejiang Jili Holding Group to offer automobile design and manufacturing for Baidu's new EV company. Geely holds the distinction of best-selling Chinese automobile brands in past years under the Volvo and Geely brands. By conveying Baidu's expertise in autonomous driving and smart transportation with Geely's expertise as a leading automobile and EV manufacturer, we hope to pave the way for the future passenger vehicles. Turning to DuoOS, which continues to see strong adoption. Monthly watch queries from third-party devices reached 3.6 billion, that's up 66% year over year. And DuoOS skill store now offers over 4,400 skills. Our focus on user experience through leading AI capabilities has made Xiaodu smart display number one in global shipments again. according to all three market research firms, IDC, Strategy Analytics, and Canalys, for the third quarter of 2020. Turning to mobile ecosystem. In December, MAU's Baidu app reached 544 million. The number of creators on Baidu nearly tripled. The total number of smart mini programs grew 124% from a year ago. The MAU's smart community program reached 414 million. This number points to a thriving internet platform that is attracting a large number of third-party creators, publishers, and service providers. The same trend can be seen in our vertical and community efforts. For example, on a quarter-over-quarter basis, Daily average viewership of videos on Baidu Health grew 92%, and daily average live video sessions hosted by healthcare professionals grew 163%. E-commerce touches the lives of 1.16 billion internet users each month in China. Through our AI building blocks, we enable users to have single log-ons meaning that a user can log into our app to check his or her express delivery status or some express delivery because just by searching and clicking the applicable delivery company search result. The service convenience of our AI building blocks enable daily express delivery service usage to surpass four million times just a month after going live in Baidu app. The vibrancy of our mobile ecosystem allows third-party services to quickly ramp up, and our search nature supports the survival of long-tail services. Daily logging users on Baidu apps surpassed 70%, up 18 points from a year ago, which creates a strong foundation for further growth of third-party services and non-advertising offerings on Baidu. On monetization, for the fourth quarter, revenue for managed page reached a third of Baidu Core's online marketing revenue, up from less than 24% a year ago. Over 300,000 managed page customers have adopted Baidu Marketing Cloud, which enables them to purchase marketing services, build audience, generate themes, and maintain lifetime relationships with consumers through the tools and services offered on our hosted platform. Our marketing cloud provides CRM-like services, for example, allowing merchants to message customers who have previously interacted with them. Such CRM features facilitate retargeting and other measures to improve overall marketing effectiveness. We aim to integrate YY onto our platform in a deep and thorough way. Comparing with other large mobile ecosystems, our non-advertising revenue represents a much smaller percentage, which means there is a huge potential for upside. The YY acquisition will help speed up the development of our non-ad revenue. We will allow YY broadcasters to increase their fans following on Baidu. Hundreds of millions of Baidu users will be able to enjoy more live streaming content through Baidu app and how kind short video and Baidu post. We believe such large-scale product integration will create significant synergy in content, infrastructure, and monetization. We also plan to leverage YY to accelerate the development of information and knowledge-centric live streaming on Baidu. This effort will not only improve user stickiness and vibrancy on our large internet platform, We believe live streaming has the potential to evolve beyond host tipping to become a major way for communities on Baidu to further divide and merchants to increase their user engagement and grow their social assets on the Baidu platform. User attention usually shifts towards interactive content. With the advent of 5G and augmented reality, To increase video effects, live streaming will be an integral component of future content development, and we are excited about this opportunity. With that, let me turn the call over to Herman to go through financial habits.