Baidu Announces Financial Results for Third Quarter of 2005
Company Reports Stronger than Expected Revenue Growth Following Successful IPO
BEIJING, Oct. 26 /PRNewswire-Xinhua / -- Baidu.com, Inc. (Nasdaq: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the quarter ended September 30, 2005(1).
(Logo: http://www.newscom.com/cgi-bin/prnh/20041011/BAIDULOGO ) Highlights of Third Quarter 2005 * Total revenues increased to RMB88.9 million ($11.0 million), representing a 27.6% increase from the previous quarter and a 174.4% increase from the corresponding period in 2004. Net income for the quarter was RMB8.5 million ($1.1 million). * Number of active online marketing customers during the third quarter increased to over 53,000, an increase of 28.9% from the previous quarter and a 148.2% increase from the corresponding period in 2004.
"We are very pleased that Baidu continued its growth momentum during the third quarter with robust traffic expansion and strong revenue growth," said Robin Li, Baidu's Chairman and CEO. "Our focus on providing the best search experience to Chinese users, the stronger than expected branding effect of our successful IPO, and the progress that we made in refining our P4P platform contributed to our solid top line growth for the quarter."
"As the leading website in China, we are well positioned for the continuing growth in the future," Mr. Li added. According to Alexa.com, Baidu.com was the No. 1 website in China based on three-month average user traffic as of September 30, 2005.
Shawn Wang, Baidu's CFO, said, "While we achieved strong revenue growth during the quarter, we have maintained a clear focus on investing in our operational infrastructure in order to position Baidu for sustainable growth in the future. We believe P4P online marketing in China is still at a very early stage, and it is extremely important for us to invest now for long-term growth. We significantly increased our investment in fixed assets, R&D and branding, as well as in strengthening our sales and distribution network during the quarter. We are confident that such investments in our operational infrastructure will help us better serve the needs of China's rapidly expanding Internet user base and online marketing customer base, presently and in the long run."
Financial Results for Third Quarter of 2005
Online marketing revenues for the third quarter of 2005 were RMB85.9 million ($10.6 million), representing a 28.7% increase from the previous quarter and a 188.5% increase from the corresponding period a year ago. The growth was primarily attributable to an increase in the number of active online marketing customers which, increased to over 53,000, representing a 28.9% increase from the previous quarter and a 148.2% increase from the corresponding period in 2004.
Depreciation expenses of servers and other equipment as a component of cost of revenues was RMB7.7 million ($1.0 million), representing a 63.6% increase from the previous quarter and a 318.6% increase from the corresponding period in 2004. This increase was primarily attributable to expenses incurred in connection with the building of our new major data center in Beijing to strengthen our ability to support increasing user traffic. Capital expenditures totaled RMB38.9 million ($4.8 million) for the third quarter of 2005, representing a 149.3% increase from the previous quarter.
Bandwidth cost as a component of cost of revenues was RMB6.7 million ($0.8 million), representing a 66.0% increase from the previous quarter and a 333.7% increase from the corresponding period in 2004 relating mostly to our data center expansion.
Traffic acquisition cost as a component of cost of revenues was RMB5.7 million ($0.7 million), representing 6.4% of total revenues compared to 9.4% in the corresponding period in 2004.
Research and Development expenses were RMB11.0 million ($1.4 million), a 58.8% increase from the previous quarter and a 224.0% increase from the corresponding period in 2004 reflecting the increase in R&D headcount.
Selling and marketing expenses as a component of selling, general and administrative expenses were RMB19.7 million ($2.4 million), representing an increase of 22.7% from the previous quarter and 189.8% from the corresponding quarter in 2004. The increase was mainly due to our ongoing brand promotion efforts during the quarter and the expenses incurred in strengthening our sales and distribution network.
Operating profit on a GAAP basis was RMB6.9 million ($0.9 million), representing a 42.2% decrease from the previous quarter and 172.0% increase from the corresponding period in 2004. The sequential decrease was mainly due to share-based compensation expenses and an increase in server depreciation and bandwidth costs associated with the opening of the new data center. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB17.7 million ($2.2 million) for the third quarter of 2005, remaining stable from the previous quarter and a 139.8% increase from the corresponding period in 2004.
Net income on a GAAP basis was RMB8.5 million ($1.1 million), representing a 29.4% decrease from the previous quarter and a 189.3% increase from the corresponding period in 2004. Net income excluding share-based compensation expenses (non-GAAP) was RMB19.3 million ($2.4 million), a 6.0% increase from the previous quarter and a 147.9% increase from the corresponding period in 2004. Basic and diluted earnings per ADS for the third quarter of 2005 amounted to RMB0.35 ($0.04) and RMB0.26 ($0.03), respectively.
Net cash provided by operating activities was RMB53.5 million ($6.6 million) for the third quarter of 2005, representing a 65.6% increase from the previous quarter and a 205.6% increase from the corresponding period in 2004.
Adjusted EBITDA (non-GAAP), which is defined here as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, was RMB27.8 million ($3.4 million) for the third quarter for 2005, representing a 12.1% increase from the previous quarter and a 176.8% increase from the corresponding period in 2004.
Outlook for Fourth Quarter 2005
Baidu currently expects to generate total revenues in an amount ranging from RMB102 million ($12.6 million) to RMB106 million ($13.1 million) for the fourth quarter of 2005, representing a 215-227% increase from the corresponding period in 2004. This forecast reflects Baidu's current and preliminary view, which is subject to change.
Conference Call Information
Baidu's management will hold an earnings conference call on October 26, 2005 at 8 PM (EDT) which corresponds to October 27, 2005 at 8 AM Beijing/Hong Kong time. A live and archived webcast of this conference will be available at http://ir.baidu.com.
Dial-in details for the conference call are as follows: US: 617 224 4327 UK: 44 207 365 8426 Hong Kong: 852 3002 1672 Passcode for all regions: 44191413
A replay of the conference call may be accessed at the following number until 11 PM (EDT) on October 29, 2005:
International: 617 801 6888 Passcode: 53986750 About Baidu
Baidu.com, Inc. is the leading Chinese language Internet search provider. As a technology-based media company, Baidu aims to provide the best way for people to find information. In addition to serving individual Internet search users, Baidu provides an effective platform for businesses to reach potential customers. Baidu's ADSs, each of which represents one Class A ordinary share, are currently trading on the NASDAQ National Market under the symbol "BIDU".
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Baidu's strategic and operational plans, contain forward-looking statements. Baidu may also make written or oral forward- looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Baidu's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward- looking statement, including but not limited to the following: our growth strategies; our future business development, results of operations and financial condition; expected changes in our margins and certain cost or expense items as a percentage of our revenues; our ability to attract and retain users and customers; competition in the Chinese language Internet search market; the outcome of ongoing, or any future, litigation or arbitration, including those relating to copyright, patent and other intellectual property rights; the expected growth of the Chinese language Internet search market and the number of Internet and broadband users in China; and Chinese governmental policies relating to the Internet and Internet content providers. Further information regarding these and other risks is included in our registration statement on Form F-1, as amended, filed with the Securities and Exchange Commission. Baidu does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
About Non-GAAP Financial Measures
To supplement Baidu's consolidated financial results presented in accordance with GAAP, Baidu uses the following measures defined as non-GAAP financial measures by the SEC: adjusted EBITDA, operating profit excluding share-based compensation expenses and net income excluding share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" and "Reconciliation from net cash provided by operating activities to adjusted EBITDA" set forth at the end of this release.
Baidu believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Baidu's liquidity and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Baidu's historical liquidity. Baidu computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
Baidu.com, Inc. Condensed Consolidated Balance Sheets September June December (in RMB thousands) 30, 2005 30, 2005 31, 2004 Unaudited Unaudited Audited Cash and cash equivalents 966,309 210,696 200,196 Account receivable, net 21,456 21,038 9,645 Other current assets 8,797 7,929 2,421 Total current assets 996,562 239,663 212,262 Fixed assets, net 91,362 58,194 35,932 Intangibles, net 13,169 12,806 12,953 Goodwill 8,741 8,731 - Investment under cost method 2,023 - - Other non-current assets - 9,048 1,059 Total non-current assets 115,295 88,779 49,944 Total assets 1,111,857 328,442 262,206 Accrued expenses and other liabilities 74,309 39,799 21,900 Customers' deposits 57,367 42,065 25,990 Deferred revenue 7,954 7,607 6,302 Total current liabilities 139,630 89,471 54,192 Redeemable convertible preferred shares - 211,352 211,352 Shareholders' equity (deficit) 972,227 27,619 (3,338) Total liabilities, redeemable convertible Preferred shares and shareholders' equity (deficit) 1,111,857 328,442 262,206 Baidu.com, Inc. Condensed Consolidated Statements of Operations For the Three Months Ended September 30, September 30, June 30, (in RMB thousands except 2005 2004 2005 for share, per share and per ADS information) Revenues Unaudited Unaudited Unaudited Online marketing services 85,884 29,767 66,721 Others 3,052 2,643 2,982 Total revenues 88,936 32,410 69,703 Less: business tax and surcharges (5,723) (1,922) (4,529) Total net revenues 83,213 30,488 65,174 Operating cost and expenses Cost of revenues (note 1) (24,319) (8,203) (16,386) Selling, general and administrative (30,166) (11,497) (23,725) Research and development (11,004) (3,396) (6,930) Share-based compensation (note 2) (10,807) (4,849) (6,169) Total operating cost and expenses (76,296) (27,945) (53,210) Operating profit 6,917 2,543 11,964 Interest income, net 3,721 356 920 Foreign exchange loss, net (550) -- -- Other income, net 285 41 342 Net income before tax 10,373 2,940 13,226 Taxation (1,869) -- (1,175) Net Income 8,504 2,940 12,051 Earnings per share for Class A and Class B ordinary shares, and per ADS: Basic 0.35 0.27 0.99 Diluted 0.26 0.10 0.39 Weighted average aggregate number of Class A and Class B ordinary shares outstanding: Basic 24,010,660 10,963,517 12,156,710 Diluted 32,904,458 29,335,663 30,518,035 Pro forma earnings per share on an as converted basis for Class A and Class B ordinary shares, and per ADS(2): Basic 0.27 0.11 0.42 Diluted 0.26 0.10 0.39 Pro forma weighted average aggregate number of ordinary shares outstanding on an as converted basis for Class A and Class B ordinary shares: Basic 31,249,302 27,612,394 28,805,587 Diluted 32,904,458 29,335,663 30,518,035 (1)Cost of revenues is analyzed as follows: Traffic acquisition costs (5,660) (3,038) (4,270) Bandwidth costs (6,693) (1,543) (4,032) Depreciation (7,711) (1,842) (4,712) Other (4,255) (1,780) (3,372) Total cost of revenues (24,319) (8,203) (16,386) (2) Share-based compensation expenses are allocated as follows: Cost of revenues (343) (419) (233) Selling, general and administrative (6,776) (3,676) (4,222) Research and development (3,688) (754) (1,714) (10,807) (4,849) (6,169)
Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures (*) (in RMB thousands, unaudited)
Three months ended September 30, 2004 GAAP Result Adjustment Non-GAAP Results Operating profit 2,543 4,849 7,392 Net income 2,940 4,849 7,789 Three months ended June 30, 2005 GAAP Result Adjustment Non-GAAP Results Operating profit 11,964 6,169 18,133 Net income 12,051 6,169 18,220 Three months ended September 30, 2005 GAAP Result Adjustment Non-GAAP Results Operating profit 6,917 10,807 17,724 Net income 8,504 10,807 19,311 Reconciliation from net cash provided by operating activities to adjusted EBITDA(*)(in RMB thousands, unaudited): Three Three Three months months months ended As a ended As a ended As a September of % June % of September % of 30, 2004 revenues 30, 2005 revenues 30, 2005 revenues Net cash provided by operating activities 17,494 54% 32,034 46% 53,462 60% Changes in assets and liabilities, net of effects of acquisitions (7,060) -22% (7,175) -10% (24,094) -27% Provision for income taxes - - 1,175 2% 1,869 2% Interest income and other, net (397) -1% (1,261) -2% (3,456) -4% Tax benefits from exercise of stock options, warrants and other - - - - - - Adjusted EBITDA 10,037 31% 24,773 36% 27,781 31% (*) Definition of adjusted EBITDA: earnings before interest, taxes, depreciation, amortization, other non-operating income and share- based compensation expenses. 1. This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are based on the effective exchange rate as of September 30, 2005, which was RMB8.0920 to US$1.00. 2. Pro forma basic and diluted earnings per share are computed by dividing net income by weighted average number of ordinary shares outstanding for the period plus the number of ordinary shares resulting from the assumed conversion of all the outstanding redeemable convertible preferred shares upon closing of the initial public offering as if the conversion had occurred at the beginning of the period, or when the preferred shares were issued, if later.
SOURCE Baidu.com, Inc. -0- 10/26/2005 /CONTACT: China: Cynthia He of Baidu.com, Inc. (Beijing), +8610-8262-1188, firstname.lastname@example.org; or Christina Splinder of Ogilvy Public Relations Worldwide (Beijing), +8610-8520-6550, email@example.com; or US: Stefan Anikewich of Hill & Knowlton (New York), +1-212-885-0505, firstname.lastname@example.org, all for Baidu.com, Inc./ /Photo: http://www.newscom.com/cgi-bin/prnh/20041011/BAIDULOGO / /Web site: http://Baidu.com / (BIDU) CO: Baidu.com, Inc. ST: China IN: CPR MLM SU: ERN ASI LD -- NYW180 -- 6250 10/26/2005 16:00 EDT http://www.prnewswire.com