FORM 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2020

Commission File Number: 000-51469

 

 

BAIDU, INC.

 

 

Baidu Campus

No. 10 Shangdi 10th Street

Haidian District, Beijing 100085

The People’s Republic of China

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BAIDU, INC.
By:    

/s/ Herman Yu

Name:     Herman Yu
Title:     Chief Financial Officer

Date: August 17, 2020


Exhibit Index

Exhibit 99.1—Press Release

EX-99.1

Exhibit 99.1

Baidu Announces Second Quarter 2020 Results

BEIJING, China, August 13, 2020 – Baidu, Inc. (NASDAQ: BIDU) (“Baidu” or the “Company”), a leading search engine, knowledge and information centered Internet platform and AI company, today announced its unaudited financial results for the second quarter ended June 30, 20201.

“With COVID-19 becoming more manageable in China, Baidu’s business is steadily rebounding. We are pleased that in-app revenue grew in the second quarter, despite a challenging macro environment, further validating our strategy to make Baidu App a super app through AI-powered building blocks and marketing cloud platform.” said Robin Li, Co-founder and CEO of Baidu. “Baidu’s new AI businesses, including cloud, smart devices and smart transportation, saw double-digit growth in the second quarter and stand to become an important revenue driver in the years to come.”

“In addition to investing in new AI businesses, Baidu is also diversifying our revenue streams through membership, online games and others to increase the ARPU of our existing traffic.” said Herman Yu, CFO of Baidu. “The healthy growth of Baidu App and new AI businesses have enabled Baidu Core’s adjusted EBITDA margin to reach 41% in the second quarter. We plan to continue heavy investments in technology to maximize Baidu’s future growth potential.”

Second Quarter 2020 Financial Highlights

 

     Baidu, Inc.  
(In millions except per ADS, unaudited)    Q2
2019
    Q1
2020
    Q2
2020
    YOY     QOQ  
     RMB     RMB     RMB     US$              

Total revenues

     26,326       22,545       26,034       3,685       (1 %)      15

Operating income (loss)

     233       (437     3,644       516       1,464     —    

Operating income (non-GAAP) 2

     1,955       1,437       5,605       793       187     290

Net income to Baidu

     2,412       41       3,579       507       48     8,629

Net income to Baidu (non-GAAP) 2

     3,635       3,082       5,082       719       40     65

Diluted earnings per ADS

     6.57       0.02       10.31       1.46       57     51,450

Diluted earnings per ADS (non-GAAP) 2

     10.11       8.84       14.73       2.08       46     67

Adjusted EBITDA 2

     3,355       2,852       7,015       993       109     146

Adjusted EBITDA margin

     13     13     27     27    

 

1

Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.0651 to US$1.00, the exchange rate in effect as of June 30, 2020 as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Translations are provided solely for the convenience of the reader.

2 

Non-GAAP measures are defined in Non-GAAP Financial Measures section. Also see the table captioned “Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures” for more details.

 

1


     Baidu Core  
(In millions, unaudited)    Q2
2019
    Q1
2020
    Q2
2020
    YOY     QOQ  
     RMB     RMB     RMB     US$              

Total revenues

     19,540       15,268       18,926       2,679       (3 %)      24

Operating income

     2,109       1,848       4,966       703       135     169

Operating income (non-GAAP) 2

     3,485       3,348       6,482       917       86     94

Net income to Baidu Core

     3,731       1,698       4,424       626       19     161

Net income to Baidu Core (non-GAAP) 2

     4,740       4,519       5,656       801       19     25

Adjusted EBITDA2

     4,766       4,641       7,771       1,100       63     67

Adjusted EBITDA margin

     24     30     41     41    

Other Highlights

Corporate

 

   

As part of corporate social responsibilities, Baidu is partnering with healthcare professionals and government organizations to tackle public health risks and improve the quality of life, using Baidu AI for public health monitoring, drug development and disease diagnosis. Baidu AI healthcare solutions have been adopted by nearly 2,000 hospitals and primary healthcare institutions across 27 provinces.

 

   

Baidu returned US$540 million to shareholders under the 2020 Share Repurchase Program in the second quarter, bringing the Company’s cumulative repurchase for the last two years to approximately US$1.9 billion.

 

   

Baidu’s board of directors recently approved a change to the 2020 Share Repurchase Program, increasing the repurchase authorization from US$1 billion to US$3 billion, which is effective through December 31, 2022.

Mobile Ecosystem

 

   

Baidu App daily active users (“DAUs”) reached 204 million in June 2020, adding 16 million users in the last 12 months.

 

   

As a leading Internet platform for content and services, Baidu has attracted a large variety of knowledge and information-based videos to its platform, including live and short videos. Over 800 sessions of topical live streaming were broadcasted in the second quarter, with sessions like Baidu Wiki Virtual Zoo, Summer Art Festival and Wandering through Civilization Season 2, attracting over 40,000,000 views.

 

   

Baijiahao (“BJH”) publisher accounts reached 3.4 million, up 52% year over year, in June 2020. The large scale of Baidu’s platform is drawing more original content creators to join BJH, which allows easy sharing of content across Baidu App, Haokan, Quanmin and Baidu’s full set of knowledge products.

 

2


   

Baidu Smart Mini Program (“SMP”) is becoming more lively with the number of SMPs joining Baidu’s network growing over five folds in the last year, and SMP monthly active users (“MAUs”) on Baidu App reaching 339 million, up 25% year over year. App developers are migrating to SMP, which enables users native-app like, closed-loop experience on third-party content and services, without having to leave Baidu and download the host apps.

 

   

Revenue from Baidu Managed Page increased to approximately 30% of Baidu Core’s online marketing services revenue in the second quarter of 2020. Merchants with HTML5 websites across many industries are switching to Managed Page, as the landing page for their search results.

DuerOS

 

   

In June 2020, DuerOS monthly voice queries on Xiaodu devices reached 2.8 billion, nearly doubling from last year, and DuerOS total monthly voice queries reached 5.8 billion, up 57% from last year.

 

   

DuerOS skills store now offers 4,000 skills in wide ranging genres, including education, video, online game and live streaming. DuerOS developer community has grown to over 42,000 members.

 

   

JD.com announced that Xiaodu series of smart displays and smart speakers was the best-selling in the smart speaker category on its platform during this year’s June 18 Shopping Festival.

Cloud, AI Services & AI Platform

 

   

Baidu formed a strategic partnership with China National Building Materials Group (CNBM Group), the parent of 13 listed companies. CNBM Group plans to use Baidu AI PaaS, equipped with big data and IoT edge computing capabilities, to provide intelligent logistics, intelligent factory and industrial autonomous driving. For example, CNBM Group plans to use Baidu AI PaaS paired with Baidu intelligent map to improve the routing efficiency of its logistics vehicles and track the vehicles whereabouts to optimize operational costs and increase traffic safety.

 

   

Baidu’s AI open platform, built on top of Baidu Cloud, offers over 260 AI capabilities, which are tapped by over 2.1 million developers.

 

   

At the World Artificial Intelligence Conference, Baidu’s natural language processing framework ERNIE (Enhanced Representation through kNowledge IntEgration) earned the distinction of the SAIL (Super AI Leader) Award, recognizing inspiring technology breakthroughs, application innovations and AI projects that change people’s lives.

Apollo

 

   

The Apollo robotaxi operations in Beijing, Changsha and Cangzhou have expanded into larger networks and more complex road conditions, such as downtown streets.

 

3


   

In May 2020, Baidu completed the 145,000 square feet Apollo Park in Beijing, an autonomous driving and V2X testing facility that supports testing, operational command center, cloud control system, vehicle warehousing, maintenance and calibration.

iQIYI

 

   

iQIYI subscribers reached 104.9 million, up 4% year over year, in June 2020, and membership revenue was up 19% year over year. iQIYI’s large subscriber base further strengthens iQIYI’s foundation to produce entertainment blockbuster originals.

Second Quarter 2020 Results

Total revenues reached RMB 26.0 billion ($3.69 billion), decreasing 1% year over year. Online marketing revenues were RMB 17.7 billion ($2.50 billion), decreasing 8% year over year. Other revenues were RMB 8.3 billion ($1.18 billion), increasing 18% year over year, driven by the strong growth of iQIYI membership and Baidu’s cloud and smart transportation solutions.

Revenue from Baidu Core reached RMB 18.9 billion ($2.68 billion), decreasing 3% year over year. Revenue from iQIYI reached RMB 7.4 billion ($1.05 billion), up 4% year over year. iQIYI membership revenue grew 19% year over year, partially offset by online advertising revenue declining 28% year over year.

Cost of revenues was RMB 13.1 billion ($1.86 billion), decreasing 19% year over year, primarily due to a decrease in traffic acquisition costs, sales tax and surcharges, and costs of goods sold. The decrease in traffic acquisition costs reflected decreasing union revenues, as the Company focused on optimizing profitability over revenue growth.

Selling, general and administrative expenses were RMB 4.4 billion ($625 million), decreasing 16% year over year, primarily due to decreased marketing spending and personnel related expenses.

Research and development expenses were RMB 4.8 billion ($685 million), increasing 2% year over year.

Operating income was RMB 3.6 billion ($516 million) and operating margin was 14%. Baidu Core operating income was RMB 5.0 billion ($703 million) and Baidu Core operating margin was 26%.

Non-GAAP operating income was RMB 5.6 billion ($793 million), and non-GAAP operating margin was 22%. Non-GAAP Baidu Core operating income was RMB 6.5 billion ($917 million), and non-GAAP Baidu Core operating margin was 34%.

 

4


Total other income was RMB 366 million ($53 million), decreasing 70% year over year, primarily due to loss from equity method investments, which is booked a quarter in arrears and reflects the impact of COVID-19 on its investees.

Income tax expense was RMB 1.2 billion ($174 million), which included tax withholding accrual for dividend distribution to offshore entities, compared to RMB 416 million in Q2 2019.

Net income attributable to Baidu was RMB 3.6 billion ($507 million), and diluted earnings per ADS was RMB 10.31 ($1.46). Net income attributable to Baidu Core was RMB 4.4 billion ($626 million). Non-GAAP net income attributable to Baidu was RMB 5.1 billion ($719 million), and non-GAAP net margin was 20%. Non-GAAP diluted earnings per ADS amounted to RMB 14.73 ($ 2.08). Non-GAAP net income attributable to Baidu Core was RMB 5.7 billion ($801 million), and non-GAAP net margin for Baidu Core was 30%.

Adjusted EBITDA was RMB 7.0 billion ($993 million) and adjusted EBITDA margin was 27%. Adjusted EBITDA for Baidu Core was RMB 7.8 billion ($1.1 billion) and adjusted EBITDA margin for Baidu Core was 41%.

As of June 30, 2020, cash, cash equivalents, restricted cash and short-term investments were RMB 154.1 billion ($21.80 billion), and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB 144.6 billion ($20.46 billion). Free cash flow was RMB 7.3 billion ($1.04 billion). Free cash flow excluding iQIYI was RMB 8.8 billion ($1.24 billion).

For more information on the adoption of ASU 2019-02 beginning January 1, 2020, in accordance with the new accounting standard, please see explanation under “Non-GAAP Financial Measures.”

Financial Guidance

For the third quarter of 2020, Baidu expects revenues to be between RMB 26.3 billion ($3.7 billion) and RMB 28.7 billion ($4.1 billion), representing a growth rate of -6% to 2% year over year, which assumes that Baidu Core revenue will grow between -7% and 3% year over year. The COVID-19 situation in China is evolving, and business visibility is very limited. The above forecast reflects Baidu’s current and preliminary view, which is subject to substantial uncertainty.

Conference Call Information

Baidu’s management will hold an earnings conference call at 9:15 PM on August 13, 2020, U.S. Eastern Time (9:15 AM on August 14, 2020, Beijing/Hong Kong Time).

Please register in advance of the conference call using the link provided below. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID by email.

 

5


For pre-registration, please click http://apac.directeventreg.com/registration/event/2568424. It will automatically direct you to the registration page of “Baidu Q2 2020 Earnings Conference Call”, where you may fill in your details for RSVP. If it requires you to enter a participant conference ID, please enter “2568424”.

In the 10 minutes prior to the call start time, you may use the conference access information (including dial-in number(s), Direct Event passcode and unique registrant ID) provided in the confirmation email that you have received following your pre-registration.

Additionally, a live and archived webcast of this conference call will be available at http://ir.baidu.com.

A replay of the conference call may be accessed by phone at the following number until August 21, 2020:

International:        +61 2 8199 0299

Passcode:              2568424

About Baidu

Baidu, Inc. is a leading search engine, knowledge and information centered Internet platform and AI company. The Company’s mission is to make the complicated world simpler through technology. Baidu’s ADSs trade on the NASDAQ Global Select Market under the symbol “BIDU”. Currently, ten ADSs represent one Class A ordinary share.

Contacts

Investors Relations, Baidu, Inc. Tel: +86-10-5992-8888 Email: ir@baidu.com

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,” “confident” and similar statements. Among other things, the outlook for the third quarter of 2020, quotations from management in this announcement, as well as Baidu’s and other parties’ 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, 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 but not limited to 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: Baidu’s growth strategies; its future business development, including development of new products and services; its ability to attract and retain users and customers; competition in the Chinese Internet search and newsfeed market; competition for online marketing customers; changes in the Company’s revenues and certain cost or expense items as a percentage of its revenues; the outcome of ongoing, or any future, litigation or arbitration, including those relating to intellectual property rights; the expected growth of the Chinese-language Internet search and newsfeed market and the number of Internet and broadband users in China; Chinese governmental policies relating to the Internet and Internet search providers, and general economic conditions in China and elsewhere. Further information regarding these and other risks is included in the Company’s annual report on Form 20-F and other documents 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. All information provided in this press release and in the attachments is as of the date of the press release, and Baidu undertakes no duty to update such information, except as required under applicable law.

 

6


Non-GAAP Financial Measures

To supplement Baidu’s consolidated financial results presented in accordance with GAAP, Baidu uses the following non-GAAP financial measures: non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) attributable to Baidu, non-GAAP net margin, non-GAAP diluted earnings per ADS, adjusted EBITDA, adjusted EBITDA margin and free cash flow. 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.

Baidu believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding certain items that may not be indicative of its recurring core business operating results, such as operating performance excluding not only non-cash charges, but also other items that are infrequent or unusual in nature. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to Baidu’s historical performance and liquidity. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using these non-GAAP financial measures is that these non-GAAP measures exclude certain items that have been and will continue to be for the foreseeable future a significant component in the Company’s results of operations. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company’s data.

 

7


Non-GAAP operating income represents operating income excluding share-based compensation expenses and amortization and impairment of intangible assets resulting from business combinations.

Non-GAAP net income attributable to Baidu represents net income attributable to Baidu excluding share-based compensation expenses, amortization and impairment of intangible assets resulting from business combinations, disposal gain or loss, impairment of long-term investments, fair value change of long-term investments, adjusted for related income tax effects. Baidu’s share of equity method investments for these non-GAAP reconciling items, amortization and impairment of intangible assets not on the investees’ books, accretion of their redeemable non-controlling interests, and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per shares, adjusted for related income tax effects, are also excluded.

Non-GAAP diluted earnings per ADS represents diluted earnings per ADS calculated by dividing non-GAAP net income attributable to Baidu, which is adjusted for accretion for the redeemable non-controlling interests, by the weighted average number of ordinary shares expressed in ADS. Adjusted EBITDA represents operating income excluding depreciation, amortization and impairment of intangible assets resulting from business combinations, and share-based compensation expenses.

Free cash flow represents net cash provided by operating activities less capital expenditures. Starting from January 1, 2020, Baidu adopted ASU 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials, which reclassifies cash outflows for costs incurred to acquire licensed contents from investing activities to operating activities. To increase comparability, 2019 free cash flow has been retrospectively adjusted to include cash outflows of acquisition of licensed copyrights, which is presented on the same basis as 2020 and going forward.

For more information on non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures.”

 

8


Baidu, Inc.

Condensed Consolidated Statements of Income (Loss)

(In millions except for share, per share (or ADS) information, unaudited)

 

    Three Months Ended     Six Months Ended  
    June 30,     March 31,     June 30,     June 30,     June 30,     June 30,     June 30,  
    2019     2020     2020     2020     2019     2020     2020  
    RMB     RMB     RMB     US$(2)     RMB     RMB     US$(2)  

Revenues:

             

Online marketing services

    19,237       14,243       17,688       2,504       36,894       31,931       4,520  

Others

    7,089       8,302       8,346       1,181       13,555       16,648       2,355  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    26,326       22,545       26,034       3,685       50,449       48,579       6,875  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses:

             

Cost of revenues(1)

    16,116       14,687       13,134       1,859       30,955       27,821       3,938  

Selling, general and administrative(1)

    5,243       3,852       4,417       625       11,297       8,269       1,170  

Research and development(1)

    4,734       4,443       4,839       685       8,900       9,282       1,313  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    26,093       22,982       22,390       3,169       51,152       45,372       6,421  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    233       (437     3,644       516       (703     3,207       454  

Other income (loss):

             

Interest income

    1,205       1,441       1,312       186       2,277       2,753       390  

Interest expense

    (805     (751     (820     (116     (1,498     (1,571     (222

Foreign exchange income (loss), net

    216       (98     55       8       (97     (43     (6

Gain (loss) from equity method investments

    429       181       (1,732     (245     (431     (1,551     (220

Other income (loss), net

    193       (1,816     1,551       220       1,887       (265     (37
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (loss), net

    1,238       (1,043     366       53       2,138       (677     (95
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    1,471       (1,480     4,010       569       1,435       2,530       359  

Income tax expense

    416       198       1,222       174       710       1,420       201  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    1,055       (1,678     2,788       395       725       1,110       158  

Net loss attributable to noncontrolling interests

    (1,357     (1,719     (791     (112     (1,360     (2,510     (355
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Baidu

    2,412       41       3,579       507       2,085       3,620       513  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per ADS (1 Class A ordinary share equals 10 ADSs):

             

-Basic

    6.84       0.05       10.34       1.46       5.86       10.37       1.47  

-Diluted

    6.57       0.02       10.31       1.46       5.72       10.32       1.46  

Earnings per share for Class A and Class B ordinary shares:

             

-Basic

    68.38       0.52       103.44       14.64       58.60       103.66       14.67  

-Diluted

    65.69       0.23       103.06       14.59       57.22       103.20       14.61  

Weighted average number of Class A and Class B ordinary shares outstanding:

             

Basic

    34,996,791       34,577,763       34,377,658       34,377,658       34,981,800       34,477,710       34,477,710  

Diluted

    35,044,719       34,757,943       34,505,617       34,505,617       35,055,695       34,631,780       34,631,780  

(1)   Includes share-based compensation expenses as follows:

             

Cost of revenues

    99       81       108       15       165       189       27  

Selling, general and administrative

    503       464       550       78       1,019       1,014       144  

Research and development

    1,022       945       1,188       168       1,648       2,133       302  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation expenses

    1,624       1,490       1,846       261       2,832       3,336       473  

 

(2)

All translations from RMB to U.S. dollars are made at a rate of RMB 7.0651 to US$1.00, the exchange rate in effect as of June 30, 2020 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System.

 

9


Baidu, Inc.

Condensed Consolidated Balance Sheets

(In millions except for share information, unaudited)

 

     December 31,      June 30,      June 30,  
     2019      2020      2020  
     RMB      RMB      US$  

ASSETS

        

Current assets:

        

Cash and cash equivalents

     33,443        20,349        2,880  

Restricted cash

     996        1,528        216  

Short-term investments

     112,924        132,174        18,708  

Accounts receivable, net

     7,416        6,706        949  

Amounts due from related parties

     1,594        1,637        232  

Other current assets, net

     9,189        9,654        1,366  
  

 

 

    

 

 

    

 

 

 

Total current assets

     165,562        172,048        24,351  
  

 

 

    

 

 

    

 

 

 

Non-current assets:

        

Fixed assets, net

     18,311        16,894        2,391  

Licensed copyrights, net

     6,287        5,743        813  

Intangible assets, net

     1,600        1,633        231  

Goodwill

     18,250        18,767        2,656  

Long-term investments, net

     69,410        68,625        9,713  

Amounts due from related parties

     3,564        3,585        507  

Deferred tax assets, net

     2,193        1,399        198  

Operating lease right-of-use assets

     7,332        7,352        1,041  

Other non-current assets

     8,807        8,422        1,193  
  

 

 

    

 

 

    

 

 

 

Total non-current assets

     135,754        132,420        18,743  
  

 

 

    

 

 

    

 

 

 

Total assets

     301,316        304,468        43,094  
  

 

 

    

 

 

    

 

 

 

LIABILITIES AND EQUITY

        

Current liabilities:

        

Short-term loans

     2,618        3,619        512  

Accounts payable and accrued liabilities

     32,701        31,986        4,527  

Customer deposits and deferred revenue

     11,062        11,601        1,642  

Deferred income

     529        507        72  

Long-term loans, current portion

     737        7,506        1,062  

Notes payable, current portion

     5,219        —          —    

Amounts due to related parties

     2,231        2,850        403  

Operating lease liabilities

     2,283        2,379        337  
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     57,380        60,448        8,555  
  

 

 

    

 

 

    

 

 

 

Non-current liabilities:

        

Deferred income

     17        44        6  

Deferred revenue

     1,009        756        107  

Amounts due to related parties

     3,846        3,853        545  

Long-term loans

     7,804        887        126  

Notes payable

     38,090        45,681        6,466  

Convertible senior notes

     12,297        12,694        1,797  

Deferred tax liabilities

     3,273        3,511        497  

Operating lease liabilities

     4,486        4,404        623  

Other non-current liabilities

     299        394        57  
  

 

 

    

 

 

    

 

 

 

Total non-current liabilities

     71,121        72,224        10,224  
  

 

 

    

 

 

    

 

 

 

Total liabilities

     128,501        132,672        18,779  
  

 

 

    

 

 

    

 

 

 

Redeemable noncontrolling interests

     1,109        1,173        166  

Equity

        

Total Baidu shareholders’ equity

     163,599        164,509        23,284  

Noncontrolling interests

     8,107        6,114        865  
  

 

 

    

 

 

    

 

 

 

Total equity

     171,706        170,623        24,149  
  

 

 

    

 

 

    

 

 

 

Total liabilities, redeemable noncontrolling interests, and equity

     301,316        304,468        43,094  
  

 

 

    

 

 

    

 

 

 

 

10


Baidu, Inc.

Selected Information

(In millions except for per ADS information, unaudited)

 

    Three months ended
June 30, 2019 (RMB)
    Three months ended
March 31, 2020 (RMB)
    Three months ended
June 30, 2020 (RMB)
    Three months ended
June 30, 2020 (US$)
 
    Baidu
Core
    iQIYI     Elim &
adj(2)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(2)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(2)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(2)
    Baidu,
Inc.
 

Total revenues

    19,540       7,110       (324     26,326       15,268       7,650       (373     22,545       18,926       7,412       (304     26,034       2,679       1,049       (43     3,685  

YOY

                    (3 %)      4       (1 %)         

QOQ

                    24     (3 %)        15        

Costs and expenses:

                               

Cost of revenues (1)

    9,453       6,981       (318     16,116       7,088       7,903       (304     14,687       6,555       6,834       (255     13,134       928       967       (36     1,859  

Selling, general and administrative (1)

    3,898       1,346       (1     5,243       2,560       1,311       (19     3,852       3,230       1,196       (9     4,417       457       169       (1     625  

Research and development (1)

    4,080       655       (1     4,734       3,772       678       (7     4,443       4,175       664       —         4,839       591       94       —         685  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    17,431       8,982       (320     26,093       13,420       9,892       (330     22,982       13,960       8,694       (264     22,390       1,976       1,230       (37     3,169  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

YOY

                               

Cost of revenues

                    (31 %)      (2 %)        (19 %)         

Selling, general and administrative

                    (17 %)      (11 %)        (16 %)         

Research and development

                    2     1       2        

Cost and expenses

                    (20 %)      (3 %)        (14 %)         

Operating income (loss)

    2,109       (1,872     (4     233       1,848       (2,242     (43     (437     4,966       (1,282     (40     3,644       703       (181     (6     516  

YOY

                    135     (32 %)        1464        

QOQ

                    169     (43 %)        —            

Operating margin

    11     (26 %)        1     12     (29 %)        (2 %)      26     (17 %)        14        

Add: total other income (loss),net

    1,664       (426     —         1,238       (414     (629     —         (1,043     507       (141     —         366       73       (20     —         53  

Less: income tax expense

    410       6         416       193       5       —         198       1,206       16       —         1,222       172       2       —         174  

Less: net income (loss) attributable to NCI

    (368     23       (1,012 )(3)      (1,357     (457     (1     (1,261 )(3)      (1,719     (157     3       (637 )(3)      (791     (22     —         (90 )(3)      (112
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income(loss) attributable to Baidu

    3,731       (2,327     1,008       2,412       1,698       (2,875     1,218       41       4,424       (1,442     597       3,579       626       (203     84       507  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

YOY

                    19     (38 %)        48        

QOQ

                    161     (50 %)        8629        

Net margin

    19     (33 %)        9     11     (38 %)        0     23     (19 %)        14        

Non-GAAP financial measures:

                               

Operating income (loss) (non-GAAP)

    3,485       (1,526       1,955       3,348       (1,868       1,437       6,482       (837       5,605       917       (118       793  

YOY

                    86     (45 %)        187        

QOQ

                    94     (55 %)        290        

Operating margin (non-GAAP)

    18     (21 %)        7     22     (24 %)        6     34     (11 %)        22        

Net income (loss) attributable to Baidu (non-GAAP)

    4,740       (1,962       3,635       4,519       (2,482       3,082       5,656       (956       5,082       801       (135       719  

YOY

                    19     (51 %)        40        

QOQ

                    25     (61 %)        65        

Net margin (non-GAAP)

    24     (28 %)        14     30     (32 %)        14     30     (13 %)        20        

Adjusted EBITDA

    4,766       (1,407       3,355       4,641       (1,746       2,852       7,771       (716       7,015       1,100       (101       993  

YOY

                    63     (49 %)        109        

QOQ

                    67     (59 %)        146        

Adjusted EBITDA margin

    24     (20 %)        13     30     (23 %)        13     41     (10 %)        27        

(1)   Includes share-based compensation as follows:

    

                             

Cost of revenues

    58       41         99       34       47         81       49       59         108       7       8         15  

Selling, general and administrative

    327       176         503       273       191         464       331       219         550       47       31         78  

Research and development

    959       63         1,022       877       68         945       1,102       86         1,188       156       12         168  
 

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total share-based compensation

    1,344       280         1,624       1,184       306         1,490       1,482       364         1,846       210       51         261  

 

(2)

Relates to intersegment eliminations and adjustments

(3)

Relates to the net loss attributable to iQIYI noncontrolling interests

 

11


Baidu, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions, unaudited)

 

     Three months ended
June 30, 2019 (RMB)
    Three months ended
March 31, 2020 (RMB)
    Three months ended
June 30, 2020 (RMB)
    Three months ended
June 30, 2020 (US$)
 
     Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
    Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
    Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
    Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
 

Net cash provided by (used in) operating activities

     6,074       891       6,965       2,801       (604     2,197       9,547       (1,358     8,189       1,351       (192     1,159  

Net cash provided by (used in) investing activities

     (2,713     (7,836     (10,549     (11,084     (1,610     (12,694     (8,854     1,144       (7,710     (1,254     162       (1,092

Net cash provided by (used in) financing activities

     (8,822     373       (8,449     (1,296     (79     (1,375     (2,211     823       (1,388     (312     116       (196

Effect of exchange rate changes on cash, cash equivalents and restricted cash

     235       170       405       139       64       203       26       (10     16       3       (1     2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

     (5,226     (6,402     (11,628     (9,440     (2,229     (11,669     (1,492     599       (893     (212     85       (127

Cash, cash equivalents and restricted cash

                        

At beginning of period

     20,541       14,026       34,567       27,529       6,910       34,439       18,089       4,681       22,770       2,560       663       3,223  

At end of period

     15,315       7,624       22,939       18,089       4,681       22,770       16,597       5,280       21,877       2,348       748       3,096  

Net cash provided by (used in) operating activities

     6,074       891       6,965       2,801       (604     2,197       9,547       (1,358     8,189       1,351       (192     1,159  

Less: Capital expenditures

     (1,204     (155     (1,359     (478     (67     (545     (797     (57     (854     (113     (8     (121

Less: Acquisition of licensed copyrights(1)

     (41     (2,906     (2,947     —         —         —         —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

     4,829       (2,170     2,659       2,323       (671     1,652       8,750       (1,415     7,335       1,238       (200     1,038  

 

Note: Baidu excl. iQIYI represents Baidu, Inc. minus iQIYI’s consolidated cash flows.    

 

(1)   Starting from January 1, 2020, Baidu adopted ASU 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials, which reclassifies cash outflows for costs incurred to acquire licensed contents from investing activities to operating activities. To increase comparability, 2019 non-GAAP measure of free cash flow has been retrospectively adjusted to include cash outflows of acquisition of licensed copyrights, which is presented on the same basis as 2020 and going forward.

 

 

    

Free cash flow, previously reported

     4,870       736       5,606       2,323       2,056       4,379       8,750       1,290       10,040       1,238       183       1,421  

Less: Acquisition of licensed copyrights

     (41     (2,906     (2,947     —         (2,727     (2,727     —         (2,705     (2,705     —         (383     (383
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow, revised

     4,829       (2,170     2,659       2,323       (671     1,652       8,750       (1,415     7,335       1,238       (200     1,038  

 

12


Baidu, Inc.

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

(In millions except for ADS and per ADS information, unaudited)

 

     Three months ended     Three months ended     Three months ended     Three months ended  
     June 30, 2019 (RMB)     March 31, 2020 (RMB)     June 30, 2020 (RMB)     June 30, 2020 (US$)  
     Baidu
Core
    iQIYI     Baidu,
Inc.
    Baidu
Core
    iQIYI     Baidu,
Inc.
    Baidu
Core
    iQIYI     Baidu,
Inc.
    Baidu
Core
    iQIYI     Baidu,
Inc.
 

Operating income (loss)

     2,109       (1,872     233       1,848       (2,242     (437     4,966       (1,282     3,644       703       (181     516  

Add: Share-based compensation expenses

     1,344       280       1,624       1,184       306       1,490       1,482       364       1,846       210       51       261  

Add: Amortization and impairment of intangible assets(1)

     32       66       98       316       68       384       34       81       115       4       12       16  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) (non-GAAP)

     3,485       (1,526     1,955       3,348       (1,868     1,437       6,482       (837     5,605       917       (118     793  

Add: Depreciation of fixed assets

     1,281       119       1,400       1,293       122       1,415       1,289       121       1,410       183       17       200  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     4,766       (1,407     3,355       4,641       (1,746     2,852       7,771       (716     7,015       1,100       (101     993  

Net income (loss) attributable to Baidu

     3,731       (2,327     2,412       1,698       (2,875     41       4,424       (1,442     3,579       626       (203     507  

Add: Share-based compensation expenses

     1,337       280       1,495       1,177       306       1,348       1,473       364       1,676       208       51       237  

Add: Amortization and impairment of intangible assets(1)(3)

     8       52       37       143       54       173       19       65       55       4       9       8  

Add: Disposal loss (gain)(3)(4)

     (181     —         (181     (252     —         (252     453       —         453       64       —         64  

Add: Impairment of long-term investments(3)

     162       23       185       1,528       24       1,542       752       48       779       107       7       110  

Add: Fair value loss (gain) of long-term investments(3)

     (285     (1     (286     (176     —         (176     (2,535     —         (2,535     (359     —         (359

Add: Reconciling items on equity method investments(2)

     (32     11       (27     401       9       406       1,070       9       1,075       151       1       152  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Baidu (non-GAAP)

     4,740       (1,962     3,635       4,519       (2,482     3,082       5,656       (956     5,082       801       (135     719  

Diluted earnings per ADS

         6.57           0.02           10.31           1.46  

Add: Accretion of the redeemable noncontrolling interests

         0.05           0.07           0.07           0.01  

Add: Non-GAAP adjustments to earnings per ADS

         3.49           8.75           4.35           0.61  
      

 

 

       

 

 

       

 

 

       

 

 

 

Diluted earnings per ADS (non-GAAP)

         10.11           8.84           14.73           2.08  

 

(1)

This represents amortization and impairment of intangible assets resulting from business combinations.

(2)

This represents Baidu’s share of equity method investments for other non-GAAP reconciling items, amortization and impairment of intangible assets not on the investee’s books, accretion of their redeemable noncontrolling interests, and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per shares, adjusted for related income tax effects.

(3)

Net of related tax impact

(4)

Includes re-measurement gain or loss of previous held equity interest in the acquisition

 

13