Non-GAAP Financial Measures
To supplement Baidus consolidated financial results presented in accordance with GAAP, Baidu uses the following
non-GAAP financial measures: non-GAAP operating profit, non-GAAP net income attributable to Baidu,
non-GAAP diluted earnings per ADS, adjusted EBITDA 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
managements internal comparisons to Baidus 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 Companys 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 Companys data.
Non-GAAP operating profit represents operating
profit excluding share-based compensation expenses. Non-GAAP net income attributable to Baidu represents net income attributable to Baidu excluding share-based compensation expenses and the gain or loss
associated with the issuance of shares by Baidus equity method investees at a price higher or lower than the carrying value per share. Non-GAAP diluted earnings per ADS represents diluted earnings per
ADS calculated based on non-GAAP net income attributable to Baidu. Adjusted EBITDA represents operating profit excluding depreciation, amortization and share-based compensation expenses. Free cash flow
represents net cash provided by operating activities less capital expenditures.
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.