BAIDU, INC. filed this Form 6-K on 02/14/2018
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Content costs as a component of cost of revenues were RMB 13.4 billion ($2.06 billion), representing 15.8% of total revenues, compared to 11.1% in 2016. The year-over-year increase was mainly due to iQIYI’s increased content costs.

Selling, general and administrative expenses were RMB 13.1 billion ($2.02 billion), representing a decrease of 13% from 2016, primarily due to a decrease in promotional spending.

Research and development expenses totaled RMB 12.9 billion ($1.99 billion), representing a 27% increase from 2016. The increase was primarily due to the growth of research and development personnel-related costs.

Share-based compensation expenses, which were allocated to related operating cost and expense line items, were RMB 3.2 billion ($499 million), compared to RMB 1.8 billion in 2016.

Operating profit was RMB 15.7 billion ($2.41 billion), a 56% increase from 2016. Non-GAAP operating profit was RMB 18.9 billion ($2.91 billion), representing a 60% increase from 2016.

Other income, net was RMB 4.6 billion ($707 million), which mainly consisted of the investment gain recognized as a result of disposal of Baidu Deliveries. Other income, net was RMB3.8 billion in 2016, which mainly consisted of the investment gain recognized as a result of Baidu’s exchange of Uber China shares with Didi.

Income tax expense was RMB 3.0 billion ($460 million), compared to an income tax expense of RMB 2.9 billion in 2016. Effective tax rate was 14%, compared to 20% in 2016. The decrease in the effective tax rate was primarily due to the nontaxable investment gain.

Net income attributable to Baidu was RMB 18.3 billion ($2.81 billion), representing a 57% increase from 2016. Diluted earnings attributable to Baidu per ADS amounted to RMB 52 ($8.06). Non-GAAP net income attributable to Baidu was RMB 22.3 billion ($3.42 billion), a 68% increase from 2016. Non-GAAP diluted earnings per ADS was RMB 64 ($9.79).

Net operating cash inflow was RMB 32.9 billion ($5.05 billion) and capital expenditures were RMB 4.8 billion ($735 million).

Recent Development

Baidu’s online video subsidiary, iQIYI, Inc. (“iQIYI”), has submitted a draft registration statement on Form F-1 in compliance with the U.S. Securities Act of 1933, as amended (the “Securities Act”) to the U.S. Securities and Exchange Commission (the “SEC”) for a proposed initial public offering of iQIYI and listing of iQIYI’s American depositary shares representing its ordinary shares on a major stock exchange in the U.S. (the “Proposed IPO”). The Proposed IPO is expected to commence as capital markets conditions permit and is subject to iQIYI’s public filing of the registration statement with the SEC in compliance with the Securities Act, and the SEC declaring such registration statement effective. The proposed number of American depositary shares to be offered and sold in the Proposed IPO has not yet been determined. Baidu expects to remain iQIYI’s controlling shareholder after the completion of the Proposed IPO.