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Baidu Announces First Quarter 2013 Results
04/25/13

BEIJING, April 25, 2013 /PRNewswire/ -- Baidu, Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the first quarter ended March 31, 2013[1].

(Logo: http://photos.prnewswire.com/prnh/20081103/BAIDULOGO)

First Quarter 2013 Highlights

  • Total revenues in the first quarter of 2013 were RMB5.969 billion ($961.0 million), a 40.0% increase from the corresponding period in 2012.
  • Operating profit in the first quarter of 2013 was RMB2.210 billion ($355.9 million), a 5.7% increase from the corresponding period in 2012.
  • Net income attributable to Baidu in the first quarter of 2013 was RMB2.043 billion ($328.9 million), an 8.5% increase from the corresponding period in 2012. Diluted earnings attributable to Baidu per ADS for the first quarter of 2013 were RMB5.88 ($0.95); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the first quarter of 2013 were RMB6.20 ($1.00).

"We saw healthy financial results in the first quarter of 2013 as we continued to invest in establishing China's leading mobile ecosystem." said Robin Li, chairman and chief executive officer of Baidu. "Our mobile offering is making exciting progress, with our flagship mobile search product having now surpassed 100 million daily active users, an over 25% increase from the end of the fourth quarter."

Mr. Li continued, "Continually developing the most advanced search technology remains central to Baidu's overall strategy, and we're very excited by the possibilities opened up by innovation in image and voice recognition. Our focus will remain on tightly integrating our leading search core with valuable vertical products in areas such as travel, e-commerce and location based services to bring users the information they want as quickly as possible on both desktop and mobile devices."

Jennifer Li, Baidu's chief financial officer, commented, "We remain committed to investing aggressively, particularly in marketing and R&D. By deploying resources in the most strategically important areas of our business, we're confident we can build exceptional long-term value for shareholders. For the quarter, we also recognized a whole quarter consolidation of iQiyi."

First Quarter 2013 Results

Baidu reported total revenues of RMB5.969 billion ($961.0 million) for the first quarter of 2013, representing a 40.0% increase from the corresponding period in 2012.

Online marketing revenues for the first quarter of 2013 were RMB5.953 billion ($958.5 million), representing a 39.7% increase from the corresponding period in 2012. Baidu had about 410,000 active online marketing customers in the first quarter of 2013, representing a 27.7% increase from the corresponding period in 2012 and a 1.0% increase from the fourth quarter of 2012.

Revenue per online marketing customer for the first quarter was approximately RMB14,500 ($2,335), a 9.0% increase from the corresponding period in 2012 and a 6.5% decrease compared to the fourth quarter of 2012.

Traffic acquisition cost (TAC) as a component of cost of revenues was RMB609.6 million ($98.2 million), representing 10.2% of total revenues, as compared to 7.8% in the corresponding period in 2012 and 9.6% in the fourth quarter of 2012. The increase mainly reflects increased contextual ads contributions and hao123 promotions through our network.

Bandwidth costs as a component of cost of revenues were RMB404.9 million ($65.2million), representing 6.8% of total revenues, compared to 5.2% in the corresponding period in 2012. Depreciation costs as a component of cost of revenues were RMB333.1 million ($53.6 million), representing 5.6% of total revenues, compared to 5.4% in the corresponding period in 2012. These increases were mainly due to an increase in network infrastructure capacity.

Content costs as a component of cost of revenues were RMB95.8 million ($15.4 million), representing 1.6% of total revenues, compared to 0.7% in the corresponding period in 2012. This increase mainly reflects the full quarter impact of iQiyi's consolidation.  

Selling, general and administrative expenses were RMB848.1 million ($136.6 million), representing an increase of 77.2% from the corresponding period in 2012, primarily due to an increase in promotional expenses.

Research and development expenses were RMB810.7 million ($130.5 million), an 82.9% increase from the corresponding period in 2012. The increase was primarily due to an increase in the number of research and development personnel.

Share-based compensation expenses, which were allocated to related operating costs and expense line items, were RMB110.9 million ($17.9 million) in the first quarter of 2013, compared to RMB35.2 million in the corresponding period in 2012 and RMB66.6 million in the fourth quarter of 2012. The increase from the corresponding period was a result of increased share grants to employees.

Operating profit was RMB2.210 billion ($355.9 million), representing a 5.7% increase from the corresponding period in 2012. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB2.321 billion ($373.8 million), a 9.2% increase from the corresponding period in 2012.

Income tax expense was RMB388.9 million ($62.6 million), compared to an income tax expense of RMB331.2 million in the corresponding period in 2012. The effective tax rate for the first quarter of 2013 was 16.2% as compared to 15.1% for the corresponding period in 2012 and 16.2% in the fourth quarter of 2012.

Net income attributable to Baidu was RMB2.043 billion ($328.9 million), representing an 8.5% increase from the corresponding period in 2012. Basic and diluted earnings per ADS for the first quarter of 2013 amounted to RMB5.89 ($0.95) and RMB5.88 ($0.95), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB2.154 billion ($346.8 million), a 12.3% increase from the corresponding period in 2012. Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the first quarter of 2013 amounted to RMB6.20 ($1.00) and RMB6.20 ($1.00), respectively.

As of March 31, 2013, the Company had cash, cash equivalents and short-term investments of RMB33.817 billion ($5.445 billion). Net operating cash inflow for the first quarter of 2013 was RMB2.186 billion ($351.9 million). Capital expenditures for the first quarter of 2013 were RMB 468.2 million ($75.4 million).

Adjusted EBITDA (non-GAAP), defined in this announcement as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, was RMB2.781 billion ($447.8million) for the first quarter of 2013, representing a 13.9% increase from the corresponding period in 2012.

Outlook for Second Quarter 2013

Baidu currently expects to generate total revenues in an amount ranging from RMB7.370 billion ($1.187 billion) to RMB7.550 billion ($1.216 billion) for the second quarter of 2013, representing a 35.1% to 38.4% year-over-year increase. 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 at 8:00 PM on April 25, 2013 U.S. Eastern Time (8:00 AM on April 26, 2013 Beijing/Hong Kong Time).

Dial-in details for the earnings conference call are as follows:



International:   

+65-6723-9381



US:           

+1-718-354-1231

UK:           

+44-20-3059-8139

Hong Kong:    

+852-2475-0994



Passcode for all regions:

29340159

A replay of the conference call may be accessed by phone at the following number until May 2, 2013:

International:

+61-2-8199-0299



Passcode:

29340159

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

About Baidu

Baidu, 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 trade on the NASDAQ Global Select Market under the symbol "BIDU". Currently, ten ADSs represent one Class A ordinary share.

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 second quarter 2013 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, 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, including development of new products and services; our ability to attract and retain users and customers; competition in the Chinese and Japanese language Internet search markets; competition for online marketing customers; changes in our revenues and certain cost or expense items as a percentage of our 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 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, Japan and elsewhere. Further information regarding these and other risks is included in our 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. 

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, net income excluding share-based compensation expenses, and basic and diluted earnings per ADS 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 these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding certain expenses, particularly share-based compensation expenses, that may not be indicative of its operating performance or financial condition from a cash perspective. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our 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. Baidu has computed its non-GAAP financial measures using the same consistent method from quarter to quarter since April 1, 2006. We believe 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 share-based compensation charge that has been and will continue to be for the foreseeable future a significant recurring expense in our results of operations.  A limitation of using non-GAAP adjusted EBITDA is that it does not include all items that impact our net income for the period. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to the non-GAAP financial measures.

For investor and media inquiries, please contact:

China

Victor Tseng
Baidu, Inc.
Tel: +86-10-5992-7244
Email: ir@baidu.com

Nick Beswick
Brunswick Group
Tel: +86-10-5960-8600
Email: baidu@brunswickgroup.com

U.S.

Cindy Zheng
Brunswick Group
Tel: +1-212-333-3810
Email: baidu@brunswickgroup.com

[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 made at a rate of RMB6.2108 to US$1.00, the effective noon buying rate as of March 29, 2013 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.

 

Baidu, Inc. 

Condensed Consolidated Statements of Income




Three Months Ended




March 31,

March 31,

December 31,

(In RMB thousands except for share, per share (or ADS) information)



2013

2012

2012




Unaudited

Unaudited

Unaudited

 Revenues: 






 Online marketing services 



5,952,898

4,260,530

6,287,549

 Other services 



15,640

3,197

47,797

 Total revenues 



5,968,538

4,263,727

6,335,346







 Operating costs and expenses: 






 Cost of revenues (note 1, 2) 



(2,099,264)

(1,250,550)

(1,993,313)

 Selling, general and administrative (note 2) 



(848,102)

(478,549)

(792,373)

 Research and development (note 2) 



(810,682)

(443,162)

(701,575)

 Total operating costs and expenses 



(3,758,048)

(2,172,261)

(3,487,261)







 Operating profit 



2,210,490

2,091,466

2,848,085







 Other income: 






 Interest income 



273,987

182,252

252,556

 Interest expense 



(89,246)

(25,316)

(33,012)

 Foreign exchange gain (loss), net 



(461)

(10)

(3,028)

 Loss from equity method investments 



(5,453)

(45,868)

(121,719)

 Other income (loss), net 



6,468

(3,510)

380,545

 Total other income 



185,295

107,548

475,342







 Income before income taxes 



2,395,785

2,199,014

3,323,427







 Income taxes 



(388,861)

(331,196)

(539,909)







 Net income 



2,006,924

1,867,818

2,783,518

 Less: net loss attributable to noncontrolling interests 



(35,908)

(15,157)

(11,964)

 Net income attributable to Baidu, Inc. 



2,042,832

1,882,975

2,795,482













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






Net income attributable to Baidu, Inc.-Basic 



58.86

53.93

79.96

Net income attributable to Baidu, Inc.-Diluted



58.82

53.84

79.91







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






Net income attributable to Baidu, Inc.-Basic 



5.89

5.39

8.00

Net income attributable to Baidu, Inc.-Diluted



5.88

5.38

7.99







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




Basic 



34,968,420

34,918,054

34,963,019

Diluted



34,989,911

34,972,390

34,983,115







 (1) Cost of revenues are detailed as follows: 






 Sales tax and surcharges 



(432,768)

(310,021)

(442,709)

 Traffic acquisition costs 



(609,606)

(331,277)

(606,809)

 Bandwidth costs 



(404,880)

(222,648)

(337,194)

 Depreciation costs 



(333,101)

(228,436)

(312,739)

 Operational costs 



(218,712)

(127,996)

(169,161)

 Content costs 



(95,791)

(29,327)

(120,337)

 Share-based compensation expenses 



(4,406)

(845)

(4,364)

 Total cost of revenues 



(2,099,264)

(1,250,550)

(1,993,313)







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






 Cost of revenues 



(4,406)

(845)

(4,364)

 Selling, general and administrative 



(29,540)

(13,994)

(4,423)

 Research and development 



(77,002)

(20,320)

(57,778)

 Total share-based compensation expenses 



(110,948)

(35,159)

(66,565)







Baidu, Inc.

Condensed Consolidated Balance Sheets







March 31

December 31

(In RMB thousands except for number of shares and per share data)

2013

2012



Unaudited

Audited





ASSETS




Current assets:




Cash and cash equivalents


8,727,262

11,880,632

Restricted cash


250,232

395,029

Short-term investments


25,089,511

20,604,223

Accounts receivable, net


1,428,071

1,253,483

Deferred tax assets, net


196,496

160,315

Other assets, current


337,295

380,407

Total current assets


36,028,867

34,674,089





Non-current assets:




Fixed assets, net


3,872,684

3,887,877

Intangible assets, net


1,974,236

1,587,665

Goodwill


4,151,258

3,877,564

Long-term investments, net


909,297

803,499

Deferred tax assets, net


53,625

53,303

Other assets, non-current


850,298

784,893

Total non-current assets


11,811,398

10,994,801





Total assets


47,840,265

45,668,890





LIABILITIES AND EQUITY




Current liabilities:




Accounts payable and accrued liabilities


3,686,121

3,806,836

Customer advances and deposits


1,950,181

2,067,586

Deferred revenue


54,591

94,121

Deferred income


65,838

64,506

Long-term loans, current portion


2,169,741

2,170,978

Capital lease obligation


33,036

32,502

Total current liabilities


7,959,508

8,236,529





Non-current liabilities:




Deferred income


340,000

190,000

Long-term loans


352,525

356,589

Notes payable


9,306,273

9,336,686

Deferred tax liabilities


308,785

289,482

Capital lease obligation


36,019

44,479

Total non-current liabilities


10,343,602

10,217,236





Total liabilities


18,303,110

18,453,765





Redeemable noncontrolling interests


935,488

1,033,283





Equity




Class A Ordinary Shares, par value US$0.00005 per share, 825,000,000 shares authorized, and 27,202,710 shares and 27,218,017 shares issued and outstanding as at December 31, 2012 and March 31, 2013


12

12

Class B Ordinary Shares, par value US$0.00005 per share, 35,400,000 shares authorized, and 7,763,000 shares and 7,753,000 shares issued and outstanding as at December 31, 2012 and March 31, 2013


3

3

Additional paid-in capital


2,270,772

2,095,273

Retained earnings


26,096,447

24,038,219

Accumulated other comprehensive loss


(49,069)

(78,278)

Total Baidu, Inc. shareholders' equity


28,318,165

26,055,229

Noncontrolling interests


283,502

126,613

Total equity


28,601,667

26,181,842





Total liabilities, redeemable noncontrolling interests, and equity


47,840,265

45,668,890





 

Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures (*) (in RMB thousands, unaudited)












Three months ended March 31, 2012

Three months ended December 31, 2012

Three months ended March 31, 2013


GAAP Result

Adjustment

Non-GAAP      Results     

GAAP Result

Adjustment

Non-GAAP    Results   

GAAP Result

Adjustment

Non-GAAP      Results    

Operating profit                 

2,091,466

35,159

2,126,625

2,848,085

66,565

2,914,650

2,210,490

110,948

2,321,438












Three months ended March 31, 2012

Three months ended December 31, 2012

Three months ended March 31, 2013


GAAP Result

Adjustment

Non-GAAP     Results    

GAAP Result

Adjustment

Non-GAAP
   Results    

GAAP Result

Adjustment

Non-GAAP      Results    

Net income attributable to Baidu, Inc.

1,882,975

35,159

1,918,134

2,795,482

66,565

2,862,047

2,042,832

110,948

2,153,780











(*) The adjustment is only for share-based compensation.

 

Reconciliation from net cash provided by operating activities to adjusted EBITDA(*) (in RMB thousands, unaudited)
















Three months ended

As a % of

Three months ended

As a % of

Three months ended

As a % of


March 31, 2012

total revenues

December 31, 2012

total revenues

March 31, 2013

total revenues

Net cash provided by operating activities                            

2,366,922

56%

2,809,658

45%

2,185,543

37%








   Changes in assets and liabilities, net of effects of acquisitions

(148,216)

-4%

450,111

7%

391,950

6%

   Income taxes expenses

331,196

8%

539,909

8%

388,861

7%

   Interest income and other, net

(107,548)

-3%

(475,342)

-8%

(185,295)

-3%








Adjusted EBITDA

2,442,354

57%

3,324,336

52%

2,781,059

47%








(*) Definition of adjusted EBITDA: earnings before interest, taxes, depreciation, amortization,  other non-operating income, and share-based compensation expenses.

SOURCE Baidu, Inc.

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