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Baidu Announces Third Quarter 2015 Results
Oct 29, 2015

BEIJING, Oct. 29, 2015 /PRNewswire/ -- Baidu, Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the third quarter ended September 30, 2015[1].

Baidu, Inc. Logo

"With mobile accounting for nearly two-thirds of Baidu's search traffic and China squarely in a mobile age, Baidu is pioneering and redefining the mobile experience for users in China. We further extended the reach of our platform by deeply integrating and connecting search and maps with transaction services," said Robin Li, chairman and CEO of Baidu. "We have made great momentum in O2O and seen strong progress in transaction services for Baidu," Li said.

"We delivered another solid quarter, with mobile growing its contribution. The momentum in transaction services gives us the confidence to continue investing," said Jennifer Li, CFO of Baidu. "We will invest in ways that leverage and buttress our competitive advantage," she said.

Third Quarter 2015 Operational Highlights

  • Mobile search monthly active users (MAUs) were 643 million for the month of September 2015, an increase of 26% year-over-year
  • Mobile maps MAUs were 326 million for the month of September 2015, an increase of 34% year-over-year
  • Gross merchandise value[2] (GMV) for Transaction Services totaled RMB60.2 billion ($9.5 billion) for the third quarter of 2015, an increase of 119% year-over-year
  • Baidu Wallet activated accounts reached 45 million at the end of September 2015, an increase of 520% year-over-year

Share Repurchase

In the third quarter of 2015, the Company completed its share repurchase program authorized by the board of directors in July 2015. Under the program, the Company repurchased approximately 6.0 million ADSs for approximately $1 billion. On October 22, 2015, Baidu's board of directors authorized a new share repurchase program under which the Company may repurchase up to $2 billion of its shares over the next 24 months.

Third Quarter 2015 Financial Highlights

  • Total revenues in the third quarter of 2015 were RMB18.383 billion ($2.892 billion), a 36.0% increase from the corresponding period in 2014. Mobile revenue represented 54% of total revenues for the third quarter of 2015, compared to 37% for the corresponding period in 2014.
  • Operating profit in the third quarter of 2015 was RMB2.512 billion ($395.2 million), a 35.9% decrease from the corresponding period in 2014. Transaction Services[3] reduced non-GAAP operating margins by 32.0 percentage points and iQiyi further reduced non-GAAP operating margins by 5.4 percentage points.
  • Net income attributable to Baidu in the third quarter of 2015 was RMB2.841 billion ($447.0 million), a 26.7% decrease from the corresponding period in 2014. Diluted earnings attributable to Baidu per ADS for the third quarter of 2015 were RMB7.92 ($1.25); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the third quarter of 2015 were RMB9.07 ($1.43).

Third Quarter 2015 Results

Baidu reported total revenues of RMB18.383 billion ($2.892 billion) for the third quarter of 2015, representing a 36.0% increase from the corresponding period in 2014.

Online marketing revenues for the third quarter of 2015 were RMB17.680 billion ($2.782 billion), representing a 31.7% increase from the corresponding period in 2014. Baidu had approximately 623,000 active online marketing customers[4] in the third quarter of 2015, representing a 20.7% increase from the corresponding period in 2014 and a 5.6% increase from the second quarter of 2015. Revenue per online marketing customer for the third quarter was approximately RMB28,300 ($4,453), a 9.3% increase from the corresponding period in 2014 and a 3.3% increase compared to the second quarter of 2015.

Traffic acquisition cost as a component of cost of revenues was RMB2.411 billion ($379.4 million), representing 13.1% of total revenues, as compared to 12.9% in the corresponding period in 2014 and 12.7% in the second quarter of 2015.

Bandwidth costs as a component of cost of revenues were RMB970.0 million ($152.6 million), representing 5.3% of total revenues, compared to 5.6% in the corresponding period in 2014. Depreciation costs as a component of cost of revenues were RMB657.3 million ($103.4 million), representing 3.6% of total revenues, compared to 3.8% in the corresponding period in 2014.

Content costs as a component of cost of revenues were RMB914.5 million ($143.9 million), representing 5.0% of total revenues, compared to 3.7% in the corresponding period in 2014, and 5.1% in the previous quarter. The year-over-year increase was mainly due to iQiyi's increased content costs.

Selling, general and administrative expenses were RMB5.702 billion ($897.1 million), representing an increase of 111.2% from the corresponding period in 2014, primarily due to an increase in promotional spending for transaction services.

Research and development expenses were RMB2.690 billion ($423.2 million), a 46.9% increase from the corresponding period in 2014. 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 RMB400.3 million ($63.0 million) in the third quarter of 2015, compared to RMB234.2 million in the corresponding period in 2014 and RMB354.7 million in the second quarter of 2015. The increase from the corresponding period in 2014 was a result of increased share grants to employees.

Operating profit was RMB2.512 billion ($395.2 million), representing a 35.9% decrease from the corresponding period in 2014. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB2.912 billion ($458.2 million), a 29.9% decrease from the corresponding period in 2014.

Income tax expense was RMB590.5 million ($92.9 million), compared to an income tax expense of RMB656.8 million in the corresponding period in 2014. The effective tax rate for the third quarter of 2015 was 19.4% as compared to 15.5% for the corresponding period in 2014 and 19.0% in the second quarter of 2015.

Net income attributable to Baidu was RMB2.841 billion ($447.0 million), representing a 26.7% decrease from the corresponding period in 2014. Basic and diluted earnings per ADS for the third quarter of 2015 amounted to RMB7.94 ($1.25) and RMB7.92 ($1.25), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB3.241 billion ($510.0 million), a 21.1% decrease from the corresponding period in 2014. Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the third quarter of 2015 amounted to RMB9.09 ($1.43) and RMB9.07 ($1.43), respectively.

As of September 30, 2015, the Company had cash, cash equivalents and short-term investments of RMB70.144 billion ($11.037 billion). Net operating cash inflow for the third quarter of 2015 was RMB4.785 billion ($759.2 million). Capital expenditures for the third quarter of 2015 were RMB1.862 billion ($295.3 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 RMB3.842 billion ($604.5 million) for the third quarter of 2015, representing a 21.9% decrease from the corresponding period in 2014.

Outlook for Fourth Quarter 2015

Baidu currently expects to generate total revenues in an amount ranging from RMB18.200 billion ($2.864 billion) to RMB18.750 billion ($2.950 billion) for the fourth quarter of 2015, representing a 29.5% to 33.4% year-over-year increase. Pursuant to Baidu's exchange of Qunar shares with Ctrip, as as a result of which Baidu no longer retains voting control of Qunar, Baidu will no longer consolidate Qunar's financials after October 26, 2015. 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 October 29, 2015, U.S. Eastern Time (8:00 AM on October 30, 2015, Beijing/Hong Kong Time).

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

International:

+65 67135090

China                   

4006208038



US:

+1 8456750437

UK:

+44 2030598139

Hong Kong:

+852 30186771





Passcode for all regions:

59702295

A replay of the conference call may be accessed by phone at the following number until November 6, 2015:

International:

+61 2 8199 0299



Passcode:

59702295

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 and most equitable way for people to find what they're looking for. 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 fourth quarter of 2015 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 other 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 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:

Sharon Ng
Baidu, Inc.
Tel: +86-10-5992-4958
Investor inquiries email: ir@baidu.com 
Media inquiries email: intlcomm@baidu.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 RMB 6.3556 to US$1.00, the effective noon buying rate as of September 30, 2015 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.

[2]

Gross merchandise value (GMV) for Transaction Services is defined as GMV generated by Qunar, Baidu Nuomi and Baidu Takeout Delivery. GMV generated by Qunar is defined as the value of confirmed orders of products and services, excluding cancellations. GMV generated by Baidu Nuomi and Baidu Takeout Delivery is defined as the value of confirmed orders of products and services, regardless of whether the service has been consumed or delivered.

[3]

Transaction Services (formerly O2O & Other) includes Qunar, Baidu Nuomi, Baidu Takeout Delivery, Baidu Maps, Baidu Connect, Baidu Wallet and other products.

[4]

The number of active online marketing customers and revenue per online active customer exclude those associated with our group-buying and takeout delivery related businesses for consistency with previous reporting.

 

Baidu, Inc. 

Condensed Consolidated Statements of Income




Three Months Ended




September 30,

September 30,

June 30,

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



2015

2014

2015




Unaudited

Unaudited

Unaudited

 Revenues: 






 Online marketing services 



17,680,374

13,427,179

16,227,496

 Other services 



702,707

92,577

347,742

 Total revenues 



18,383,081

13,519,756

16,575,238







 Operating costs and expenses: 






 Cost of revenues (note 1, 2) 



(7,479,580)

(5,068,337)

(6,503,020)

 Selling, general and administrative (note 2) 



(5,701,859)

(2,700,008)

(3,889,844)

 Research and development (note 2) 



(2,689,970)

(1,831,590)

(2,712,681)

 Total operating costs and expenses 



(15,871,409)

(9,599,935)

(13,105,545)







 Operating profit 



2,511,672

3,919,821

3,469,693







 Other income: 






 Interest income 



616,171

536,367

612,523

 Interest expense 



(329,372)

(177,168)

(213,522)

 Foreign exchange income (loss), net 



61,407

(44,476)

5,396

 Loss from equity method investments 



(8,856)

(9,982)

(2,417)

 Other income, net 



200,625

20,091

142,382

 Total other income 



539,975

324,832

544,362







 Income before income taxes 



3,051,647

4,244,653

4,014,055







 Income taxes 



(590,517)

(656,768)

(762,951)







 Net income 



2,461,130

3,587,885

3,251,104

 Less: net loss attributable to noncontrolling interests 



(379,939)

(288,227)

(410,909)

 Net income attributable to Baidu, Inc. 



2,841,069

3,876,112

3,662,013













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






Net income attributable to Baidu, Inc.-Basic 



79.38

110.53

102.23

Net income attributable to Baidu, Inc.-Diluted



79.20

110.02

101.86







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






Net income attributable to Baidu, Inc.-Basic 



7.94

11.05

10.22

Net income attributable to Baidu, Inc.-Diluted



7.92

11.00

10.19







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



Basic 



34,850,398

35,069,521

35,141,734

Diluted



34,928,787

35,231,630

35,268,366







 (1) Cost of revenues are detailed as follows: 






 Sales tax and surcharges 



(1,260,606)

(997,040)

(1,175,617)

 Traffic acquisition costs 



(2,411,180)

(1,741,922)

(2,111,734)

 Bandwidth costs 



(970,005)

(752,607)

(896,156)

 Depreciation costs 



(657,325)

(512,758)

(616,072)

 Operational costs 



(1,254,114)

(557,515)

(850,503)

 Content costs 



(914,545)

(498,119)

(840,223)

 Share-based compensation expenses 



(11,805)

(8,376)

(12,715)

 Total cost of revenues 



(7,479,580)

(5,068,337)

(6,503,020)







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






 Cost of revenues 



(11,805)

(8,376)

(12,715)

 Selling, general and administrative 



(138,133)

(102,680)

(130,418)

 Research and development 



(250,359)

(123,137)

(211,592)

 Total share-based compensation expenses 



(400,297)

(234,193)

(354,725)







 

Baidu, Inc. 

Condensed Consolidated Balance Sheets







September 30

December 31

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

2015

2014



Unaudited

Audited





ASSETS




    Current assets:




 Cash and cash equivalents


14,575,190

13,852,725

 Restricted cash


1,968,449

413,010

 Short-term investments


55,568,672

43,818,037

 Accounts receivable, net


4,177,362

3,664,447

 Amounts due from related parties


50

50

 Deferred tax assets, net


1,279,909

684,952

 Other assets, current 


5,649,886

3,407,427

    Total current assets


83,219,518

65,840,648





    Non-current assets:




 Fixed assets, net


10,564,579

8,705,364

 Intangible assets, net


3,574,316

3,574,359

 Goodwill


17,699,332

17,418,895

 Long-term investments, net


8,176,655

2,878,922

 Deferred tax assets, net


258,649

259,127

 Other assets, non-current 


1,129,980

893,952

    Total non-current assets


41,403,511

33,730,619





Total assets


124,623,029

99,571,267





LIABILITIES AND EQUITY




   Current liabilities:




        Short-term loans


704,243

93,000

Accounts payable and accrued liabilities


19,858,180

12,964,893

Customer advances and deposits


5,557,235

4,296,440

Deferred revenue


235,082

164,809

Deferred income


532,065

518,543

Long-term loans, current portion


-

2,167,405

Capital lease obligation


49,391

57,346

Due to Related Parties, Current


1,602

8,385

    Total current liabilities


26,937,798

20,270,821





    Non-current liabilities:




Deferred income


45,879

39,626

Long-term loans


4,120,196

1,860,000

Notes payable


32,591,969

21,556,782

Amounts due to related parties


-

8

Deferred tax liabilities


1,078,163

1,143,821

Capital lease obligation


15,502

50,079

Other Non Current Liabilities


205,071

144,542

    Total non-current liabilities


38,056,780

24,794,858





Total liabilities


64,994,578

45,065,679





Redeemable noncontrolling interests


2,155,981

1,894,502





Equity




Class A Ordinary Shares, par value US$0.00005 per share,
825,000,000 shares authorized, and  27,613,315 shares and
27,069,839 shares issued and outstanding as at December
31, 2014 and September 30, 2015


12

12

Class B Ordinary Shares, par value US$0.00005 per share,
35,400,000 shares authorized, and  7,492,921 shares and
7,492,921 shares issued and outstanding as at December 31,
2014 and September 30, 2015


3

3

Additional paid-in capital


5,833,199

3,633,919

Retained earnings


50,111,572

47,659,772

Accumulated other comprehensive income (loss)


174,448

231,923

    Total Baidu, Inc. shareholders' equity


56,119,234

51,525,629

    Noncontrolling interests


1,353,236

1,085,457

Total equity


57,472,470

52,611,086





Total liabilities, redeemable noncontrolling interests, and equity


124,623,029

99,571,267





 

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












Three months ended September 30, 2014

Three months ended June 30, 2015

Three months ended September 30, 2015


GAAP Result

Adjustment

Non-GAAP Results

GAAP Result

Adjustment

Non-GAAP Results

GAAP Result

Adjustment

Non-GAAP Results

Operating profit

3,919,821

234,193

4,154,014

3,469,693

354,725

3,824,418

2,511,672

400,297

2,911,969












Three months ended September 30, 2014

Three months ended June 30, 2015

Three months ended September 30, 2015


GAAP Result

Adjustment

Non-GAAP Results

GAAP Result

Adjustment

Non-GAAP Results

GAAP Result

Adjustment

Non-GAAP Results

Net income
attributable to Baidu,
Inc.

3,876,112

234,193

4,110,305

3,662,013

354,725

4,016,738

2,841,069

400,297

3,241,366











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







 

 

Reconciliation from net cash provided by operating activities to free cash flow (in RMB thousands, unaudited)
















Three months ended

As a % of

Three months ended

As a % of

Three months ended

As a % of


September 30, 2014

total revenues

June 30, 2015

total revenues

September 30, 2015

total revenues

Net cash provided by operating activities

4,855,114

36%

5,727,404

35%

4,785,393

26%








Less:  Capital expenditures

(1,380,039)

-10%

(923,146)

-6%

(1,861,602)

-10%








Free cash flow

3,475,075

26%

4,804,258

29%

2,923,791

16%








 

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SOURCE Baidu, Inc.