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Baidu Announces Unaudited Financial Results for Second Quarter of 2005
Aug 23, 2005
          Continued Growth and Focused Investments in Chinese Search

BEIJING, Aug. 23 /Xinhua-PRNewswire/ -- Baidu.com, Inc. (Nasdaq: BIDU), the leading Chinese language Internet search provider, today announced unaudited financial results for the quarter ended June 30, 2005(1). It is Baidu's first earnings announcement since its listing on the NASDAQ National Market on August 5, 2005.

(Logo: http://www.newscom.com/cgi-bin/prnh/20041011/BAIDULOGO )

According to Alexa.com, Baidu.com was the 6th largest website globally for the three months period ended August 23, 2005 and the 4th largest website globally for the one week period ended August 23, 2005, as measured by user traffic that reflects page views and reach during the applicable period.

    Highlights of Second Quarter of 2005

    *  Total revenues increased to RMB69.7 million ($8.4 million),
       representing a 52.6% growth from the previous quarter and a 188.6%
       growth from the corresponding year in 2004.
    *  Net income increased to RMB12.1 million ($1.5 million), representing a
       381.8% growth from the previous quarter and a 625.5% growth from the
       corresponding period in 2004.
    *  The number of active online marketing customers increased to 41,248,
       representing a 29.8% growth from the previous quarter and a 142.6%
       growth from the corresponding period in 2004.
    *  Headcount increased by 103 persons to 750 persons, reflecting continued
       investments in research and development as well as sales and marketing.

"We are very pleased with the results of the second quarter, showing the continued, robust increase in revenues and expansion of our customer base. We are particularly excited that our dedication to enhancing user experience has attracted more and more users to use Baidu for their information needs," said Robin Li, Baidu's Chairman and CEO.

"Our recent successful IPO demonstrated strong investor confidence in the prospects of China's Internet search market, in our business model as well as in our management team. Going forward, we will continue to focus on Chinese language search," Robin Li added.

"China's online marketing sector, and the search-based pay-for-performance model in particular, is still at an early stage of development but is evolving rapidly. Baidu will continue to make focused investments in our products, technology and marketing in order to maintain our leadership position in this rapidly developing market and to provide the best search experience to Chinese Internet users," said Shawn Wang, Baidu's CFO.

Unaudited Financial Results for Second Quarter of 2005

Total net revenues for the second quarter of 2005 were RMB65.2 million ($7.9 million), representing a 52.9% increase from the previous quarter and a 185.5% increase from the corresponding period in 2004.

Online marketing revenues for the second quarter of 2005 were RMB66.7 million ($8.1 million), representing a 55.1% increase from the previous quarter and a 211.9% increase from the corresponding period in 2004. The significant growth in the quarterly online marketing revenues was primarily attributable to the catch-up effect of the post-Chinese New Year holiday period, as well as Baidu's expanded marketing efforts which led to the increases in the number of active online marketing customers and revenue per online marketing customer. As highlighted above, the number of active online marketing customers increased to 41,248, representing a 29.8% growth from the previous quarter and a 142.6% growth from the corresponding period in 2004. Average revenue per online marketing customer increased to RMB1,613.9 ($195), representing an 18.9% growth from the previous quarter and a 28.3% growth from the corresponding period in 2004.

Traffic acquisition cost was RMB4.3 million ($0.5 million), decreasing to 6.1% of total revenues from 11.4% in the corresponding period in 2004.

Selling and marketing expenses, as components of operating expenses, were RMB16.0 million ($1.9 million), representing an increase of 90.5% from the previous quarter and 225.3% from the corresponding quarter in 2004. The increases were primarily attributable to the increase in sales and marketing personnel and expanded marketing efforts.

Operating profit on a GAAP basis was RMB11.9 million ($1.4 million), representing a 336.8% increase from the previous quarter and 687.6% from the corresponding period in 2004. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB18.1 million ($2.2 million) for the second quarter of 2005, representing a 104.2% increase from the previous quarter and a 224.6% increase from the corresponding period in 2004.

Net income on a GAAP basis was RMB12.1 million ($1.5 million), representing a 381.8% increase from the previous quarter and a 625.5% increase from the corresponding period in 2004. Net income excluding share-based compensation expenses (non-GAAP) was RMB18.2 million ($2.2 million) for the second quarter of 2005, a 110.8% increase from the previous quarter and a 218.0% increase from the corresponding period in 2004. Basic and diluted earnings per ADS for the second quarter of 2005 amounted to RMB0.99 ($0.12) and RMB0.39 ($0.05), respectively.

Adjusted EBITDA (non-GAAP), defined here as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, was RMB24.8 million ($3.0 million) for the second quarter for 2005, representing a 75.7% increase from the previous quarter and a 235.1% increase from the corresponding period in 2004.

Capital expenditures (including acquisitions) totaled RMB15.6 million ($1.9 million) for the second quarter of 2005, representing a 200.4% increase from the corresponding period in 2004, as a result of our expanded expenditures on operational activities.

Cash and cash equivalents, as of June 30, 2005, amounted to RMB210.7 million ($25.5 million), up from RMB200.2 million ($24.2 million) as of March 31, 2005. Operating cash flow was RMB32.0 million ($3.9 million) for the second quarter of 2005, as compared to RMB14.8 million ($1.8 million) for the previous quarter and RMB13.0 million ($1.6 million) for the corresponding period in 2004.

Outlook for Third Quarter 2005(2)

Baidu currently expects to generate total revenues in an amount ranging from RMB77.4 million ($9.6 million) to RMB81.2 million ($10.0 million) for the third quarter of 2005, representing a 139-151% growth from the corresponding period in 2004. This forecast reflects only the company's current and preliminary view, which is subject to change.

Conference Call Information

In light of the recent IPO, Baidu will not host a conference call for this announcement. However, Baidu intends to conduct conference calls for future earnings releases. This release is also available at http://www.baidu.com.

About Baidu

Baidu.com, 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, each of which represents one Class A ordinary share, are currently trading on the NASDAQ National Market under the symbol "BIDU".

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" and similar statements. Among other things, the business outlook 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 on forms 20-F and 6-K, etc., 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, results of operations and financial condition; expected changes in our margins and certain cost or expense items as a percentage of our revenues; our ability to attract and retain users and customers; competition in the Chinese language Internet search market; the outcome of ongoing, or any future, litigation or arbitration, including those relating to copyright, patent and other intellectual property rights; the expected growth of the Chinese language Internet search market and the number of Internet and broadband users in China; and Chinese governmental policies relating to the Internet and Internet content providers. Further information regarding these and other risks is included in our registration statement on Form F-1, as amended, 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.

About non-GAAP Financial Measures

To supplement Baidu's unaudited 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 and net income 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 back of this release.

Baidu believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Baidu's liquidity and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Baidu's historical liquidity. Baidu computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.


     Baidu.com, Inc.
     Unaudited Condensed Consolidated Balance Sheet
                                                                       Pro
                                                                      forma(3)
                               June 30,   March 31,  December 31,    June 30,
    (in RMB thousands)           2005        2005         2004         2005

    Cash and cash equivalents   210,696     194,255      200,196      210,696
    Account receivable, net      21,038      14,962        9,645       21,038
    Other current assets          7,929       4,699        2,421        7,929
    Total current assets        239,663     213,916      212,262      239,663

    Fixed assets                 58,194      45,462       35,932       58,194
    Intangibles                  12,806      13,577       12,953       12,806
    Goodwill                      8,731       8,352            -        8,731
    Other non-current assets      9,048       2,989        1,059        9,048
    Total non-current assets     88,779      70,380       49,944       88,779

    Total assets                328,442     284,296      262,206      328,442

    Accrued expenses and
     other liabilities           39,799      27,258       21,900       39,799
    Customers' deposits          42,065      32,781       25,990       42,065
    Deferred revenue              7,607       7,563        6,302        7,607
    Total current liabilities    89,471      67,602       54,192       89,471

    Redeemable convertible
     preferred shares           211,352     211,352      211,352            -

    Shareholders' equity
     (deficit)                   27,619       5,342       (3,338)     238,971

    Total liabilities, redeemable
     convertible
    Preferred shares and
     shareholders' equity
     (deficit)                  328,442     284,296      262,206      328,442



     Baidu.com, Inc.
     Unaudited Condensed Consolidated Income Statement

    For the Three Months Ended
                                      June 30,       June 30,       March 31,
    (in RMB thousands except for        2005           2004          2005
     share, per share and per
     ADS information)

    Revenues
     Online marketing services        66,721          21,389        43,019
     Enterprise search software
      and related services             2,604           2,090         2,076
     Portal search services              378             669           581
    Total revenues                    69,703          24,148        45,676
     Less: business tax
      and surcharges                  (4,529)         (1,320)       (3,048)
    Total net revenues                65,174          22,828        42,628

    Operating cost and expenses
     Cost of revenues (note a)       (16,386)         (6,911)      (12,570)
     Selling, general and
      administrative                 (23,725)         (8,054)      (15,698)
     Research and development         (6,930)         (2,276)       (5,479)
     Share-based
      compensation (note b)           (6,169)         (4,068)       (6,142)
    Total operating cost
     and expenses                    (53,310)        (21,309)      (39,889)

    Operating profit                  11,964           1,519         2,739
    Interest income                      920               8           777
    Other income, net                    342             134             -
    Net income before tax             13,226           1,661         3,516
    Taxation                          (1,175)              -        (1,015)
    Net Income                        12,051           1,661         2,501

    Earnings per Share for Class A
     and Class B ordinary shares,
     and per ADS:
       Basic                            0.99            0.15          0.22
       Diluted                          0.39            0.06          0.08
    Weighted average aggregate
     number of Class A and Class B
     ordinary shares outstanding:
       Basic                      12,156,710      10,887,505    11,507,953
       Diluted                    30,518,035      27,613,768    29,807,745

    Pro forma earnings per share
     on an as converted basis for
     Class A and Class B ordinary
     shares, and per ADS(4):
       Basic                            0.42
       Diluted                          0.39

    Pro forma weighted average aggregate
     number of ordinary shares outstanding
     on an as converted basis for Class A
     and Class B ordinary shares(4):
       Basic                      28,805,587
       Diluted                    30,518,035

    (a) Cost of revenues is analysed
        as follows:
          Traffic acquisition costs   (4,270)         (2,762)       (2,339)
          Bandwidth costs             (4,032)         (1,444)       (3,821)
          Depreciation                (4,712)         (1,429)       (3,719)
          Other                       (3,372)         (1,276)       (2,691)
    Total cost of revenues           (16,386)         (6,911)      (12,570)

    (b) Share-based compensation
        expenses are allocated
        as follows:
          Cost of revenues               233             431           228
          Selling, general and
           administrative              4,222           2,896         4,825
          Research and development     1,714             741         1,089
                                       6,169           4,068         6,142


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

                            Three months ended June 30, 2004

                       GAAP Result    Adjustment    Non-GAAP Results
    Operating Profit      1,519          4,068           5,587

                       GAAP Result    Adjustment    Non-GAAP Results
    Net Income            1,661          4,068           5,729


                            Three months ended March 31, 2005

    Operating Income   GAAP Result    Adjustment    Non-GAAP Results
                          2,739          6,142           8,881

    Net Income         GAAP Result    Adjustment    Non-GAAP Results
                          2,501          6,142           8,643


                            Three months ended June 30, 2005

    Operating Income   GAAP Result    Adjustment    Non-GAAP Results
                         11,964          6,169          18,133

    Net Income         GAAP Result    Adjustment    Non-GAAP Results
                         12,051          6,169          18,220


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

                             Three           Three             Three
                            months          months            months
                             ended   As a %  ended    As a %   ended   As a %
                           June 30,    of   March 31,   of    June 30,   of
                             2004   revenues  2005   revenues   2005  revenues
    Net cash provided
     by operating
     activities            $13,044     57%   $14,811    35%   $32,034    49%

       Changes in assets
        and liabilities,
        net of effects of
        acquisitions        (5,510)   -24%      (951)   -2%    (7,177)  -11%
       Provision for income
        taxes                    0      0%     1,015     2%     1,175     2%
       Interest income and
        other, net            (142)    -1%      (777)   -2%    (1,261)   -2%
    Adjusted EBITDA         $7,392     32%   $14,098    33%   $24,771    38%

    (*) Definition of adjusted EBITDA: Earnings before interest, taxes,
        depreciation, amortization, stock-based compensation and in-process
        research and development.


    (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 based on the effective exchange rate as of June 30, 2005,
        which was RMB 8.2765 to US$1.00.
    (2) Translations from RMB to U.S. dollars for amounts referred to in the
        paragraph under the heading "Outlook for Third Quarter of 2005" are
        based on the effective exchange rate as of August 23, which was
        RMB8.10469 to US$1.00.
    (3) The pro forma balance sheet information as of June 30, 2005 assumes
        the conversion of the Company's outstanding redeemable convertible
        preferred shares as of June 30, 2005 into 16,648,877 Class B ordinary
        shares.
    (4) Pro forma basic and diluted earnings per share is computed by dividing
        net income by weighted average number of ordinary shares outstanding
        for the period plus the number of ordinary shares resulting from the
        assumed conversion of all the outstanding redeemable convertible
        preferred shares upon closing of the initial public offering as if the
        conversion had occurred at the beginning of the period, or when the
        preferred shares were issued, if later.

SOURCE  Baidu.com, Inc.
    -0-                             08/23/2005
    /CONTACT:  Investors: Cynthia He of Baidu.com, Inc., +86-10-8262-1188,
ir@baidu.com; or Media: Asia - Rachel Chan, Hong Kong, +852-2894-6309,
rachel.chan@hillandknowlton.com.hk, or US - Stefan Anikewich, New York, +1-
212-885-0505, stefan.anikewich@hillandknowlton.com, both of Hill & Knowlton
for Baidu.com, Inc./
    /Photo:  NewsCom:  http://www.newscom.com/cgi-bin/prnh/20041011/BAIDULOGO
              AP Archive:  http://photoarchive.ap.org
              PRN Photo Desk, +1-888-776-6555 or +1-212-782-2840/
    /Web site:  http://www.baidu.com/
    (BIDU)

CO:  Baidu.com, Inc.
ST:  China
IN:  ITE CPR MLM STW
SU:  ERN ZHA ASI

MT
-- LNTU002 --
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