<< Back
Baidu Announces Financial Results for Third Quarter of 2005
Oct 26, 2005
            Company Reports Stronger than Expected Revenue Growth
                           Following Successful IPO

BEIJING, Oct. 26 /PRNewswire-Xinhua / -- Baidu.com, Inc. (Nasdaq: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the quarter ended September 30, 2005(1).

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

    Highlights of Third Quarter 2005

    * Total revenues increased to RMB88.9 million ($11.0 million),
      representing a 27.6% increase from the previous quarter and a 174.4%
      increase from the corresponding period in 2004. Net income for the
      quarter was RMB8.5 million ($1.1 million).

    * Number of active online marketing customers during the third quarter
      increased to over 53,000, an increase of 28.9% from the previous quarter
      and a 148.2% increase from the corresponding period in 2004.

"We are very pleased that Baidu continued its growth momentum during the third quarter with robust traffic expansion and strong revenue growth," said Robin Li, Baidu's Chairman and CEO. "Our focus on providing the best search experience to Chinese users, the stronger than expected branding effect of our successful IPO, and the progress that we made in refining our P4P platform contributed to our solid top line growth for the quarter."

"As the leading website in China, we are well positioned for the continuing growth in the future," Mr. Li added. According to Alexa.com, Baidu.com was the No. 1 website in China based on three-month average user traffic as of September 30, 2005.

Shawn Wang, Baidu's CFO, said, "While we achieved strong revenue growth during the quarter, we have maintained a clear focus on investing in our operational infrastructure in order to position Baidu for sustainable growth in the future. We believe P4P online marketing in China is still at a very early stage, and it is extremely important for us to invest now for long-term growth. We significantly increased our investment in fixed assets, R&D and branding, as well as in strengthening our sales and distribution network during the quarter. We are confident that such investments in our operational infrastructure will help us better serve the needs of China's rapidly expanding Internet user base and online marketing customer base, presently and in the long run."

Financial Results for Third Quarter of 2005

Online marketing revenues for the third quarter of 2005 were RMB85.9 million ($10.6 million), representing a 28.7% increase from the previous quarter and a 188.5% increase from the corresponding period a year ago. The growth was primarily attributable to an increase in the number of active online marketing customers which, increased to over 53,000, representing a 28.9% increase from the previous quarter and a 148.2% increase from the corresponding period in 2004.

Depreciation expenses of servers and other equipment as a component of cost of revenues was RMB7.7 million ($1.0 million), representing a 63.6% increase from the previous quarter and a 318.6% increase from the corresponding period in 2004. This increase was primarily attributable to expenses incurred in connection with the building of our new major data center in Beijing to strengthen our ability to support increasing user traffic. Capital expenditures totaled RMB38.9 million ($4.8 million) for the third quarter of 2005, representing a 149.3% increase from the previous quarter.

Bandwidth cost as a component of cost of revenues was RMB6.7 million ($0.8 million), representing a 66.0% increase from the previous quarter and a 333.7% increase from the corresponding period in 2004 relating mostly to our data center expansion.

Traffic acquisition cost as a component of cost of revenues was RMB5.7 million ($0.7 million), representing 6.4% of total revenues compared to 9.4% in the corresponding period in 2004.

Research and Development expenses were RMB11.0 million ($1.4 million), a 58.8% increase from the previous quarter and a 224.0% increase from the corresponding period in 2004 reflecting the increase in R&D headcount.

Selling and marketing expenses as a component of selling, general and administrative expenses were RMB19.7 million ($2.4 million), representing an increase of 22.7% from the previous quarter and 189.8% from the corresponding quarter in 2004. The increase was mainly due to our ongoing brand promotion efforts during the quarter and the expenses incurred in strengthening our sales and distribution network.

Operating profit on a GAAP basis was RMB6.9 million ($0.9 million), representing a 42.2% decrease from the previous quarter and 172.0% increase from the corresponding period in 2004. The sequential decrease was mainly due to share-based compensation expenses and an increase in server depreciation and bandwidth costs associated with the opening of the new data center. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB17.7 million ($2.2 million) for the third quarter of 2005, remaining stable from the previous quarter and a 139.8% increase from the corresponding period in 2004.

Net income on a GAAP basis was RMB8.5 million ($1.1 million), representing a 29.4% decrease from the previous quarter and a 189.3% increase from the corresponding period in 2004. Net income excluding share-based compensation expenses (non-GAAP) was RMB19.3 million ($2.4 million), a 6.0% increase from the previous quarter and a 147.9% increase from the corresponding period in 2004. Basic and diluted earnings per ADS for the third quarter of 2005 amounted to RMB0.35 ($0.04) and RMB0.26 ($0.03), respectively.

Net cash provided by operating activities was RMB53.5 million ($6.6 million) for the third quarter of 2005, representing a 65.6% increase from the previous quarter and a 205.6% increase from the corresponding period in 2004.

Adjusted EBITDA (non-GAAP), which is defined here as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, was RMB27.8 million ($3.4 million) for the third quarter for 2005, representing a 12.1% increase from the previous quarter and a 176.8% increase from the corresponding period in 2004.

Outlook for Fourth Quarter 2005

Baidu currently expects to generate total revenues in an amount ranging from RMB102 million ($12.6 million) to RMB106 million ($13.1 million) for the fourth quarter of 2005, representing a 215-227% increase from the corresponding period in 2004. 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 on October 26, 2005 at 8 PM (EDT) which corresponds to October 27, 2005 at 8 AM Beijing/Hong Kong time. A live and archived webcast of this conference will be available at http://ir.baidu.com.

    Dial-in details for the conference call are as follows:
    US: 617 224 4327
    UK: 44 207 365 8426
    Hong Kong: 852 3002 1672
    Passcode for all regions: 44191413

A replay of the conference call may be accessed at the following number until 11 PM (EDT) on October 29, 2005:

    International: 617 801 6888
    Passcode: 53986750

    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 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 end 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. Condensed Consolidated Balance Sheets


                                      September    June         December
    (in RMB thousands)                30, 2005     30, 2005     31, 2004
                                      Unaudited    Unaudited    Audited

    Cash and cash equivalents          966,309       210,696     200,196
    Account receivable, net             21,456        21,038       9,645
    Other current assets                 8,797         7,929       2,421
    Total current assets               996,562       239,663     212,262

    Fixed assets, net                   91,362        58,194      35,932
    Intangibles, net                    13,169        12,806      12,953
    Goodwill                             8,741         8,731           -
    Investment under cost
     method                              2,023             -           -
    Other non-current assets                 -         9,048       1,059
    Total non-current assets           115,295        88,779      49,944


    Total assets                     1,111,857       328,442     262,206

    Accrued expenses and
     other liabilities                  74,309        39,799      21,900
    Customers' deposits                 57,367        42,065      25,990
    Deferred revenue                     7,954         7,607       6,302
    Total current liabilities          139,630        89,471      54,192

    Redeemable convertible
     preferred shares                        -       211,352     211,352

    Shareholders' equity
     (deficit)                         972,227        27,619      (3,338)

    Total liabilities,
     redeemable convertible
    Preferred shares and
     shareholders' equity
     (deficit)                       1,111,857       328,442     262,206



       Baidu.com, Inc. Condensed Consolidated Statements of Operations

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

    Revenues                       Unaudited       Unaudited     Unaudited
     Online marketing services        85,884          29,767        66,721
     Others                            3,052           2,643         2,982
    Total revenues                    88,936          32,410        69,703
     Less: business tax
      and surcharges                  (5,723)         (1,922)       (4,529)
    Total net revenues                83,213          30,488        65,174

    Operating cost and expenses
     Cost of revenues (note 1)       (24,319)         (8,203)      (16,386)
     Selling, general and
      administrative                 (30,166)        (11,497)      (23,725)
     Research and development        (11,004)         (3,396)       (6,930)
     Share-based compensation
      (note 2)                       (10,807)         (4,849)       (6,169)
    Total operating cost
     and expenses                    (76,296)        (27,945)      (53,210)

    Operating profit                   6,917           2,543        11,964
    Interest income, net               3,721             356           920
    Foreign exchange loss, net          (550)             --            --
    Other income, net                    285              41           342
    Net income before tax             10,373           2,940        13,226
    Taxation                          (1,869)             --        (1,175)
    Net Income                         8,504           2,940        12,051

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

     Basic                              0.35            0.27          0.99
     Diluted                            0.26            0.10          0.39

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

     Basic                        24,010,660      10,963,517    12,156,710
     Diluted                      32,904,458      29,335,663    30,518,035

    Pro forma earnings per share
    on an as converted basis for
    Class A and Class B ordinary
    shares, and per ADS(2):

     Basic                              0.27            0.11          0.42
     Diluted                            0.26            0.10          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:

     Basic                        31,249,302      27,612,394    28,805,587
     Diluted                      32,904,458      29,335,663    30,518,035

    (1)Cost of revenues is analyzed as follows:

        Traffic acquisition costs     (5,660)         (3,038)       (4,270)
        Bandwidth costs               (6,693)         (1,543)       (4,032)
        Depreciation                  (7,711)         (1,842)       (4,712)
        Other                         (4,255)         (1,780)       (3,372)
       Total cost of revenues        (24,319)         (8,203)      (16,386)

    (2) Share-based compensation expenses are allocated as follows:

        Cost of revenues                (343)           (419)         (233)
        Selling, general and
         administrative               (6,776)         (3,676)       (4,222)
        Research and development      (3,688)           (754)       (1,714)

                                     (10,807)         (4,849)       (6,169)

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

                               Three months ended September 30, 2004
                         GAAP Result      Adjustment      Non-GAAP Results

    Operating profit        2,543            4,849             7,392
    Net income              2,940            4,849             7,789

                               Three months ended June 30, 2005
                         GAAP Result      Adjustment      Non-GAAP Results

    Operating profit       11,964            6,169            18,133
    Net income             12,051            6,169            18,220


                               Three months ended September 30, 2005
                         GAAP Result      Adjustment      Non-GAAP Results

    Operating profit        6,917           10,807            17,724
    Net income              8,504           10,807            19,311


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

                       Three              Three             Three
                       months             months            months
                       ended     As a     ended    As a     ended     As a
                       September of %     June     % of     September % of
                       30, 2004  revenues 30, 2005 revenues 30, 2005  revenues
    Net cash provided
     by operating
     activities          17,494   54%      32,034     46%   53,462     60%
      Changes in assets
       and liabilities,
       net of effects
       of acquisitions   (7,060) -22%      (7,175)   -10%  (24,094)   -27%
      Provision for
       income taxes           -    -        1,175      2%    1,869      2%
      Interest income
       and other, net      (397)  -1%      (1,261)    -2%   (3,456)    -4%
      Tax benefits
       from exercise
       of stock options,
       warrants and
       other                  -    -            -      -         -       -
    Adjusted EBITDA      10,037   31%      24,773     36%   27,781     31%

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

    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
       September 30, 2005, which was RMB8.0920 to US$1.00.

    2. Pro forma basic and diluted earnings per share are 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-                             10/26/2005
    /CONTACT:  China: Cynthia He of Baidu.com, Inc. (Beijing),
+8610-8262-1188, ir@baidu.com; or Christina Splinder of Ogilvy Public
Relations Worldwide (Beijing), +8610-8520-6550, christina.splinder@ogilvy.com;
or US: Stefan Anikewich of Hill & Knowlton (New York), +1-212-885-0505,
stefan.anikewich@hillandknowlton.com, all for Baidu.com, Inc./
    /Photo:  http://www.newscom.com/cgi-bin/prnh/20041011/BAIDULOGO /
    /Web site:  http://Baidu.com /
    (BIDU)

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

LD
-- NYW180 --
6250 10/26/2005 16:00 EDT http://www.prnewswire.com