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Baidu Announces Second Quarter 2015 Results
Jul 27, 2015

BEIJING, July 27, 2015 /PRNewswire/ -- Baidu, Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the second quarter ended June 30, 2015[1].

Baidu, Inc. Logo

"With Baidu's cornerstone search business delivering solid growth and enjoying ample runway ahead, and with powerful mobile gateways to leverage, we are ideally positioned to capture the O2O e-commerce opportunity and build the 'Next Baidu'," said Robin Li, chairman and CEO of Baidu. "As we continue to connect people with services and enable closed loop transactions, we are creating a transactional business model as Baidu grows and evolves in the age of mobile."

"We delivered solid financial results in the second quarter of 2015, with our core search business exhibiting strong growth and attractive profitability," said Jennifer Li, CFO of Baidu. "With the solid base of our core search business, coupled with upward momentum of our O2O e-commerce initiatives, we continue to invest decisively in the 'Next Baidu'. We are delighted by the progress we have achieved and are confident that these investments will generate long term shareholder value. Going forward, we will report the financial impact of the new initiatives, namely O2O & Other[2] and iQiyi."

Second Quarter 2015 Operational Highlights

  • Mobile search monthly active users (MAUs) were 629 million for the month of June 2015, an increase of 24% year-over-year
  • Mobile maps MAUs were 304 million for the month of June 2015, an increase of 48% year-over-year
  • Gross merchandise value[3] (GMV) for O2O services totaled RMB40.5 billion ($6.5 billion) for the second quarter of 2015, an increase of 109% year-over-year

Second Quarter 2015 Financial Highlights

  • Total revenues in the second quarter of 2015 were RMB16.575 billion ($2.673 billion), a 38.3% increase from the corresponding period in 2014. Mobile revenue represented 50% of total revenues for the second quarter of 2015, flat from the first quarter of 2015.
  • Operating profit in the second quarter of 2015 was RMB3.470 billion ($559.6 million), a 2.5% decrease from the corresponding period in 2014. O2O & Other reduced operating margins by 25.3 percentage points and iQiyi reduced operating margins by 5.1 percentage points.
  • Net income attributable to Baidu in the second quarter of 2015 was RMB3.662 billion ($590.6 million), a 3.3% increase from the corresponding period in 2014. Diluted earnings attributable to Baidu per ADS for the second quarter of 2015 were RMB10.19 ($1.64); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2015 were RMB11.19 ($1.81).

Second Quarter 2015 Results

Baidu reported total revenues of RMB16.575 billion ($2.673 billion) for the second quarter of 2015, representing a 38.3% increase from the corresponding period in 2014.

Online marketing revenues for the second quarter of 2015 were RMB16.227 billion ($2.617 billion), representing a 37.1% increase from the corresponding period in 2014. Baidu had about 590,000 active online marketing customers[4] in the second quarter of 2015, representing a 20.9% increase from the corresponding period in 2014 and a 12.6% increase from the first quarter of 2015. Revenue per online marketing customer for the second quarter was approximately RMB27,400 ($4,419), a 13.2% increase from the corresponding period in 2014 and a 15.1% increase compared to the first quarter of 2015.

Traffic acquisition cost as a component of cost of revenues was RMB2.112 billion ($340.6 million), representing 12.7% of total revenues, flat from the corresponding period in 2014 and compared to 13.5% in the first quarter of 2015.

Bandwidth costs as a component of cost of revenues were RMB896.2 million ($144.5 million), representing 5.4% of total revenues, compared to 5.8% in the corresponding period in 2014. Depreciation costs as a component of cost of revenues were RMB616.1 million ($99.4 million), representing 3.7% of total revenues, compared to 3.9% in the corresponding period in 2014.

Content costs as a component of cost of revenues were RMB840.2 million ($135.5 million), representing 5.1% of total revenues, compared to 3.0% in the corresponding period in 2014 and 4.8% in the previous quarter. The year-over-year increase was mainly due to iQiyi's increased content costs.

Selling, general and administrative expenses were RMB3.890 billion ($627.4 million), representing an increase of 81.0% from the corresponding period in 2014, primarily due to an increase in promotional spending for O2O.

Research and development expenses were RMB2.713 billion ($437.5 million), a 56.2% 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 RMB354.7 million ($57.2 million) in the second quarter of 2015, compared to RMB220.6 million in the corresponding period in 2014 and RMB291.1 million in the first quarter of 2015. The increase from the corresponding period was a result of increased share grants to employees.

Operating profit was RMB3.470 billion ($559.6 million), representing a 2.5% decrease from the corresponding period in 2014. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB3.824 billion ($616.8 million), a 1.2% increase from the corresponding period in 2014.

Income tax expense was RMB763.0 million ($123.1 million), compared to an income tax expense of RMB605.6 million in the corresponding period in 2014. The effective tax rate for the second quarter of 2015 was 19.0% compared to 15.4% for the corresponding period in 2014 and 20.7% in the first quarter of 2015.

Net income attributable to Baidu was RMB3.662 billion ($590.6 million), representing a 3.3% increase from the corresponding period in 2014. Basic and diluted earnings per ADS for the second quarter of 2015 amounted to RMB10.22 ($1.65) and RMB10.19 ($1.64), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB4.017 billion ($647.9 million), a 6.6% increase from the corresponding period in 2014. Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2015 amounted to RMB11.23 ($1.81) and RMB11.19 ($1.81), respectively.

As of June 30, 2015, the Company had cash, cash equivalents and short-term investments of RMB74.959 billion ($12.090 billion). Net operating cash inflow for the second quarter of 2015 was RMB5.727 billion ($923.8 million). Capital expenditures for the second quarter of 2015 were RMB923.1 million ($148.9 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 RMB4.707 billion ($759.1 million) for the second quarter of 2015, representing a 4.7% increase from the corresponding period in 2014.

Outlook for Third Quarter 2015

Baidu currently expects to generate total revenues in an amount ranging from RMB18.170 billion ($2.931 billion) to RMB18.580 billion ($2.997 billion) for the third quarter of 2015, representing a 34.4% to 37.4% 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 July 27, 2015, U.S. Eastern Time (8:00 AM on July 28, 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:

79830113

A replay of the conference call may be accessed by phone at the following number until August 4, 2015:

International:

+61 2 8199 0299



Passcode:

79830113

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 third quarter 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
Email: ir@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 RMB6.2000 to US$1.00, the effective noon buying rate as of June 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]

O2O (online to offline) & Other includes Qunar, Baidu Nuomi, Baidu Takeout Delivery, Baidu Maps, Baidu Connect, Baidu Wallet and other products.

[3]

Gross merchandise value (GMV) for O2O 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.

[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




June 30,

June 30,

March 31,

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



2015

2014

2015




Unaudited

Unaudited

Unaudited

 Revenues: 






 Online marketing services 



16,227,496

11,836,858

12,518,757

 Other services 



347,742

148,924

205,859

 Total revenues 



16,575,238

11,985,782

12,724,616







 Operating costs and expenses: 






 Cost of revenues (note 1, 2) 



(6,503,020)

(4,541,422)

(5,326,103)

 Selling, general and administrative (note 2) 



(3,889,844)

(2,148,874)

(2,956,867)

 Research and development (note 2) 



(2,712,681)

(1,737,216)

(2,286,333)

 Total operating costs and expenses 



(13,105,545)

(8,427,512)

(10,569,303)







 Operating profit 



3,469,693

3,558,270

2,155,313







 Other income: 






 Interest income 



612,523

463,802

561,213

 Interest expense 



(213,522)

(146,045)

(199,128)

 Foreign exchange income, net 



5,396

81

8,992

 Loss from equity method investments 



(2,417)

(5,501)

(7,979)

 Other income, net 



142,382

66,888

90,875

 Total other income 



544,362

379,225

453,973







 Income before income taxes 



4,014,055

3,937,495

2,609,286







 Income taxes 



(762,951)

(605,614)

(541,000)







 Net income 



3,251,104

3,331,881

2,068,286

 Less: net loss attributable to noncontrolling interests 



(410,909)

(214,815)

(380,994)

 Net income attributable to Baidu, Inc. 



3,662,013

3,546,696

2,449,280













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






Net income attributable to Baidu, Inc.-Basic 



102.23

101.19

67.86

Net income attributable to Baidu, Inc.-Diluted



101.86

100.91

67.57







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






Net income attributable to Baidu, Inc.-Basic 



10.22

10.12

6.79

Net income attributable to Baidu, Inc.-Diluted



10.19

10.09

6.76







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



Basic 



35,141,734

35,050,662

35,112,842

Diluted



35,268,366

35,148,579

35,267,371







 (1) Cost of revenues are detailed as follows: 






 Sales tax and surcharges 



(1,175,617)

(872,086)

(948,209)

 Traffic acquisition costs 



(2,111,734)

(1,517,128)

(1,721,629)

 Bandwidth costs 



(896,156)

(700,473)

(849,628)

 Depreciation costs 



(616,072)

(461,927)

(582,437)

 Operational costs 



(850,503)

(627,052)

(607,068)

 Content costs 



(840,223)

(354,294)

(608,420)

 Share-based compensation expenses 



(12,715)

(8,462)

(8,712)

 Total cost of revenues 



(6,503,020)

(4,541,422)

(5,326,103)







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






 Cost of revenues 



(12,715)

(8,462)

(8,712)

 Selling, general and administrative 



(130,418)

(97,030)

(117,855)

 Research and development 



(211,592)

(115,060)

(164,509)

 Total share-based compensation expenses 



(354,725)

(220,552)

(291,076)







 

Baidu, Inc. 

Condensed Consolidated Balance Sheets







June 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


21,296,827

13,852,725

 Restricted cash


646,400

413,010

 Short-term investments


53,661,977

43,818,037

 Accounts receivable, net


3,804,167

3,664,447

 Amounts due from related parties


50

50

 Deferred tax assets, net


985,126

684,952

 Other assets, current 


4,053,862

3,407,427

    Total current assets


84,448,409

65,840,648





    Non-current assets:




 Fixed assets, net


9,863,213

8,705,364

 Intangible assets, net


3,633,241

3,574,359

 Goodwill


17,727,971

17,418,895

 Long-term investments, net


5,582,952

2,878,922

 Deferred tax assets, net


258,011

259,127

 Other assets, non-current 


1,197,292

893,952

    Total non-current assets


38,262,680

33,730,619





Total assets


122,711,089

99,571,267





LIABILITIES AND EQUITY




   Current liabilities:




        Short-term loans


49,650

93,000

Accounts payable and accrued liabilities


16,057,112

12,964,893

Customer advances and deposits


4,691,757

4,296,440

Deferred revenue


313,442

164,809

Deferred income


522,625

518,543

Long-term loans, current portion


2,171,870

2,167,405

Capital lease obligation


48,768

57,346

Due to Related Parties, Current


1,521

8,385

    Total current liabilities


23,856,745

20,270,821





    Non-current liabilities:




Deferred income


42,413

39,626

Long-term loans


1,861,890

1,860,000

Notes payable


31,795,845

21,556,782

Amounts due to related parties


-

8

Deferred tax liabilities


1,107,326

1,143,821

Capital lease obligation


27,159

50,079

Other Non Current Liabilities


170,337

144,542

    Total non-current liabilities


35,004,970

24,794,858





Total liabilities


58,861,715

45,065,679





Redeemable noncontrolling interests


2,032,524

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

27,657,626 shares issued and outstanding as at December

31, 2014 and June 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 June 30, 2015


3

3

Additional paid-in capital


5,497,383

3,633,919

Retained earnings


53,619,055

47,659,772

Accumulated other comprehensive income (loss)


1,028,775

231,923

    Total Baidu, Inc. shareholders' equity


60,145,228

51,525,629

    Noncontrolling interests


1,671,622

1,085,457

Total equity


61,816,850

52,611,086





Total liabilities, redeemable noncontrolling interests, and equity


122,711,089

99,571,267





 

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












Three months ended June 30, 2014

Three months ended March 31, 2015

Three months ended June 30, 2015


GAAP Result

Adjustment

Non-GAAP Results

GAAP Result

Adjustment

Non-GAAP Results

GAAP Result

Adjustment

Non-GAAP Results

Operating profit

3,558,270

220,552

3,778,822

2,155,313

291,076

2,446,389

3,469,693

354,725

3,824,418












Three months ended June 30, 2014

Three months ended March 31, 2015

Three months ended June 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.

3,546,696

220,552

3,767,248

2,449,280

291,076

2,740,356

3,662,013

354,725

4,016,738











(*) 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


June 30, 2014

total revenues

March 31, 2015

total revenues

June 30, 2015

total revenues

Net cash provided by operating activities

4,127,577

34%

2,839,481

22%

5,727,404

35%








Less:  Capital expenditures

(863,717)

-7%

(1,021,341)

-8%

(923,146)

-6%








Free cash flow

3,263,860

27%

1,818,140

14%

4,804,258

29%








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SOURCE Baidu, Inc.


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