Baidu Announces Unaudited Financial Results for Second Quarter of 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.
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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.
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, email@example.com; or Media: Asia - Rachel Chan, Hong Kong, +852-2894-6309, firstname.lastname@example.org, or US - Stefan Anikewich, New York, +1- 212-885-0505, email@example.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 -- 7295 08/23/2005 17:01 EDT http://www.prnewswire.com