EX-99.1 2 d691391dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

Baidu Announces Second Quarter 2019 Results

BEIJING, China, August 19, 2019 – Baidu, Inc. (NASDAQ: BIDU) (“Baidu” or the “Company”), the leading Chinese language Internet search provider, today announced its unaudited financial results for the second quarter ended June 30, 20191.

“Our focus on strengthening Baidu’s mobile ecosystem through knowledge-based content, BJH accounts, smart mini programs and managed pages on Baidu’s platform is translating into better user experience, stronger traffic growth, and, we believe, ultimately higher conversion for our customers. In June, Baidu App DAUs reached 188 million, up 27% year over year, in-app search queries grew over 20% year over year and smart mini program MAUs reached 270 million, up 49% sequentially,” said Robin Li, Baidu co-founder and CEO. “On Baidu’s AI businesses, DuerOS voice assistant continues to experience strong momentum with installed base surpassing 400 million devices, up 4.5 fold year over year, and monthly voice queries surpassing 3.6 billion, up 7.5 fold year over year, in June. As mobile internet penetration in China slows, we are excited about the huge opportunity to provide content and service providers a cross-platform distribution channel beyond mobile, into smart homes and automobiles.”

“Baidu delivered a solid second quarter with revenues reaching RMB 26.3 billion, growing 9% sequentially, and Baidu Core revenues growing 12% sequentially, despite the weak macro environment, our self-directed healthcare initiative, industry-specific policy changes and large influx of ad inventory.” said Herman Yu, Baidu CFO. “With Baidu traffic growing robustly and our mobile ecosystem continuing to expand, we are in a good position to focus on capitalizing monetization and ROI improvement opportunities to deliver shareholder value.”

Second Quarter 2019 Financial Highlights

 

     Baidu Inc.  
(in millions, except for per ADS information,    For the three-month ended  
unaudited)    June 30, 2018     March 31, 2019     June 30, 2019     YOY     YOY2     QOQ     June 30, 2019  
     RMB     RMB     RMB                       US$  

Total revenues

     25,972       24,123       26,326       1     6     9     3,835  

Operating income (loss)

     5,422       (936     233       (96 %)        —         34  

Operating margin

     21     (4 %)      1        

Non-GAAP operating income

     6,563       401       1,955       (70 %)        388     285  

Non-GAAP operating margin

     25     2     7        

 

 

1 

Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.8650 to US$1.00, the effective noon buying rate as of June 28, 2019, in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Translations are provided for the convenience of the reader.

2 

Excluding revenues from divested businesses Global DU and Du Xiaoman (financial services), which were approximately RMB1.0 billion for the three months ended June 30, 2018.

 

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Net income (loss) attributable to Baidu

     6,402       (327     2,412       (62 %)        —         351  

Net margin

     25     (1 %)      9        

Non-GAAP net income attributable to Baidu

     7,705       967       3,635       (53 %)        276     529  

Non-GAAP net margin

     30     4     14        

Diluted earnings (loss) per ADS

     18.14       (0.98     6.57       (64 %)        —         0.96  

Non-GAAP diluted earnings per ADS

     21.83       2.77       10.11       (54 %)        265     1.47  
     Baidu Core  
(in millions, except for per ADS information,    For the three-month ended  
unaudited)    June 30, 2018     March 31, 2019     June 30, 2019     YOY     YOY2     QOQ     June 30, 2019  
     RMB     RMB     RMB                       US$  

Total revenues

     20,018       17,450       19,540       (2 %)      3     12     2,846  

Operating income

     6,736       1,091       2,109       (69 %)        93     307  

Operating margin

     34     6     11        

Non-GAAP operating income

     7,784       2,110       3,485       (55 %)        65     508  

Non-GAAP operating margin

     39     12     18        

Net income attributable to Baidu

     8,158       703       3,731       (54 %)        431     543  

Net margin

     41     4     19        

Non-GAAP net income attributable to Baidu

     8,831       1,824       4,740       (46 %)        160     690  

Non-GAAP net margin

     44     10     24        

Other Highlights

Corporate

 

   

Forbes named Baidu one of the “50 Most Innovative Companies” in China, recognizing Baidu Apollo for its leadership and innovation in autonomous driving, in its July 2019 China edition. Forbes also recognized iQIYI in the same issue for its leadership and innovation in online entertainment in China.

 

   

Baidu Create, Baidu’s annual AI developer conference, was held in July 2019 in Beijing, where Baidu announced the synchronized v5.0 releases of Baidu Brain, DuerOS and Apollo. The Company also announced the development of Baidu Honghu, an energy-efficient AI chipset to power voice interactions in smart devices for homes and autos.

 

   

Over 240 million Baidu users have used Baidu Maps voice features as of June 2019, up more than 2.5 fold from last year.

 

   

In the second quarter of 2019, Baidu returned $291 million to its shareholders, increasing its accumulated return to US$778 million, under the 2018 Share Repurchase Program. In May 2019, Baidu’s Board approved an additional US$1 billion repurchase under the 2019 Share Repurchase Program.

 

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Mobile Ecosystem

 

   

Baidu App daily active users (“DAUs”) in June 2019 reached 188 million, growing 27% year over year. In-app search is providing better user experience through native-app like experiences with newsfeed, smart mini programs and managed pages.

 

   

Baidu Smart Mini Program monthly active users (“MAUs”) reached 270 million in June 2019, up 49% in three months, continuing the strong momentum since its launch a year ago. Smart Mini Program allows Baidu to connect users to a broad range of services and information with native-app like experience.

 

   

Baijiahao (“BJH accounts”), Baidu’s feed content network, grew to 2.2 million publisher accounts in June 2019, enabling influencers and media firms to not only share their information on Baidu’s newsfeed and short video apps but also make their information fully searchable.

 

   

Baidu continues to improve the user experience on its platform with Baidu AI, to identify and filter out low-quality, offensive and inappropriate ads and other content. In the first half of 2019, Baidu’s AI filtered over one billion misleading, low-quality ad materials and tens of billions of offensive, inappropriate images, texts, videos and web links.

DuerOS

 

   

DuerOS is a leading voice assistant for the Chinese language with installed base surpassing 400 million, up 4.5 fold year over year, and monthly voice queries surpassing 3.6 billion, up 7.5 fold year over year in June.

 

   

DuerOS skills store has released over 2,400 skills in wide-ranging genres, including Xueersi (education), YY (live streaming), Meituan (local services) and China Construction Bank (financial services), and the DuerOS developer community has expanded to over 33,000 members.

 

   

Baidu released DuerOS v5.0, enabling capabilities of full-duplex continued conversation, routines, home feed, home communication system and DLNA casting, which enables video streaming from Xiaodu smart speaker to TV through voice command.

 

   

Baidu recently released the following first-party DuerOS smart devices: 1) Xiaodu Smart Speaker Metal (MSRP $28) with enhanced infrared-enabled voice control; 2) Xiaodu Smart Speaker Play (MSRP $18, for kids); and 3) Xiaodu Smart Display 1C 4G (MSRP $100), supporting both Wi-Fi and cellular connectivity with a rechargeable lithium battery.

 

   

Both Canalys and Strategy Analytics, leading global technology market analytics firms, ranked Xiaodu smart speakers first in smart speaker shipments in China and third globally for the first quarter of 2019.

 

   

Geely Auto signed a strategic partnership with Baidu to pre-install DuerOS powered infotainment in Geely cars.

Apollo

 

   

In June 2019, First Automotive Works (FAW) began production of autonomous passenger vehicles powered by Apollo for the robotaxi pilot program in Changsha, Hunan province.

 

   

Baidu jointly published with BMW, Daimler, Volkswagen, Aptiv, Continental, Intel and other top-tier industry players the first autonomous-driving safety report in the world, Safety First for Automated Driving Report, in July 2019.

 

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Apollo’s test fleet reached over 2 million test kilometers on the road in June 2019, spanning across 13 cities, including Beijing, Changsha, Xiong’an and Xiamen.

 

   

As of July 2019, Baidu received almost half of the 204 autonomous driving pilot licenses granted in China, five times that of the next industry player. Baidu was also the only company in China to receive T4 licenses, the highest level of autonomous driving test license issued by the Beijing Municipal Commission of Transport, which permits autonomous vehicles to operate in complex driving conditions, including urban roads, tunnels, school zones and other scenarios.

Cloud & AI Platform

 

   

Both Canalys and Synergy Research ranked Baidu Cloud as a Top 3 China-based PaaS and IaaS public cloud service provider in their China Public Cloud reports for the first quarter of 2019.

 

   

Baidu’s AI Open Platform saw strong adoption in the first six months of 2019, with its developer base growing 37% to 1.3 million developer accounts. Through Baidu’s AI Open Platform on Baidu Cloud, developers can leverage Baidu’s comprehensive AI capabilities, such as speech recognition, natural language processing and computer vision, to build their products and solutions.

 

   

Developer downloads on PaddlePaddle, Baidu’s open-sourced deep learning platform, increased 45% sequentially in the second quarter of 2019. Baidu provides advanced, easy-to-use model training toolkits for PaddlePaddle, such as EasyDL and AI studio, to help developers build deep learning models at scale.

iQIYI

 

   

iQIYI subscribers reached 100.5 million in June 2019, increasing 50% year over year, further strengthening its foundation to offer blockbuster original entertainment content.

Second Quarter 2019 Results

Total revenues reached RMB 26.3 billion ($3.84 billion), increasing 1% year over year, or 6% year over year, excluding the impact of announced divestures2, and increasing 9% quarter over quarter. Online marketing revenues were RMB19.2 billion ($2.80 billion), decreasing 9% year over year and increasing 9% quarter over quarter. Other revenues were RMB 7.1 billion ($1.03 billion), increasing 44% year over year, driven mainly by robust growth in iQIYI membership services, cloud and smart devices.

Revenue from Baidu Core reached RMB 19.5 billion ($2.85 billion), decreasing 2% year over year, or increasing 3% year over year, excluding the impact of announced divestures2, and increasing 12% quarter over quarter. Baidu Core’s marketing services experienced softness in top sectors, including healthcare, online games, financial services, and auto/logistics sectors. Revenue from iQIYI reached RMB 7.1 billion ($1.04 billion), up 15% year over year. iQIYI membership services grew 38% year over year, while online advertising revenue fell 16% year over year.

Content costs were RMB 5.8 billion ($847 million), increasing 12% year over year, mainly due to increased investment in iQIYI content and, to a much lesser extent, in content for BJH accounts, Baidu’s feed publisher network.

 

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Traffic acquisition cost was RMB 3.4 billion ($499 million), increasing 27% year over year, as a result of higher TAC costs and expansion into offline digitalized screens and other areas.

Bandwidth costs were RMB 2.0 billion ($298 million), increasing 32% year over year, mainly due to increasing demand from feed, video and cloud services.

Other cost of revenues, which includes depreciation, operational costs, sales taxes and surcharges, and share-based compensation, was RMB 4.8 billion ($703 million), increasing 89% year over year, mainly due to higher cost of goods sold for smart home devices and higher depreciation expense.

Selling, general and administrative expenses were RMB 5.2 billion ($764 million), increasing 16% year over year, primarily due to increased investment in channel and promotional marketing, as well as the increase in personnel related expenses.

Research and development expenses were RMB 4.7 billion ($690 million), increasing 17% year over year, primarily due to the increase in personnel related expenses.

Operating income was RMB 233 million ($34 million), and operating margin was 1%. Operating income for Baidu Core was RMB 2.1 billion ($307 million), and Baidu Core operating margin was 11%. Non-GAAP operating income was RMB 2.0 billion ($285 million), and non-GAAP operating margin was 7%. Non-GAAP operating income for Baidu Core was RMB 3.5 billion ($508 million), and non-GAAP Baidu Core operating margin was 18%.

Total other income was RMB 1.2 billion ($180 million), increasing 69% year over year, mainly due to increased income from equity method investments and foreign exchange gains from RMB depreciation.

Income tax expense was RMB 416 million ($61 million), compared to RMB 1.1 billion in the second quarter of 2018. Effective tax rate was 28%, compared to 18% in the second quarter of 2018, primarily due to the lower pre-tax income from Baidu Core and iQIYI not being able to recognize tax benefit from its losses in the current period.

Net income attributable to Baidu was RMB 2.4 billion ($351 million), and net margin was 9%. Diluted earnings per ADS amounted to RMB 7 ($0.96). Net income attributable to Baidu Core was RMB 3.7 billion ($543 million), and Baidu Core net margin was 19%. Non-GAAP net income attributable to Baidu was RMB 3.6 billion ($529 million), and non-GAAP net margin was 14%. Non-GAAP diluted earnings per ADS amounted to RMB 10 ($1.47). Non-GAAP net income attributable to Baidu Core was RMB 4.7 billion ($690 million), and non-GAAP net margin for Baidu Core was 24%.

Adjusted EBITDA was RMB 3.4 billion ($489 million) and adjusted EBITDA margin was 13%. Adjusted EBITDA to Baidu Core was RMB 4.8 billion ($694 million) and Baidu Core adjusted EBITDA margin was 24%.

 

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As of June 30, 2019, cash, cash equivalents, restricted cash and short-term investments were RMB 137.3 billion ($20.00 billion), and excluding iQIYI, cash, cash equivalents, restricted cash and short-term investments were RMB 120.9 billion ($17.61 billion). Free cash flow was RMB 5.6 billion ($817 million). Excluding iQIYI, free cash flow was RMB 4.9 billion ($710 million).

Financial Guidance

For the third quarter of 2019, Baidu expects revenues to be between RMB 26.9 billion ($3.84 billion3) and RMB 28.5 billion ($4.07 billion), representing -5% to 1% increase year over year, or -1% to 5% increase year over year, excluding revenues from announced divestures, and 2% to 8% increase quarter over quarter. Previously announced divestures, which were consummated in 2018, generated approximately RMB 1.0 billion revenue in the third quarter of 2018. This forecast reflects Baidu’s current and preliminary view, which is subject to substantial uncertainty.

Conference Call Information

Baidu’s management will hold an earnings conference call at 9:15 PM on August 19, 2019, U.S. Eastern Time (9:15 AM on August 20, 2019, 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 2036214779
Hong Kong:    +852 30186771
Passcode for all regions:    9480017

A replay of the conference call may be accessed by phone at the following number until August 27, 2019:

 

International:

   +61 2 8199 0299

Passcode:

   9480017

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. Baidu aims to make a complex world simpler through technology. Baidu’s ADSs trade on the NASDAQ Global Select Market under the symbol “BIDU.” Currently, ten ADSs represent one Class A ordinary share.

 

 

3 

The translations from RMB to U.S. dollars for the expected revenues in the third quarter of 2019 are made at a rate of RMB7.0 to US$1.0, the rounded noon buying rate as of August 8, 2019, in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at this rate, or any particular rate, or at all.

 

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Contacts

Investors Relations, Baidu, Inc.

Tel: +86-10-5992-8888

Email: ir@baidu.com

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 of 2019, quotations from management in this announcement, as well as Baidu’s and other parties’ 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 but not limited to 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: Baidu’s growth strategies; its future business development, including development of new products and services; its ability to attract and retain users and customers; competition in the Chinese Internet search and feed market; competition for online marketing customers; changes in the Company’s revenues and certain cost or expense items as a percentage of its 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 and feed 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 the Company’s 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.

Non-GAAP Financial Measures

To supplement Baidu’s consolidated financial results presented in accordance with GAAP, Baidu uses the following non-GAAP financial measures: non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) attributable to Baidu, non-GAAP net margin, non-GAAP diluted earnings per ADS, adjusted EBITDA, adjusted EBITDA margin and free cash flow. 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.

 

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Baidu believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding certain items that may not be indicative of its recurring core business

operating results, such as operating performance excluding not only non-cash charges, but also other items that are infrequent or unusual in nature. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its 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. The Company believes 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 certain items that have been and will continue to be for the foreseeable future a significant component in the Company’s results of operations. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company’s data.

Non-GAAP operating income represents operating income excluding share-based compensation expenses and amortization of intangible assets resulting from business combinations.

Non-GAAP net income attributable to Baidu represents net income attributable to Baidu excluding share-based compensation expenses, amortization of intangible assets resulting from business combinations, disposal gain or loss, impairment of long-term investments, fair value change of long-term investments, adjusted for related income tax effects. Baidu’s share of equity method investments for these non-GAAP reconciling items, amortization of intangible assets not on the investees’ books, accretion of their redeemable noncontrolling interests, and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per shares, adjusted for related income tax effects, are also excluded.

Non-GAAP diluted earnings per ADS represents diluted earnings per ADS calculated based on non-GAAP net income attributable to Baidu, adjusted for accretion for the redeemable noncontrolling interests. Adjusted EBITDA represents operating income excluding depreciation, amortization of intangible assets resulting from business combinations, and share-based compensation expenses. Free cash flow represents net cash provided by operating activities less capital expenditures.

For more information on non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures.”

 

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Baidu, Inc.

Condensed Consolidated Balance Sheets

(In millions except for share information, unaudited)

 

     December 31,
2018
     June 30,
2019
     June 30,
2019
 
     RMB      RMB      USD  

ASSETS

        

Current assets:

        

Cash and cash equivalents

     27,638        20,718        3,018  

Restricted cash

     2,189        2,221        324  

Short-term investments

     111,626        114,374        16,660  

Accounts receivable, net

     6,015        6,932        1,010  

Amounts due from related parties

     785        1,315        192  

Other assets, current

     6,841        9,730        1,417  
  

 

 

    

 

 

    

 

 

 

Total current assets

     155,094        155,290        22,621  
  

 

 

    

 

 

    

 

 

 

Non-current assets:

        

Fixed assets, net

     17,903        19,306        2,812  

Intangible assets, net

     9,181        8,474        1,234  

Goodwill

     18,536        19,096        2,782  

Long-term investments, net

     80,454        83,648        12,185  

Amounts due from related parties

     4,297        4,120        600  

Deferred tax assets, net

     2,324        1,637        238  

Operating lease right-of-use assets

     —          7,075        1,031  

Other assets, non-current

     9,777        9,949        1,449  
  

 

 

    

 

 

    

 

 

 

Total non-current assets

     142,472        153,305        22,331  
  

 

 

    

 

 

    

 

 

 

Total assets

     297,566        308,595        44,952  
  

 

 

    

 

 

    

 

 

 

LIABILITIES AND EQUITY

        

Current liabilities:

        

Short-term loans

     3,046        4,017        585  

Accounts payable and accrued liabilities

     35,381        35,758        5,209  

Customer deposits and deferred revenue

     9,221        9,721        1,416  

Deferred income

     523        505        74  

Long-term loans, current portion

     84        353        51  

Notes payable, current portion

     6,871        5,142        749  

Amounts due to related parties

     1,727        1,756        256  

Operating lease liabilities

     —          2,248        327  
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     56,853        59,500        8,667  
  

 

 

    

 

 

    

 

 

 

Non-current liabilities:

        

Deferred income

     54        33        5  

Deferred revenue

     1,309        1,079        157  

Amounts due to related parties

     4,360        4,348        634  

Long-term loans

     7,456        7,197        1,048  

Notes payable

     42,735        37,534        5,468  

Convertible senior notes

     4,712        11,919        1,736  

Deferred tax liabilities

     4,099        4,152        605  

Operating lease liabilities

     —          4,332        631  

Other non-current liabilities

     236        297        43  
  

 

 

    

 

 

    

 

 

 

Total non-current liabilities

     64,961        70,891        10,327  
  

 

 

    

 

 

    

 

 

 

Total liabilities

     121,814        130,391        18,994  
  

 

 

    

 

 

    

 

 

 

Redeemable noncontrolling interests

     716        949        138  

Equity

        

Class A Ordinary Shares, par value US$0.00005 per share, 825,000,000 shares authorized, and 27,733,692 shares and 27,652,814 shares issued and outstanding as at December 31, 2018 and June 30, 2019

     —          —          —    

Class B Ordinary Shares, par value US$0.00005 per share, 35,400,000 shares authorized, and 7,201,254 shares and 7,201,254 shares issued and outstanding as at December 31, 2018 and June 30, 2019

     —          —          —    

Additional paid-in capital

     33,441        36,196        5,273  

Retained earnings

     129,246        129,297        18,834  

Accumulated other comprehensive income

     210        236        34  
  

 

 

    

 

 

    

 

 

 

Total Baidu shareholders’ equity

     162,897        165,729        24,141  
  

 

 

    

 

 

    

 

 

 

Noncontrolling interests

     12,139        11,526        1,679  
  

 

 

    

 

 

    

 

 

 

Total equity

     175,036        177,255        25,820  
  

 

 

    

 

 

    

 

 

 

Total liabilities, redeemable noncontrolling interests, and equity

     297,566        308,595        44,952  
  

 

 

    

 

 

    

 

 

 

 

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Baidu, Inc.

Condensed Consolidated Statements of Income (Loss)

(In millions except for share, per share (or ADS) information, unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,
2018
    March 31,
2019
    June 30,
2019
    June 30,
2019
    June 30,
2018
    June 30,
2019
    June 30,
2019
 
     RMB     RMB     RMB     USD(2)     RMB     RMB     USD(2)  

Revenues:

              

Online marketing services

     21,065       17,657       19,237       2,802       38,234       36,894       5,374  

Others

     4,907       6,466       7,089       1,033       8,645       13,555       1,975  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     25,972       24,123       26,326       3,835       46,879       50,449       7,349  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

              

Content costs

     5,213       6,157       5,817       847       9,407       11,974       1,744  

Traffic acquisition costs

     2,698       3,183       3,424       499       4,954       6,607       962  

Bandwidth costs

     1,550       2,040       2,048       298       3,022       4,088       595  

Others

     2,551       3,459       4,827       703       4,532       8,286       1,207  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues(1)

     12,012       14,839       16,116       2,347       21,915       30,955       4,508  

Selling, general and administrative(1)

     4,505       6,054       5,243       764       7,647       11,297       1,646  

Research and development(1)

     4,033       4,166       4,734       690       7,327       8,900       1,297  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     20,550       25,059       26,093       3,801       36,889       51,152       7,451  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     5,422       (936     233       34       9,990       (703     (102

Other income:

              

Interest income

     882       1,072       1,205       176       1,703       2,277       332  

Interest expense

     (478     (693     (805     (117     (830     (1,498     (218

Foreign exchange income (loss), net

     30       (313     216       31       (18     (97     (14

Income (loss) from equity method investment

     69       (860     429       62       (108     (431     (63

Other income, net

     231       1,694       193       28       2,087       1,887       275  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (loss), net

     734       900       1,238       180       2,834       2,138       312  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     6,156       (36     1,471       214       12,824       1,435       210  

Income taxes

     1,086       294       416       61       2,206       710       104  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     5,070       (330     1,055       153       10,618       725       106  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: net income (loss) attributable to noncontrolling interests

     (1,332     (3     (1,357     (198     (2,478     (1,360     (198
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Baidu

     6,402       (327     2,412       351       13,096       2,085       304  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

              

-Basic

     18.32       (0.98     6.84       1.00       37.17       5.86       0.85  

-Diluted

     18.14       (0.98     6.57       0.96       36.81       5.72       0.83  

Earnings (loss) per share for Class A and Class B ordinary shares:

              

-Basic

     183.16       (9.81     68.38       9.96       371.73       58.60       8.54  

-Diluted

     181.36       (9.81     65.69       9.57       368.10       57.22       8.34  

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

              

Basic

     34,953,564       34,966,643       34,996,791       34,996,791       34,896,297       34,981,800       34,981,800  

Diluted

     35,299,428       34,966,643       35,044,719       35,044,719       35,240,508       35,055,695       35,055,695  

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

    

         

Cost of revenues

     60       66       99       14       95       165       24  

Selling, general and administrative

     302       516       503       74       593       1,019       148  

Research and development

     755       626       1,022       149       1,207       1,648       240  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation expenses

     1,117       1,208       1,624       237       1,895       2,832       412  

 

(2)

All translations from RMB to U.S. dollars are made at a rate of RMB6.8650 to US$1.00, the effective noon buying rate as of June 28, 2019, in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.

 

2/4


Baidu, Inc.

Selected Information

(In millions except for per ADS information, unaudited)  
    Three months ended
June 30, 2018 (RMB)
    Three months ended
March 31, 2019 (RMB)
    Three months ended
June 30, 2019 (RMB)
    Three months ended
June 30, 2019 (USD)
 
    Baidu
Core
    iQIYI     Elim &
adj(3)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(3)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(3)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(3)
    Baidu,
Inc.
 

Total revenues

    20,018       6,170       (216     25,972       17,450       6,990       (317     24,123       19,540       7,110       (324     26,326       2,846       1,036       (47     3,835  

YOY

                    (2 %)      15       1        

YOY excluding revenue from divested businesses(1)

                    3         6        

QOQ

                    12     2       9        

Operating costs and expenses:

                               

Cost of revenues (2)

    6,061       6,107       (156     12,012       7,849       7,277       (287     14,839       9,453       6,981       (318     16,116       1,377       1,017       (47     2,347  

Selling, general and administrative (2)

    3,628       950       (73     4,505       4,940       1,141       (27     6,054       3,898       1,346       (1     5,243       568       196       —         764  

Research and development (2)

    3,593       441       (1     4,033       3,570       598       (2     4,166       4,080       655       (1     4,734       594       96       —         690  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

    13,282       7,498       (230     20,550       16,359       9,016       (316     25,059       17,431       8,982       (320     26,093       2,539       1,309       (47     3,801  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

YOY

                    31     20       27        

Cost of revenues

                    56     14       34        

Selling, general and administrative

                    7     42       16        

Research and development

                    14     49       17        

Operating income (loss)

    6,736       (1,328     14       5,422       1,091       (2,026     (1     (936     2,109       (1,872     (4     233       307       (273     —         34  

YOY

                    (69 %)      41       (96 %)         

QOQ

                    93     (8 %)        —            

Operating margin

    34     (22 %)        21     6     (29 %)        (4 %)      11     (26 %)        1        

Total other income (loss),net

    2,078       (768     (576     734       689       211       —         900       1,664       (426     —         1,238       242       (62     —         180  

Less: income taxes

    1,081       5       —         1,086       287       7       —         294       410       6         416       60       1       —         61  

Less: net income (loss) attributable to NCI

    (425     (4     (903 )(4)      (1,332     790       (8     (785 )(4)      (3     (368     23       (1,012 )(4)      (1,357     (54     3       (147 )(4)      (198
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income(loss) attributable to Baidu

    8,158       (2,097     341       6,402       703       (1,814     784       (327     3,731       (2,327     1,008       2,412       543       (339     147       351  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

YOY

                    (54 %)      11       (62 %)         

QOQ

                    431     28       —            

Net margin

    41     (34 %)        25     4     (26 %)        (1 %)      19     (33 %)        9        

Other Key Metrics:

                               

Non-GAAP operating income (loss)

    7,784       (1,235       6,563       2,110       (1,708       401       3,485       (1,526       1,955       508       (222       285  

YOY

                    (55 %)      24       (70 %)         

QOQ

                    65     (11 %)        388        

Non-GAAP operating margin

    39     (20 %)        25     12     (24 %)        2     18     (21 %)        7        

Non-GAAP net income (loss) attributable to Baidu

    8,831       (2,004       7,705       1,824       (1,508       967       4,740       (1,962       3,635       690       (286       529  

YOY

                    (46 %)      (2 %)        (53 %)         

QOQ

                    160     30       276        

Non-GAAP net margin

    44     (32 %)        30     10     (22 %)        4     24     (28 %)        14        

Adjusted EBITDA

    8,544       (1,161       7,397       3,372       (1,601       1,770       4,766       (1,407       3,355       694       (205       489  

Adjusted EBITDA margin

    43     (19 %)        28     19     (23 %)        7     24     (20 %)        13        

(1)   Excluding revenues from divested businesses Global DU and Du Xiaoman (financial services), which were approximately RMB1.0 billion for the three months ended June 30, 2018.

    

(2)   Includes share-based compensation as follows:

    

Cost of revenues

    41       19         60       30       36         66       58       41         99       8       6         14  

Selling, general and administrative

    256       46         302       338       178         516       327       176         503       48       26         74  

Research and development

    736       19         755       584       42         626       959       63         1,022       140       9         149  
 

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total share-based compensation

    1,033       84         1,117       952       256         1,208       1,344       280         1,624       196       41         237  

(3)   Relates to intersegment eliminations and adjustments

    

(4)   Relates to the net loss attributable to iQIYI noncontrolling interests

    

 

3/4


Baidu, Inc.     

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures     

(In millions except for ADS and per ADS information, unaudited)    

 

     Three months ended     Three months ended     Three months ended     Three months ended  
     June 30, 2018 (RMB)     March 31, 2019 (RMB)     June 30, 2019 (RMB)     June 30, 2019 (USD)  
     Baidu
Core
    iQIYI     Baidu, Inc.     Baidu
Core
    iQIYI     Baidu, Inc.     Baidu
Core
    iQIYI     Baidu, Inc.     Baidu
Core
    iQIYI     Baidu, Inc.  

Operating income (loss)

     6,736       (1,328     5,422       1,091       (2,026     (936     2,109       (1,872     233       307       (273     34  

Add: Share-based compensation expenses

     1,033       84       1,117       952       256       1,208       1,344       280       1,624       196       41       237  

Add: Amortization of intangible assets(1)

     15       9       24       67       62       129       32       66       98       5       10       14  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income (loss)

     7,784       (1,235     6,563       2,110       (1,708     401       3,485       (1,526     1,955       508       (222     285  

Add: Depreciation of fixed assets

     760       74       834       1,262       107       1,369       1,281       119       1,400       186       17       204  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     8,544       (1,161     7,397       3,372       (1,601     1,770       4,766       (1,407     3,355       694       (205     489  

Net income (loss) attributable to

     8,158       (2,097     6,402       703       (1,814     (327     3,731       (2,327     2,412       543       (339     351  

Add: Share-based compensation expenses

     1,033       84       1,081       947       256       1,092       1,337       280       1,495       195       41       218  

Add: Amortization of intangible assets(1), net of tax

     11       9       17       27       49       54       8       52       37       1       8       5  

Add: Disposal loss (gain), net of tax

     (462     —         114       (31     1       (30     (181     —         (181     (26     —         (26

Add: Impairment of long-term investments, net of tax

     —         —         —         279       —         279       162       23       185       24       3       27  

Add: Fair value change of long-term investments, net of tax

     (338     —         (338     (1,058     —         (1,058     (285     (1     (286     (42     —         (42

Add: Reconciling items on equity method investments, net of tax(2)

     429       —         429       957       —         957       (32     11       (27     (5     1       (4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income (loss) attributable to

     8,831       (2,004     7,705       1,824       (1,508     967       4,740       (1,962     3,635       690       (286     529  

Diluted earnings (loss) per ADS

         18.14           (0.98         6.57           0.96  

Add: Accretion of the redeemable noncontrolling interests

         —             0.05           0.05           0.01  

Add: Non-GAAP adjustments to earnings per ADS

         3.69           3.70           3.49           0.50  
      

 

 

       

 

 

       

 

 

       

 

 

 

Non-GAAP diluted earnings per ADS

         21.83           2.77           10.11           1.47  

Net cash provided by operating activities

     6,972       156       7,128       1,282       379       1,661       6,074       891       6,965       885       130       1,015  

Less: Capital expenditures

     (1,339     (166     (1,505     (2,801     (172     (2,973     (1,204     (155     (1,359     (175     (23     (198
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

     5,633       (10     5,623       (1,519     207       (1,312     4,870       736       5,606       710       107       817  

(1)   This represents amortization of intangible assets resulting from business combinations.

    

(2)   This represents Baidu’s share of equity method investments for other non-GAAP reconciling items, amortization of intangible assets not on the investee’s books, accretion of their redeemable noncontrolling interests, and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per shares, adjusted for related income tax effects.

    

(3)   Non-GAAP measures are adjusted retroactively to exclude: 1) amortization of intangible assets resulting from business combinations ; and 2) share-based compensation and amortization of intangible assets not on their books, resulting from equity method pick up; and 3) fair value change of the investees’ long-term investments, net of tax, as follows:

    

Non-GAAP operating income, previously reported

     7,769       (1,244     6,539       2,043       (1,770     272       3,453       (1,592     1,857       503       (232     271  

Add: Amortization of intangible assets(1)

     15       9       24       67       62       129       32       66       98       5       10       14  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income, revised

     7,784       (1,235     6,563       2,110       (1,708     401       3,485       (1,526     1,955       508       (222     285  

Non-GAAP net income attributable to Baidu, previously reported

     8,565       (2,013     7,433       1,524       (1,557     640       4,418       (2,025     3,279       643       (295     477  

Add: Adjustments relating to equity-method investments, net of tax

     255       —         255       273       —         273       314       11       319       46       1       47  

Add: Amortization of intangible assets(1), net of tax

     11       9       17       27       49       54       8       52       37       1       8       5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income attributable to Baidu, revised

     8,831       (2,004     7,705       1,824       (1,508     967       4,740       (1,962     3,635       690       (286     529  

Adjusted EBITDA, previously reported

     8,562       (1,125     7,417       3,387       (1,526     1,820       4,780       (1,348     3,388       697       (196     494  

Less: Adjustments to amortization of intangible assets

     (18     (36     (20     (15     (75     (50     (14     (59     (33     (3     (9     (5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA, revised

     8,544       (1,161     7,397       3,372       (1,601     1,770       4,766       (1,407     3,355       694       (205     489  

 

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