Baidu Announces Second Quarter 2012 Results

BEIJING, July 23, 2012 /PRNewswire-Asia/ -- Baidu, Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the second quarter ended June 30, 2012[1].

(Logo: http://photos.prnewswire.com/prnh/20081103/BAIDULOGO)

Second Quarter 2012 Highlights

• Total revenues in the second quarter of 2012 were RMB5.456 billion ($858.8 million), a 59.8% increase from the corresponding period in 2011.
  
• Operating profit in the second quarter of 2012 was RMB2.815 billion ($443.1 million), a 51.5% increase from the corresponding period in 2011.
  
• Net income attributable to Baidu in the second quarter of 2012 was RMB2.770 billion ($436.0 million), a 69.6% increase from the corresponding period in 2011. Diluted earnings attributable to Baidu per ADS for the second quarter of 2012 were RMB7.86 ($1.24); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2012 were RMB8.01 ($1.26).

"We are pleased to announce strong results for the second quarter despite macro headwinds and challenging comparisons with the same period last year," said Robin Li, chairman and chief executive officer of Baidu. "Our efforts to expand our customer base continue to make solid progress."

Mr. Li continued, "In the coming quarters, we will maintain momentum by rolling out optimized sales processes and more advanced tools to help current and potential customers increase returns on their online marketing spend. We will also continue to actively explore the vast opportunities in China's fast-emerging mobile Internet and cloud sectors."

Jennifer Li, Baidu's chief financial officer, commented, "We once again posted solid growth on the top and bottom lines even as we continued to invest aggressively in expanding our network infrastructure and talent base. Moving forward, this robust investment strategy will be key to achieving long-term, sustainable growth and strengthening Baidu's position at the heart of China's Internet ecosystem."

Second Quarter 2012 Results

Baidu reported total revenues of RMB5.456 billion ($858.8 million) for the second quarter of 2012, representing a 59.8% increase from the corresponding period in 2011.

Online marketing revenues for the second quarter of 2012 were RMB5.452 billion ($858.1 million), representing a 59.7% increase from the corresponding period in 2011. Baidu had about 352,000 active online marketing customers in the second quarter of 2012, representing an 18.1% increase from the corresponding period in 2011 and a 9.7% increase from the first quarter of 2012. Revenue per online marketing customer for the second quarter was approximately RMB15,500 ($2,440), a 34.8% increase from the corresponding period in 2011 and a 16.5% increase compared to the first quarter of 2012.

Traffic acquisition cost (TAC) as a component of cost of revenues was RMB453.7 million ($71.4 million), representing 8.3% of total revenues, as compared to 7.9% in the corresponding period in 2011 and 7.8% in the first quarter of 2012.

Bandwidth costs as a component of cost of revenues were RMB242.6 million ($38.2 million), representing 4.4% of total revenues, compared to 4.3% in the corresponding period in 2011. Depreciation costs as a component of cost of revenues were RMB251.1 million ($39.5 million), representing 4.6% of total revenues, compared to 4.2% in the corresponding period in 2011. These increases were mainly due to an increase in network infrastructure capacity.

Selling, general and administrative expenses were RMB587.6 million ($92.5 million), representing an increase of 55.6% from the corresponding period in 2011, primarily due to an increase in personnel and marketing-related expenses.

Research and development expenses were RMB545.5 million ($85.9 million), an 82.7% increase from the corresponding period in 2011. 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 RMB53.9 million ($8.5 million) in the second quarter of 2012, compared to RMB34.7 million in the corresponding period in 2011 and RMB35.2 million in the first quarter of 2012.

Operating profit was RMB2.815 billion ($443.1 million), representing a 51.5% increase from the corresponding period in 2011. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB2.869 billion ($451.6 million), a 51.5% increase from the corresponding period in 2011.

Income tax expense was RMB235.4 million ($37.0 million), compared to an income tax expense of RMB285.5 million in the corresponding period in 2011. The effective tax rate for the second quarter of 2012 was 7.9% as compared to 14.9% for the corresponding period in 2011 and 15.1% in the first quarter of 2012. The decrease in effective tax rate was due to a reversal of a tax provision the Company booked in 2011 for one of its subsidiaries at a non-preferential tax rate. This subsidiary has obtained a high and new technology enterprise tax license in the second quarter.

Net income attributable to Baidu was RMB2.770 billion ($436.0 million), representing a 69.6% increase from the corresponding period in 2011. Basic and diluted earnings per ADS for the second quarter of 2012 amounted to RMB7.87 ($1.24) and RMB7.86 ($1.24), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB2.824 billion ($444.5 million), a 69.3% increase from the corresponding period in 2011. Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2012 amounted to RMB8.02 ($1.26) and RMB8.01 ($1.26), respectively.

As of June 30, 2012, the Company had cash, cash equivalents and short-term investments of RMB18.257 billion ($2.874 billion). Net operating cash inflow for the second quarter of 2012 was RMB3.040 billion ($478.6 million). Capital expenditures for the second quarter of 2012 were RMB722.0 million ($113.7 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 RMB3.207 billion ($504.8 million) for the second quarter of 2012, representing a 54.4% increase from the corresponding period in 2011.

Outlook for Third Quarter 2012

Baidu currently expects to generate total revenues in an amount ranging from RMB6.245 billion ($983.0 million) to RMB6.410 billion ($1.009 billion) for the third quarter of 2012, representing a 49.6% to 53.5% 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 23, 2012 U.S. Eastern Time (8:00 AM on July 24, 2012 Beijing/Hong Kong Time).

Dial-in details for the earnings conference call are as follows:

A replay of the conference call may be accessed by phone at the following number until July 30, 2012:

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 2012 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 Japanese language 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, Japan 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 relesae, 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:

China

Victor Tseng
Baidu, Inc.
Tel: +86-10-5992-7244
ir@baidu.com

Martin Reidy
Brunswick Group LLC
Tel: +86-10-5960-8600
mreidy@brunswickgroup.com

U.S.

Cindy Zheng
Brunswick Group
Tel: +1-212-333-3810
czheng@brunswickgroup.com

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[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 RMB6.3530 to US$1.00, the effective noon buying rate as of June 29, 2012 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.
 

SOURCE Baidu, Inc.