Baidu Announces Second Quarter 2013 Results

BEIJING, July 24, 2013 /PRNewswire/ -- 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, 2013[1].

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Second Quarter 2013 Highlights

• Total revenues in the second quarter of 2013 were RMB7.561 billion ($1.232 billion), a 38.6% increase from the corresponding period in 2012.
• Operating profit in the second quarter of 2013 was RMB2.904 billion ($473.1 million), a 3.2% increase from the corresponding period in 2012.
• Net income attributable to Baidu in the second quarter of 2013 was RMB2.644 billion ($430.8 million), a 4.5% decrease from the corresponding period in 2012. Diluted earnings attributable to Baidu per ADS for the second quarter of 2013 were RMB7.52 ($1.22); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2013 were RMB7.75 ($1.26).

"We made solid progress in the second quarter, adding a record 58,000 online active customers," said Robin Li, chairman and chief executive officer of Baidu. "The adoption of our mobile platform gained momentum and mobile monetization improved. Mobile revenues for the first time accounted for over 10% of our total revenues this quarter." 

Mr. Li continued, "Our recent investments have further strengthened Baidu's position in key strategic areas such as search, LBS, app distribution and online video. Our market-leading technology, innovative new products and unrivaled customer value proposition will keep us at the heart of the Internet in China."

"We are encouraged to see clear progress in key investment areas," commented Jennifer Li, Baidu's chief financial officer. "We will continue to invest aggressively and remain committed to building long-term value for our shareholders."

Second Quarter 2013 Results

Baidu reported total revenues of RMB7.561 billion ($1.232 billion) for the second quarter of 2013, representing a 38.6% increase from the corresponding period in 2012.

Online marketing revenues for the second quarter of 2013 were RMB7.539 billion ($1.228 billion), representing a 38.3% increase from the corresponding period in 2012. Baidu had about 468,000 active online marketing customers in the second quarter of 2013, representing a 33.0% increase from the corresponding period in 2012 and a 14.1% increase from the first quarter of 2013.

Revenue per online marketing customer for the second quarter was approximately RMB16,100 ($2,623), a 3.9% increase from the corresponding period in 2012 and an 11.0% increase compared to the first quarter of 2013.

Traffic acquisition cost (TAC) as a component of cost of revenues was RMB880.0 million ($143.4 million), representing 11.6% of total revenues, as compared to 8.3% in the corresponding period in 2012 and 10.2% in the first quarter of 2013. The increase mainly reflected increased contextual ads contributions and hao123 promotions through our network.

Bandwidth costs as a component of cost of revenues were RMB457.3 million ($74.5 million), representing 6.0% of total revenues, compared to 4.4% in the corresponding period in 2012.  Depreciation costs as a component of cost of revenues were RMB357.0 million ($58.2 million), representing 4.7% of total revenues, compared to 4.5% in the corresponding period in 2012. The increase was mainly due to an increase in network infrastructure capacity.

Content costs as a component of cost of revenues were RMB150.7 million ($24.5 million), representing 2.0% of total revenues, compared to 0.6% in the corresponding period in 2012, and 1.6% in the previous quarter. The year-over-year increase was mainly due to the inclusion of iQiyi's content costs.

Selling, general and administrative expenses were RMB1.078 billion ($175.7 million), representing an increase of 83.5% from the corresponding period in 2012, primarily due to expenses related to the promotion of our products.

Research and development expenses were RMB941.8 million ($153.4 million), a 72.6% increase from the corresponding period in 2012，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 RMB83.3 million ($13.6 million) in the second quarter of 2013, compared to RMB53.9 million in the corresponding period in 2012 and RMB110.9 million in the first quarter of 2013.

Operating profit was RMB2.904 billion ($473.1 million), representing a 3.2% increase from the corresponding period in 2012. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB2.987 billion ($486.7 million), a 4.1% increase from the corresponding period in 2012.

Income tax expense was RMB513.2 million ($83.6 million), compared to income tax expense of RMB235.4 million in the corresponding period in 2012. The effective tax rate for the second quarter of 2013 was 16.3%, as compared to 7.9% for the corresponding period in 2012 and 16.2% in the first quarter of 2013.

Net income attributable to Baidu was RMB2.644 billion ($430.8 million), representing a 4.5% decrease from the corresponding period in 2012. Basic and diluted earnings per ADS for the second quarter of 2013 amounted to RMB7.52 ($1.23) and RMB7.52 ($1.22), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB2.727 billion ($444.4 million), a 3.4% decrease from the corresponding period in 2012. Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2013 amounted to RMB7.76 ($1.26) and RMB7.75 ($1.26), respectively.

As of June 30, 2013, the Company had cash, cash equivalents and short-term investments of RMB34.069 billion ($5.551 billion). Net operating cash inflow for the second quarter of 2013 was RMB3.205 billion ($522.2 million). Capital expenditures for the second quarter of 2013 were RMB547.8million ($89.3 million).

Adjusted EBITDA (non-GAAP), defined as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, was RMB3.477 billion ($566.5 million) for the second quarter of 2013, representing an 8.4% increase from the corresponding period in 2012.

Outlook for Third Quarter 2013

Baidu currently expects to generate total revenues in an amount ranging from RMB8.730 billion ($1.422 billion) to RMB8.960 billion ($1.460 billion) for the third quarter of 2013, representing a 39.7% to 43.3% 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 24, 2013, U.S. Eastern Time (8:00 AM on July 25, 2013, 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 31, 2013:

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 2013 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.  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:

China

Victor Tseng
Baidu, Inc.
Tel: +86-10-5992-7244
[email protected]

Nick Beswick
Brunswick Group LLC
Tel: +86-10-5960-8600
[email protected]

U.S.

Cindy Zheng
Brunswick Group LLC
Tel: +1-212-333-3810
[email protected]

SOURCE Baidu, Inc.