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Baidu Announces First Quarter 2010 Results

2010-04-29 02:17 808


BEIJING, April 29 /PRNewswire-Asia/ -- Baidu, Inc. (Nasdaq: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the first quarter ended March 31, 2010(1).

(Logo: http://www.prnasia.com/sa/200811032131.jpg )

First Quarter 2010 Highlights

-- Total revenues in the first quarter of 2010 were RMB1.294 billion

($189.6 million), a 59.6% increase from the corresponding period

in 2009.

-- Operating profit in the first quarter of 2010 was RMB530.8 million

($77.8 million), a 167.4% increase from the corresponding period

in 2009.

-- Net income in the first quarter of 2010 was RMB480.5 million

($70.4 million), a 165.3% increase from the corresponding period in

2009. Diluted earnings per share ("EPS") for the first quarter of 2010

was RMB13.77 ($2.02); diluted EPS excluding share-based compensation

expenses (non-GAAP) for the first quarter of 2010 was RMB14.33 ($2.10).

"We delivered a quarter of record revenue and strong profitability despite the usual seasonality associated with the Chinese New Year holiday," said Robin Li, chairman and chief executive officer of Baidu. "In particular, Phoenix Nest's performance continued to exceed our expectations as customers increasingly appreciate the new platform's advanced tools and superior return on investment. Looking ahead, we will continue to innovate and educate Chinese companies about the benefits of search engine marketing with Baidu."

Jennifer Li, Baidu's chief financial officer, added, "True to our commitment to managing for profitable growth, we delivered both strong top and bottom line results in the first quarter. For the rest of the year, we will aggressively expand our R&D and sales teams to drive improvements in technology and monetization while investing in network infrastructure to support traffic growth."

(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 RMB6.8258 to US$1.00, the effective noon

buying rate as of March 31, 2010 in The City of New York for cable

transfers of RMB as certified for customs purposes by the Federal

Reserve Bank of New York.

First Quarter 2010 Results

Baidu reported total revenues of RMB1.294 billion ($189.6 million) for the first quarter of 2010, representing a 59.6% increase from the corresponding period in 2009.

Online marketing revenues for the first quarter of 2010 were RMB1.293 billion ($189.5 million), representing a 59.6% increase from the corresponding period in 2009. Baidu had around 221,000 active online marketing customers in the first quarter of 2010, representing a 19.5% increase from the corresponding period in 2009 and a 0.9% decrease from the previous quarter. Revenue per online marketing customer for the first quarter was approximately RMB5,900 ($864), a 34.1% increase from the corresponding period in 2009 and a 3.5% increase from the previous quarter.

Traffic acquisition costs (TAC) as a component of cost of revenues were RMB171.3 million ($25.1 million), representing 13.2% of total revenues, as compared to 15.3% in the corresponding period in 2009 and 16.0% in the fourth quarter of 2009. The decrease in TAC as a percentage of total revenues reflects initiatives to drive quality improvements on Baidu Union traffic.

Bandwidth costs as a component of cost of revenues were RMB58.0 million ($8.5 million), representing 4.5% of total revenues, compared to 6.0% in the corresponding period in 2009. Depreciation costs as a component of cost of revenues were RMB65.9 million ($9.7 million), representing 5.1% of total revenues, compared to 7.4% in the corresponding period in 2009. The decreases in bandwidth and depreciation costs as percentages of total revenues reflect efficiency improvements as well as increased scalability of investment in capital expenditure.

Selling, general and administrative expenses were RMB214.6 million ($31.4 million), representing an increase of 5.0% from the corresponding period in 2009, primarily due to increased sales headcount. The increase was partly offset by lower marketing expenses.

Research and development expenses were RMB122.1 million ($17.9 million), representing a 42.6% increase from the corresponding period in 2009, primarily due to increased R&D personnel expenses.

Share-based compensation expenses, which were allocated to related operating costs and expense line items, decreased in aggregate by 16.7% to RMB19.5 million ($2.9 million) in the first quarter of 2010 from RMB23.5 million in the corresponding period in 2009.

Operating profit was RMB530.8 million ($77.8 million), representing a 167.4% increase from the corresponding period in 2009. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB550.3 million ($80.6 million), a 147.9% increase from the corresponding period in 2009.

Income tax expense was RMB70.7 million ($10.4 million), compared to an income tax expense of RMB26.9 million for the corresponding period in 2009. The effective tax rate for the first quarter of 2010 was 12.8% as compared to 12.9% for the corresponding period in 2009.

Net income was RMB480.5 million ($70.4 million), representing a 165.3% increase from the corresponding period in 2009. Basic and diluted EPS for the first quarter of 2010 amounted to RMB13.82 ($2.02) and RMB13.77 ($2.02), respectively.

Net income excluding share-based compensation expenses (non-GAAP) was RMB500.1 million ($73.3 million), a 144.4% increase from the corresponding period in 2009. Basic and diluted EPS excluding share based compensation expenses (non-GAAP) for the first quarter of 2010 amounted to RMB14.38 ($2.11) and RMB14.33 ($2.10), respectively.

As of March 31, 2010, the Company had cash, cash equivalents and short-term investments of RMB4.909 billion ($719.2 million). Net operating cash inflow and capital expenditures for the first quarter of 2010 were RMB426.2 million ($62.4 million) and RMB105.3 million ($15.4 million), respectively.

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 RMB641.2 million ($93.9 million) for the first quarter of 2010, representing a 116.1% increase from the corresponding period in 2009.

Outlook for Second Quarter 2010

Baidu currently expects to generate total revenues in an amount ranging from RMB 1.830 billion ($268.1 million) to RMB 1.870 billion ($274.0 million) for the second quarter of 2010, representing a 67% to 70% year-over-year increase. This forecast reflects Baidu's current and preliminary view, which is subject to change.

Earnings Conference Call

Baidu's management will hold an earnings conference call at 8:00 PM on April 28, 2010 U.S. Eastern Time (8:00 AM on April 29, 2010 Beijing/Hong Kong time).

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

US: +1-617-597-5364

UK: +44-207-365-8426

Hong Kong: +852-3002-1672

Passcode for all regions: 83504881

A replay of the conference call may be accessed by phone at the following number until May 6, 2010:

International: +1-617-801-6888

Passcode: 34704854

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, each of which represents one Class A ordinary share, currently trade on the NASDAQ Global Select 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," "confident" and similar statements. Among other things, the outlook for second quarter 2010 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 April 28, 2010, 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 EPS 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 and 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 non-GAAP financial measures.

For investor and media inquiries, please contact:

China:

Victor Tseng

Baidu, Inc.

Tel: +86-10-5992-7244

Email: ir@baidu.com

Cynthia He

Brunswick Group LLC

Tel: +86-10-6566-2256

Email: che@brunswickgroup.com

U.S.:

Ms. Kate Tellier

Brunswick Group LLC

Tel: +1-212-333-3810

Email: ktellier@brunswickgroup.com

Baidu, Inc.

Condensed Consolidated Balance Sheets

March 31, December 31, March 31,

(in RMB thousands) 2010 2009 2009

Unaudited Audited Unaudited

ASSETS

Current assets:

Cash and cash equivalents 4,157,130 4,199,889 2,494,320

Short-term investments 751,894 381,149 276,329

Accounts receivable, net 153,686 161,610 76,434

Other assets, current 118,822 91,067 76,785

Deferred tax assets, net 10,118 9,157 5,580

Total current assets 5,191,650 4,842,872 2,929,448

Non-current assets:

Fixed assets, net 1,036,921 997,557 767,159

Intangible assets, net 120,054 122,595 122,928

Goodwill 63,691 63,691 54,083

Long-term investments, net 14,577 14,308 12,300

Deferred tax assets, net 33,799 33,799 27,679

Other assets, non-current 99,222 82,153 85,416

Total non-current assets 1,368,264 1,314,103 1,069,565

TOTAL ASSETS 6,559,914 6,156,975 3,999,013

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued

liabilities, current 664,078 749,861 410,740

Customer advances and deposits,

current 573,724 607,828 379,090

Deferred revenue 59,170 42,035 5,662

Deferred income -- -- 52

Total current liabilities 1,296,972 1,399,724 795,544

Non-current liabilities:

Long-term payable for business

acquisition 4,150 4,150 --

Total non-current liabilities 4,150 4,150 --

Total liabilities 1,301,122 1,403,874 795,544

Shareholders' equity

Class A Ordinary Shares, Par value

US$0.00005 per share, 825,000,000

shares authorized, and 26,298,960

shares and 26,330,659 shares issued

and outstanding as at December 31,

2009 and March 31, 2010 11 11 11

Class B Ordinary Shares, Par value

US$0.00005 per share, 35,400,000

shares authorized, and 8,454,332

shares and 8,454,332 shares issued

and outstanding as at December 31,

2009 and March 31, 2010 4 4 4

Additional paid-in capital 1,455,395 1,426,070 1,183,217

Accumulated other comprehensive loss (117,684) (113,513) (116,305)

Retained earnings 3,921,066 3,440,529 2,136,542

Total shareholders' equity 5,258,792 4,753,101 3,203,469

TOTAL LIABILITIES AND SHAREHOLDERS'

EQUITY 6,559,914 6,156,975 3,999,013

Baidu, Inc.

Condensed Consolidated Statements of Income

For the Three Months Ended

(in RMB thousands except for share, March 31, March 31, December 31,

per share information) 2010 2009 2009

Unaudited Unaudited Unaudited

Revenues:

Online marketing services 1,293,396 810,193 1,260,301

Other services 519 518 593

Total revenues 1,293,915 810,711 1,260,894

Operating costs and expenses:

Cost of revenues (note 1, 2) (426,405) (322,235) (452,559)

Selling, general and

administrative (note 2) (214,568) (204,300) (221,767)

Research and development (note 2) (122,129) (85,670) (124,402)

Total operating costs and expenses (763,102) (612,205) (798,728)

Operating profit 530,813 198,506 462,166

Other income:

Interest income 11,374 9,123 9,313

Exchange loss, net (1) -- (40)

Gain and loss from equity method

investments 247 -- (167)

Other income, net 8,797 385 27,507

Total other income 20,417 9,508 36,613

Income before income taxes 551,230 208,014 498,779

Income taxes (70,693) (26,897) (70,915)

Net income 480,537 181,117 427,864

Earnings per share for Class A and

Class B ordinary shares:

Basic 13.82 5.25 12.33

Diluted 13.77 5.22 12.27

Weighted average aggregate number of

Class A and Class B ordinary shares

outstanding:

Basic 34,766,823 34,525,338 34,702,168

Diluted 34,894,049 34,727,972 34,877,586

(1) Cost of revenues are detailed as

follows:

Business tax and surcharges (81,301) (48,868) (78,822)

Traffic acquisition costs (171,349) (124,119) (201,880)

Bandwidth costs (58,012) (48,280) (54,403)

Depreciation costs (65,888) (59,616) (67,628)

Operational costs (48,256) (39,719) (48,298)

Share-based compensation expenses (1,599) (1,633) (1,528)

Total cost of revenues (426,405) (322,235) (452,559)

(2) Includes share-based compensation

expenses as follows:

Cost of revenues (1,599) (1,633) (1,528)

Selling, general and administrative (8,593) (11,156) (7,472)

Research and development (9,339) (10,665) (9,728)

Total share-based compensation

expenses (19,531) (23,454) (18,728)

Reconciliations of non-GAAP results of operations measures to the nearest

comparable GAAP measures (*) (in RMB thousands, unaudited)

Three months ended March 31, 2009

GAAP Result Adjustment Non-GAAP Results

Operating profit 198,506 23,454 221,960

Three months ended March 31, 2009

GAAP Result Adjustment Non-GAAP Results

Net income 181,117 23,454 204,571

Three months ended December 31, 2009

GAAP Result Adjustment Non-GAAP Results

Operating profit 462,166 18,728 480,894

Three months ended December 31, 2009

GAAP Result Adjustment Non-GAAP Results

Net income 427,864 18,728 446,592

Three months ended March 31, 2010

GAAP Result Adjustment Non-GAAP Results

Operating profit 530,813 19,531 550,344

Three months ended March 31, 2010

GAAP Result Adjustment Non-GAAP Results

Net income 480,537 19,531 500,068

Reconciliation from net cash provided by operating activities to adjusted

EBITDA(*) (in RMB thousands, unaudited)

Three

Three As a months As a Three As a

months % of ended % of months % of

ended total December total ended total

March 31, revenues 31, 2009 revenues March 31, revenues

2009 2010

Net cash provided

by operating

activities 247,438 31% 779,079 62% 426,169 33%

Changes in assets

and liabilities,

net of effects

of acquisitions 31,799 4% (244,723) -20% 164,711 13%

Income taxes

expenses 26,897 3% 70,915 6% 70,693 5%

Interest income

and other, net (9,508) -1% (36,613) -3% (20,417) -2%

Adjusted EBITDA 296,626 37% 568,658 45% 641,156 49%

(*) Definition of adjusted EBITDA: earnings before interest, taxes,

depreciation, amortization, other non-operating income, and

share-based compensation expenses.

Source: Baidu, Inc.
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