omniture

Baidu Announces Fourth Quarter and Fiscal Year 2018 Results

2019-02-22 05:30 7996

BEIJING, Feb. 22, 2019 /PRNewswire/ -- Baidu, Inc. (NASDAQ: BIDU) ("Baidu" or the "Company"), the leading Chinese language Internet search provider, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2018[1].

"We are excited to enter the new year on strong footing with Baidu 2018 revenues reaching RMB 102 billion[2], up 28% annually. The growth rate of Baidu App DAUs has been accelerating over the past year, up 24% year over year to 161 million in December 2018, while Haokan short video app grew to 19 million DAUs from 1 million a year ago," stated Robin Li, CEO of Baidu. "2018 was a pivotal year for Baidu, as we worked on deploying AI technologies beyond search to feed, voice assistant, AI solutions and autonomous driving, to enable more users, customers and partners to benefit from Baidu's AI."

"The diversification of Baidu's business from mobile internet into the smart home, smart transportation, cloud and autonomous driving markets will require heavy investments," said Herman Yu, CFO of Baidu. "Nevertheless, these investments taken together give Baidu a balanced portfolio for short-term, medium-term and long-term returns, and we hope to see these investments bear fruit and accelerate Baidu's revenue growth in the coming years."

Fourth Quarter 2018 Financial Highlights

  • Total revenues were RMB 27.2 billion ($3.96 billion), increasing 22% year over year, or 28% year over year excluding the impact of announced divestures[3]. Total revenues of Baidu Core were RMB 20.5 billion ($2.98 billion), increasing 14% year over year, or 20% year over year excluding the impact of announced divestures.
  • Operating income was RMB 1.1 billion ($162 million), decreasing 77% year over year, and operating margin was 4%, compared to 21% in Q4 2017. Operating income of Baidu Core was RMB 4.4 billion ($645 million), decreasing 26% year over year, and operating margin was 22%, compared to 33% in Q4 2017.
  • Non-GAAP operating income was RMB 2.7 billion ($386 million), decreasing 54% year over year, and non-GAAP operating margin was 10%, compared to 26% in Q4 2017. Non-GAAP operating income of Baidu Core was RMB 5.8 billion ($837 million), decreasing 17% year over year, and non-GAAP operating margin of Baidu Core was 28%, compared to 38% in Q4 2017.
  • Net income attributable to Baidu was RMB 2.1 billion ($303 million), decreasing 50% year over year, and diluted earnings attributable to Baidu per ADS was RMB 6 ($0.86), decreasing 52% year over year. Net income attributable to Baidu Core was RMB 4.1 billion ($589 million), decreasing 22% year over year.
  • Non-GAAP net income attributable to Baidu[4] was RMB 4.6 billion ($672 million), decreasing 17% year over year, and non-GAAP diluted earnings per ADS[5] was RMB 13 ($1.92), decreasing 17% year over year. Non-GAAP net income attributable to Baidu Core was RMB 6.5 billion ($939 million), decreasing 1% year over year.

Fiscal Year 2018 Financial Highlights

  • Total revenues were RMB 102.3 billion ($14.88 billion), increasing 28% from 2017, or 31% year over year excluding the impact of announced divestures. Total revenues of Baidu Core were RMB 78.3 billion ($11.38 billion), increasing 22% from 2017, or 26% year over year excluding the impact of announced divestures.
  • Operating income was RMB 15.5 billion ($2.26 billion), decreasing 1% from 2017. Operating margin was 15%, compared to 20% in 2017.
  • Non-GAAP operating income was RMB 20.2 billion ($2.94 billion), increasing 7% from 2017. Non-GAAP operating margin was 20%, compared to 24% in 2017. Non-GAAP operating income of Baidu Core was RMB 27.9 billion ($4.06 billion), increasing 23% year over year, and non-GAAP operating margin of Baidu Core was 36%, similar to 2017.
  • Net income attributable to Baidu was RMB 27.6 billion ($4.01 billion), increasing 51% from 2017, and diluted earnings attributable to Baidu per ADS was RMB 78 ($11.35), increasing 49% from 2017. Net income attributable to Baidu Core was RMB 33.6 billion ($4.89 billion), increasing 52% year over year.
  • Non-GAAP net income attributable to Baidu was RMB 23.3 billion ($3.39 billion), increasing 35% from 2017, and non-GAAP diluted earnings per ADS was RMB 66 ($9.64), increasing 34% from 2017. Non-GAAP net income attributable to Baidu Core was RMB 28.5 billion ($4.14 billion), increasing 37% year over year.

Other Highlights

Corporate

  • Baidu World was held in November 2018, with the conference theme "Yes, AI do" to highlight Baidu's efforts in bringing AI to everyday life in markets, such as smart home, smart transportation, cloud and autonomous driving.
  • Baidu was the exclusive red envelop giveaway sponsor of the 2019 CCTV Chinese New Year Gala, which drove traffic to new highs for Baidu's family of apps, including Baidu App (flagship search plus feed), Haokan (short video), Quanmin (flash video), Baidu Maps and Baidu Drive.
  • Baidu completed US$1.25 billion in bond offerings in the fourth quarter, consisting of US$850 million of 4.375% notes due 2024 and US$400 million of 4.875% notes due 2028, the proceeds from which will mostly be used to repay existing indebtedness.

Search and Feed

  • Baidu App daily active users ("DAUs") reached 161 million in December 2018, increasing 24% year over year.
  • Baijiahao, or BJH accounts, Baidu feed's content network, grew to 1.9 million publishers in December 2018, and includes People's Daily, Xinhua News Agency, CCTV and multiple provincial media sources
  • Baidu Smart Mini Program monthly active users ("MAUs") reached 147 million in December 2018, up 30% sequentially. Also in December, Baidu Smart Mini Program was open sourced to network partners.
  • Haokan (short video) and Quanmin (flash video) DAUs reached 19 million and 4 million, respectively, in December 2018. According QuestMobile, Quanmin and Haokan were the two fastest growing apps among the Top 10 short video apps in China, across key metrics of total daily time spent, DAUs and MAUs over the three months ending December 2018.

DuerOS

  • In December 2018, DuerOS voice assistant installed base surpassed 200 million, up 45% sequentially, and voice queries on DuerOS reached 1.6 billion, representing a sequential CAGR of over 100% for the last seven quarters.
  • The DuerOS skills store has released over 1,000 skills in wide-ranging genres, such as Douyu (live video), Dragonfly FM (online radio) and CITIC Academy (online literature), and has a community of 27,000 developers.
  • DuerOS for Apollo now enables Smart Mini Programs for Baidu App to operate in the DuerOS skills store in vehicles, positioning DuerOS as the cross-platform voice assistant preferred by users and software developers.
  • Baidu released two smart devices powered by DuerOS in November 2018—Xiaodu Smart Speaker Pro (MSRP US$45) and Xiaodu Smartphone Car Mount (MSRP US$15), the latter serves as a smartphone charger with far-field microphones that allow users to operate DuerOS skills via conversational AI.
  • Xiaodu Smart Speaker and Xiaodu Smart Display were the best-selling smart speakers on JD.com, Pinduoduo and GOME.com (a leading electronics retailer in China) during the 2018 Double 11 Shopping Festival.
  • In the hospitality sector, DuerOS voice assistant is powering Baidu's smart display to offer personal concierge in over 2,000 rooms across a score of hotels in China, particularly in 5-star hotels, including the recently opened InterContinental Shanghai Wonderland.
  • In December 2018, DuerOS and Xiaodu Smart Display received the prestigious 2018 China Red Star Design Award from the China Industrial Design Association, recognizing the two for innovation in user interaction and user design.

Apollo

  • In January 2019, Baidu released Apollo v3.5, which supports complex urban-road autonomous driving. At CES, Baidu also introduced Apollo Open Platform, which is available to the developer community, and Apollo Enterprise, which encompasses solutions to support commercial production, including DuerOS for Apollo, valet parking, assisted highway driving and intelligent maps.
  • Apollo has been granted over 50 licenses for open-road testing for autonomous vehicles, including in Beijing, Tianjin, Chongqing, Changsha and Baoding municipalities, as well as the Fujian province. The Company believes Apollo has received the largest number of open road testing licenses in China to date.
  • Apollo signed strategic partnerships with First Automotive Works (FAW) and Volvo Car Corporation in November 2018 to support the commercial production of autonomous L4 passenger vehicles.
  • Apollo has garnered over 135 OEMs, Tier 1 parts suppliers and other strategic partners to date, including recent additions of Volkswagen Automobile, China Unicom, Kalray, Quanta Computer and StarNeto Technology.

Cloud and Others

  • On the eve of Chinese New Year, the day of the 2019 CCTV Chinese New Year Gala, Baidu Cloud infrastructure smoothly handled 20.8 billion user interactions, with peak volume reaching 10 million hits per second.
  • Baidu launched OpenEdge, an open source edge computing platform, which allows developers to build light, secure and scalable edge applications, bringing AI processing to edge devices, like smart home devices, wearables and other IoTs. Baidu also unveiled two edge computing hardware solutions: BIE-AI-Box, a kit for in-vehicle computer vision designed in partnership with Intel, and BIE-AI-Board, a chipboard for mobile detection co-developed with NXP Semiconductor.
  • Over 1 million developers have used Baidu's AI Open Platform, which provides developers with access to Baidu's comprehensive AI capabilities, including speech recognition, natural language processing and computer vision, from Baidu Cloud to build their products and solutions.
  • Baidu is working with the Hainan province to broaden the adoption of blockchain by offering XuperChain, Baidu's blockchain technology, to a wide range of industries. XuperChain helps multiple parties execute transactions without the need for a trusted, central authority, addressing challenges commonly faced in information security, copyright verification, supply chain financing, online trading and other areas. XuperChain currently processes more than 55,000 transactions per second, far exceeding the industry average.
  • Baidu is working with the Beijing Internet Court to develop an electronic-evidence platform using XuperChain. As of December 2018, over 93 million patents were stored and protected on XuperChain's copyright protection system.

iQIYI

  • iQIYI added 36.6 million subscribers in 2018 to reach 87.4 million at year end, further solidifying their leadership in original entertainment blockbuster content.
  • Baidu and iQIYI co-launched a hybrid OTT TV box with Sichuan Cable TV, enhancing the home entertainment experience through AI. This follows an earlier release of Gehua Little Fruit OTT TV box.
  • In December 2018, iQIYI completed the offering of US$750 million of 3.75% convertible senior notes due 2023, the proceeds from which, net of capped call fees, will be used to expand and enhance iQIYI's content offerings and strengthen its technologies, as well as for working capital and other general corporate purposes.

Fourth Quarter 2018 Results

Total revenues reached RMB 27.2 billion ($3.96 billion), increasing 22% year over year, or 28% year over year excluding the impact of announced divestures. Online marketing revenues were RMB21.2 billion ($3.08 billion), increasing 10% year over year. Baidu had approximately 529,000 active online marketing customers[6], increasing 15% year over year. Revenue per online marketing customer was approximately RMB 40,100 ($5,800), decreasing 4% year over year. Other revenues were RMB 6.0 billion ($872 million), increasing 104% year over year, which was mainly due to the robust growth in iQIYI membership services, cloud and other businesses.

Revenue from Baidu Core reached RMB 20.5 billion ($2.98 billion), increasing 14% year over year, or 20% year over year excluding the impact of announced divestures, while revenue from iQIYI reached RMB 7.0 billion ($1.02 billion), increasing 55% year over year.

Content costs were RMB 7.3 billion ($1.07 billion), increasing 96% year over year, mainly due to increased investments in iQIYI content and, to a lesser extent, in content for BJH accounts, Baidu feeds' content network.

Traffic acquisition cost was RMB 3.4 billion ($491 million), increasing 34% year over year, as a result of increasing TAC revenue and revenue derived from online TV and offline digitalized screens.

Bandwidth costs were RMB 1.8 billion ($258 million), increasing 27% year over year, mainly due to increasing demand from feed, video and cloud.

Other cost of revenues, which includes depreciation, operational costs and share-based compensation, was RMB 3.1 billion ($453 million), increasing 27% year over year.

Selling, general and administrative expenses were RMB 5.9 billion ($864 million), increasing 64% year over year, primarily due to increased investment in channel and promotional marketing, as well as in personnel related expenses.

Research and development expenses were RMB 4.5 billion ($659 million), increasing 22% year over year, primarily due to the increase in personnel related expenses.

Operating income was RMB 1.1 billion ($162 million), decreasing 77% year over year. Operating income of Baidu Core was RMB 4.4 billion ($645 million), decreasing 26% year over year. Non-GAAP operating income was RMB 2.7 billion ($386 million), decreasing 54% year over year. Non-GAAP operating income of Baidu Core was RMB 5.8 billion ($837 million), decreasing 17% year over year.

Total other loss was RMB 60 million ($9 million), compared to total other income of RMB 314 million in Q4 2017, mainly due to the loss from equity method investments.

Income tax expense was RMB 484 million ($70 million), compared to RMB 929 million in Q4 2017. Effective tax rate was 46%, compared to 18% last year, primarily due to iQIYI not being able to recognize tax benefit from its losses in the current period.

Net loss attributable to noncontrolling interests was RMB 1.5 billion ($220 million), which mainly consisted of losses from iQIYI allocated to noncontrolling interests subsequent to its IPO.

Net income attributable to Baidu was RMB 2.1 billion ($303 million), decreasing 50% year over year. Diluted earnings per ADS amounted to RMB 6 ($0.86). Net income attributable to Baidu Core was RMB 4.1 billion ($589 million), decreasing 22% year over year. Non-GAAP net income attributable to Baidu was RMB 4.6 billion ($672 million), decreasing 17% year over year. Non-GAAP diluted earnings per ADS amounted to RMB 13 ($1.92). Non-GAAP net income attributable to Baidu Core was RMB 6.5 billion ($939 million), decreasing 1% year over year.

Adjusted EBITDA was RMB 4.0 billion ($577 million) and adjusted EBITDA margin was 15%. Adjusted EBITDA to Baidu Core was RMB 6.9 billion ($1.00 billion) and adjusted EBITDA margin to Baidu Core was 34%. 

As of December 31, 2018, cash, cash equivalents, restricted cash and short-term investments were RMB 141.5 billion ($20.57 billion). Excluding iQIYI, cash, cash equivalents, restricted cash and short-term investments were RMB 128.7 billion ($18.71 billion), as of December 31, 2018. Free cash flow was RMB 5.9 billion ($852 million). Excluding iQIYI, free cash flow was RMB 5.5 billion ($801 million).

Fiscal Year 2018 Results

Total revenues reached RMB 102.3 billion ($14.88 billion), increasing 28% year over year, or 31% year over year excluding the impact of announced divestures. Online marketing revenues were RMB 81.9 billion ($11.91 billion), increasing 19% year over year. Baidu had approximately 856,000 active online marketing customers, increasing 10% year over year. Revenue per online marketing customer was approximately RMB 95, 800 ($13,900), an 8% increase from 2017. Other revenues reached RMB 20.4 billion ($2.96 billion), increasing 86% year over year, which was mainly due to the robust growth in iQIYI membership services , cloud and other businesses.

Revenue from Baidu Core reached RMB 78.3 billion ($11.38 billion), increasing 22% year over year, or 26% year over year excluding the impact of announced divestures, while revenue from iQIYI reached RMB 25.0 billion ($3.63 billion), increasing 52% from 2017.

Content costs were RMB 23.5 billion ($3.42 billion), increasing 75% year over year, mainly due to increased investment in iQIYI content and, to a lesser extent, in content for BJH accounts, Baidu feeds' content network.

Traffic acquisition costs were RMB 11.4 billion ($1.66 billion), increasing 18% year over year.

Bandwidth costs were RMB 6.5 billion ($944 million), increasing 17% year over year.

Other cost of revenues, which includes depreciation, operational costs and share-based compensation, was RMB 10.3 billion ($1.51 billion), increasing 7% year over year.

Selling, general and administrative expenses were RMB 19.2 billion ($2.80 billion), increasing 46% year over year, primarily due to increased investment in channel and promotional spending.

Research and development expenses totaled RMB 15.8 billion ($2.29 billion), increasing 22% year over year, primarily due to the increase in personnel related expenses.

Operating income was RMB 15.5 billion ($2.26 billion), decreasing 1% from 2017. Operating income of Baidu Core was RMB 23.8 billion ($3.46 billion), increasing 21% year over year. Non-GAAP operating income was RMB 20.2 billion ($2.94 billion), increasing 7% year over year. Non-GAAP operating income of Baidu Core was RMB 27.9 billion ($4.06 billion), increasing 23% year over year.

Total other income was RMB 11.8 billion ($1.72 billion), increasing 111% from 2017, mainly due to gains from the disposal of Du Xiaoman, (financial services), and fair value gains on private company investments in accordance with ASC 321, adopted on January 1, 2018.

Income tax expense was RMB 4.7 billion ($690 million), compared to RMB 3.0 billion in 2017. Effective tax rate was 17%, compared to 14% in 2017, primarily due to iQIYI not being able to recognize tax benefit from its losses in the current period.

Net income attributable to Baidu was RMB 27.6 billion ($4.01 billion), increasing 51% year over year. Diluted earnings attributable to Baidu per ADS amounted to RMB 78 ($11.35). Net income attributable to Baidu Core was RMB 33.6 billion ($4.89 billion), increasing 52% year over year. Non-GAAP net income attributable to Baidu was RMB 23.3 billion ($3.39 billion), a 35% increase from 2017. Non-GAAP diluted earnings per ADS was RMB 66 ($9.64). Non-GAAP net income attributable to Baidu Core was RMB 28.5 billion ($4.14 billion), increasing 37% year over year.

Adjusted EBITDA reached RMB 24.3 billion ($3.54 billion) and adjusted EBITDA margin was 24%. Adjusted EBITDA to Baidu Core reached RMB 31.5 billion ($4.58 billion) and adjusted EBITDA margin to Baidu Core was 40%. 

Free cash flow was RMB 27.2 billion ($3.96 billion). Excluding iQIYI, free cash flow was RMB 24.9 billion ($3.62 billion).

Financial Guidance

For the first quarter of 2019, Baidu expects revenues to be between RMB 23.5 billion ($3.42 billion) and RMB 24.7 billion ($3.60 billion), representing a 12% to 18% increase year over year, or 18% to 24% excluding revenues from announced divestures.

Previously announced divestures together generated approximately RMB 1.1 billion in Q1 2018, and no revenue from announced divestures is expected in the Q1 2019, as these transactions have been consummated. 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 8:15 PM on February 21, 2019, U.S. Eastern Time (9:15 AM on February 22, 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:

5693149

A replay of the conference call may be accessed by phone at the following number until March 1, 2019:

International:

+61 2 8199 0299

Passcode:

5693149

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.

Contacts

Investors Relations, Baidu, Inc.
Tel: +86-10-5992-4958
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 first 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 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 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 attributable to Baidu, 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.

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.

Non-GAAP net income attributable to Baidu represents net income attributable to Baidu excluding share-based compensation expenses, the gain or loss associated with the issuance of shares by Baidu's equity method investees at a price higher or lower than the carrying value per share, accretion relating to equity method investments, disposal gain or loss, impairment of long-term investments, fair value change of long-term investments, as adjusted for related income tax effects. Non-GAAP diluted earnings per ADS represents diluted earnings per ADS calculated based on non-GAAP net income attributable to Baidu. Adjusted EBITDA represents operating income excluding depreciation, amortization (excluding the amortization of licensed copyrights and produced content of iQIYI) 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."


[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 RMB6.8755 to US$1.00, the effective noon buying rate as of December 31, 2018, 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] Starting from January 1, 2018, Baidu adopted the new revenue accounting standard ASC 606, which reclassifies value added tax from the cost of revenues to net against revenues. To increase comparability of operating results and help investors better understand our business performance and operating trends, 2017 net revenues have been used to calculate all percentage changes in revenues, percentage changes in revenues per online marketing customer, operating margin, non-GAAP operating margin, and adjusted EBITDA margin. 2017 net revenues are defined as gross revenues under legacy GAAP after the deduction of value added taxes, which is presented on the same basis as 2018 and going forward.

[3] From 2017 through Q3 2018, certain non-core businesses were divested, including Baidu Mobile Games, Baidu Deliveries, Global DU businesses and Du Xiaoman (financial services), which together generated approximately RMB 4.1 billion and RMB 3.1 billion in revenues in 2017 and 2018, respectively.

[4] Non-GAAP net income attributable to Baidu represents net income attributable to Baidu excluding share-based compensation expenses, the gain or loss associated with the issuance of the shares by our equity method investees at a price higher or lower than our carrying value per share, accretion relating to equity method investments, disposal gain or loss, impairment of long-term investments and fair value change of long-term investments, as adjusted for the tax effects on non-GAAP adjustments.

[5] Non-GAAP diluted earnings per ADS represents diluted earnings per ADS calculated based on non-GAAP net income attributable to Baidu.     

[6] The number of active online marketing customers and revenue per online active customer exclude group-buying and delivery related businesses, which is consistent with prior reporting.

 

 

Baidu, Inc. 

Condensed Consolidated Statements of Income




Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,


December 31,


December 31,

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


2017


2018


2018


2018


2017


2018


2018



RMB


RMB


RMB


US$


RMB


RMB


US$



Unaudited


Unaudited


Unaudited


Unaudited


Audited


Unaudited


Unaudited

Revenues: 















 Online marketing services 


20,418


22,481


21,197


3,083


73,146


81,912


11,914

 Others 


3,138


5,722


5,998


872


11,663


20,365


2,962

Total revenues (2017 revenues include VAT, see note 1 for details) 


23,556


28,203


27,195


3,955


84,809


102,277


14,876
















Operating costs and expenses: 















 Content costs 


3,754


6,736


7,344


1,068


13,398


23,487


3,416

 Traffic acquisition costs 


2,518


3,090


3,375


491


9,657


11,419


1,661

 Bandwidth costs 


1,400


1,695


1,775


258


5,558


6,492


944

 Others 


3,774


2,697


3,117


453


14,449


10,346


1,505

 Cost of revenues (note 2) 


11,446


14,218


15,611


2,270


43,062


51,744


7,526

 Selling, general and administrative (note 2) 


3,632


5,641


5,943


864


13,128


19,231


2,797

 Research and development (note 2) 


3,704


3,916


4,529


659


12,928


15,772


2,294

Total operating costs and expenses 


18,782


23,775


26,083


3,793


69,118


86,747


12,617
















Operating income 


4,774


4,428


1,112


162


15,691


15,530


2,259
















Other income: 















 Interest income 


917


1,258


1,490


217


3,154


4,451


647

 Interest expense 


(400)


(479)


(574)


(84)


(1,615)


(1,883)


(274)

 Foreign exchange income(loss), net 


(113)


(54)


(50)


(7)


(482)


(122)


(18)

 Income (loss) from equity method investments 


204


419


(390)


(57)


(63)


(79)


(11)

 Other (loss) income, net 


(294)


7,877


(536)


(78)


4,598


9,428


1,371

Total other income (loss) 


314


9,021


(60)


(9)


5,592


11,795


1,715
















Income before income taxes 


5,088


13,449


1,052


153


21,283


27,325


3,974

Income taxes 


929


2,053


484


70


2,995


4,743


690

Net income 


4,159


11,396


568


83


18,288


22,582


3,284

Less: net income (loss) attributable to noncontrolling interests 


-


(1,000)


(1,513)


(220)


(13)


(4,991)


(726)

Net income attributable to Baidu 


4,159


12,396


2,081


303


18,301


27,573


4,010
















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















 -Basic


12.50


35.53


5.96


0.87


52.75


78.64


11.44

 -Diluted


12.38


35.26


5.93


0.86


52.41


78.03


11.35

Earnings per share for Class A and Class B ordinary shares:















 -Basic


125.02


355.27


59.55


8.66


527.51


786.36


114.37

 -Diluted


123.81


352.57


59.32


8.63


524.08


780.27


113.49

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













Basic 


34,783,969


34,891,733


34,909,960


34,909,960


34,725,123


34,898,589


34,898,589

Diluted


35,123,903


35,158,747


35,044,338


35,044,338


34,952,391


35,171,043


35,171,043































(1) Starting on January 1, 2018, valued added tax has been reclassified from cost of revenues to net against revenues. To increase comparability of operating results and help investors better understand our business performance and trends, 2017 net revenues have been presented as follows. 2017 net revenues are defined as gross revenues under legacy GAAP after the deduction of value added taxes, which is presented on the same basis as 2018.




Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,


December 31,


December 31,



2017


2018


2018


2018


2017


2018


2018



RMB


RMB


RMB


US$


RMB


RMB


US$



Unaudited


Unaudited


Unaudited


Unaudited


Audited


Unaudited


Unaudited

 Gross revenues 


23,556


29,876


28,799


4,189


84,809


108,357


15,760

 Less: value added taxes 


1,327


1,673


1,604


234


4,768


6,080


884

 Net revenues 


22,229


28,203


27,195


3,955


80,041


102,277


14,876
















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

 Cost of revenues 


46


58


71


10


183


224


33

 Selling, general and administrative 


298


545


587


85


973


1,725


251

 Research and development 


633


636


884


129


2,088


2,727


397

 Total share-based compensation expenses 


977


1,239


1,542


224


3,244


4,676


681
















(3)  All translations from RMB to U.S. dollars are made at a rate of RMB6.8755 to US$1.00, the effective noon buying rate as of December 31, 2018, in The City of New York for cable transfers of RMB as   certified for customs purposes by the Federal Reserve Bank of New York.

 

Baidu, Inc. 

Condensed Consolidated Balance Sheets










December 31,


December 31,


December 31,

(In millions except for share information)


2017


2018


2018



RMB


RMB


US$



Audited


Unaudited


Unaudited








ASSETS







    Current assets:







 Cash and cash equivalents


11,084


27,638


4,020

 Restricted cash


252


2,189


318

 Short-term investments


89,381


111,626


16,235

 Other invested securities


18,350


-


-

 Accounts receivable, net


4,571


6,015


875

 Loans and interest receivable, net


23,938


-


-

 Amounts due from related parties


168


785


114

 Other assets, current 


3,425


6,841


995

    Total current assets


151,169


155,094


22,557








    Non-current assets:







 Fixed assets, net


12,475


17,903


2,604

 Intangible assets, net


5,467


9,181


1,335

 Goodwill


15,806


18,536


2,696

 Long-term investments, net


56,283


80,454


11,702

 Loans and interest receivable, net


3,467


-


-

 Amounts due from related parties


9


4,297


625

 Deferred tax assets, net


1,532


2,324


338

 Other assets, non-current 


5,520


9,777


1,422

    Total non-current assets


100,559


142,472


20,722








Total assets


251,728


297,566


43,279








LIABILITIES AND EQUITY







   Current liabilities:







        Short-term loans


1,244


3,046


443

        Amounts due to the third-party investors


38,486


-


-

Accounts payable and accrued liabilities


27,523


35,381


5,147

Customer advances and deposits


6,785


7,338


1,067

Deferred revenue


788


1,883


274

Deferred income


568


523


76

Long-term loans, current portion


10


84


12

Notes payable, current portion


6,500


6,871


999

Amounts due to related parties


153


1,727


251

    Total current liabilities


82,057


56,853


8,269








    Non-current liabilities:







Deferred income


73


54


8

Deferred revenue


-


1,309


190

Amounts due to related parties


-


4,360


634

Long-term loans


6,701


7,456


1,084

Notes payable


29,111


42,735


6,216

Convertible Notes, non-current


-


4,712


685

Deferred tax liabilities


3,375


4,099


596

Other non-current liabilities


39


236


34

    Total non-current liabilities


39,299


64,961


9,447








Total liabilities


121,356


121,814


17,716








Redeemable noncontrolling interests


11,022


716


104








Equity







Class A Ordinary Shares, par value US$0.00005 per share, 825,000,000 shares authorized, and 27,614,978 shares and 27,733,692 shares issued and outstanding as at December 31, 2017 and  December 31, 2018


-


-


-

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, 2017 and December 31, 2018


-


-


-

Additional paid-in capital


12,088


33,441


4,864

Retained earnings


102,328


129,246


18,798

Accumulated other comprehensive income


930


210


31

    Total Baidu, Inc. shareholders' equity


115,346


162,897


23,693

    Noncontrolling interests


4,004


12,139


1,766

Total equity


119,350


175,036


25,459








Total liabilities, redeemable noncontrolling interests, and equity


251,728


297,566


43,279

 

 

 

Baidu, Inc. 

Selected Information


















Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,


December 31,


December 31,

(In millions, unaudited)


2017


2018


2018


2018


2017


2018


2018



RMB


RMB


RMB


US$


RMB


RMB


US$

 Baidu Core 


19,109


21,606


20,520


2,985


67,681


78,271


11,384

 iQIYI 


4,817


6,914


7,028


1,022


17,378


24,989


3,634

 Intersegment eliminations & adjustments 


(370)


(317)


(353)


(52)


(250)


(983)


(142)

 Total revenues (Note 1) 


23,556


28,203


27,195


3,955


84,809


102,277


14,876
















 Baidu Core 


18,043


21,606


20,520


2,985


63,903


78,271


11,384

 iQIYI 


4,545


6,914


7,028


1,022


16,396


24,989


3,634

 Intersegment eliminations & adjustments 


(359)


(317)


(353)


(52)


(258)


(983)


(142)

 Total net revenues (Note 1)  


22,229


28,203


27,195


3,955


80,041


102,277


14,876































 Baidu Core 


6,012


7,015


4,433


645


19,715


23,808


3,463

 iQIYI 


(856)


(2,591)


(3,325)


(484)


(3,953)


(8,306)


(1,208)

 Intersegment eliminations & adjustments 


(382)


4


4


1


(71)


28


4

 Operating income 


4,774


4,428


1,112


162


15,691


15,530


2,259

 Baidu Core 


33%


32%


22%


22%


31%


30%


30%

 iQIYI 


(19%)


(37%)


(47%)


(47%)


(24%)


(33%)


(33%)

 Operating margin (Note 1) 


21%


16%


4%


4%


20%


15%


15%
















 Baidu Core 


6,937


8,050


5,754


837


22,776


27,928


4,062

 iQIYI 


(804)


(2,387)


(3,104)


(452)


(3,719)


(7,750)


(1,126)

 Intersegment eliminations & adjustments 


(382)


4


4


1


(122)


28


4

 Non-GAAP operating income 


5,751


5,667


2,654


386


18,935


20,206


2,940

 Baidu Core 


38%


37%


28%


28%


36%


36%


36%

 iQIYI 


(18%)


(35%)


(44%)


(44%)


(23%)


(31%)


(31%)

 Non-GAAP operating margin (Note 1) 


26%


20%


10%


10%


24%


20%


20%































 Baidu Core 


5,190


14,309


4,050


589


22,108


33,605


4,888

 iQIYI 


(612)


(3,140)


(3,477)


(506)


(3,737)


(9,110)


(1,325)

 Intersegment eliminations & adjustments(Note 2) 

(419)


1,227


1,508


220


(70)


3,078


447

 Net income attributable to Baidu 


4,159


12,396


2,081


303


18,301


27,573


4,010

 Baidu Core 


29%


66%


20%


20%


35%


43%


43%

 iQIYI 


(13%)


(45%)


(49%)


(49%)


(23%)


(36%)


(36%)

 Net margin (Note 1) 


19%


44%


8%


8%


23%


27%


27%
















 Baidu Core 


6,513


8,357


6,458


939


20,836


28,471


4,141

 iQIYI 


(560)


(2,939)


(3,243)


(472)


(3,470)


(8,703)


(1,265)

 Intersegment eliminations & adjustments (Note 2) 

(387)


1,267


1,406


205


(122)


3,556


516

 Non-GAAP net income attributable to Baidu 


5,566


6,685


4,621


672


17,244


23,324


3,392

 Baidu Core 


36%


39%


31%


31%


33%


36%


36%

 iQIYI 


(12%)


(43%)


(46%)


(46%)


(21%)


(35%)


(35%)

 Non-GAAP net margin (Note 1) 


25%


24%


17%


17%


22%


23%


23%































 Baidu Core 


7,870


8,982


6,887


1,002


26,695


31,503


4,582

 iQIYI 


(634)


(2,150)


(2,877)


(418)


(3,239)


(7,091)


(1,031)

 Intersegment eliminations & adjustments 


(382)


(43)


(40)


(7)


(122)


(97)


(13)

 Adjusted EBITDA


6,854


6,789


3,970


577


23,334


24,315


3,538

 Baidu Core 


44%


42%


34%


34%


42%


40%


40%

 iQIYI 


(14%)


(31%)


(41%)


(41%)


(20%)


(28%)


(28%)

 Adjusted EBITDA margin (Note 1) 


31%


24%


15%


15%


29%


24%


24%































(1) Starting on January 1, 2018, valued added tax has been reclassified from cost of revenues to net against revenues. To increase comparability of operating results and help investors better understand the Company's business performance and trends, 2017 net revenues were used to calculate operating margin, non-GAAP operating margin, non-GAAP net income margin and adjusted EBITDA margin. Net revenues for 2017 are defined as gross revenues under legacy GAAP after the deduction of value added taxes, consistent with 2018 presentation.
















 (2) Primarily related to net loss attributable to iQIYI noncontrolling interests 

 

 

 

Baidu, Inc. 

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


















Three months ended 


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,


December 31,


December 31,

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


2017


2018


2018


2018


2017


2018


2018



RMB


RMB


RMB


US$


RMB


RMB


US$
















Operating income - Baidu Core


6,012


7,015


4,433


645


19,715


23,808


3,463

Add:  Share-based compensation expenses


925


1,035


1,321


192


3,061


4,120


599

Non-GAAP operating income - Baidu Core


6,937


8,050


5,754


837


22,776


27,928


4,062
















Add:  Depreciation of fixed assets


901


885


1,082


157


3,457


3,418


497

Add:  Amortization of intangible assets


32


47


51


8


462


157


23

Adjusted EBITDA - Baidu Core


7,870


8,982


6,887


1,002


26,695


31,503


4,582
















Operating loss - iQIYI


(856)


(2,591)


(3,325)


(484)


(3,953)


(8,306)


(1,208)

Add:  Share-based compensation expenses


52


204


221


32


234


556


82

Non-GAAP operating loss - iQIYI


(804)


(2,387)


(3,104)


(452)


(3,719)


(7,750)


(1,126)
















Add:  Depreciation of fixed assets


92


81


93


14


348


312


46

Add:  Amortization of intangible assets


78


156


134


20


132


347


49

Adjusted EBITDA - iQIYI


(634)


(2,150)


(2,877)


(418)


(3,239)


(7,091)


(1,031)
















Operating income - Baidu


4,774


4,428


1,112


162


15,691


15,530


2,259

Add:  Share-based compensation expenses


977


1,239


1,542


224


3,244


4,676


681

Non-GAAP operating income - Baidu


5,751


5,667


2,654


386


18,935


20,206


2,940
















Add:  Depreciation of fixed assets


993


966


1,175


171


3,805


3,730


543

Add:  Amortization of intangible assets


110


156


141


20


594


379


55

Adjusted EBITDA-Baidu


6,854


6,789


3,970


577


23,334


24,315


3,538































Net income attributable to Baidu core


5,190


14,309


4,050


589


22,108


33,605


4,888

Add: Share-based compensation expenses


925


1,035


1,319


192


3,061


4,118


599

Add: Loss associated with the dilution of or accretion relating to equity method investments, net of tax


87


45


179


26


652


451


66

Add: Disposal loss(gain), net of tax


5


(6,697)


282


41


(5,456)


(6,388)


(930)

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


306


298


185


27


471


566


82

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


-


(633)


443


64


-


(3,881)


(564)

Non-GAAP net income attributable to Baidu core


6,513


8,357


6,458


939


20,836


28,471


4,141
















Net loss attributable to iQIYI


(612)


(3,140)


(3,477)


(506)


(3,737)


(9,110)


(1,325)

Add: Share-based compensation expenses


52


204


221


32


234


556


82

Add: Loss associated with the dilution of or accretion relating to equity method investments, net of tax


-


-


-


-


-


-


-

Add: Disposal loss(gain), net of tax


-


-


-


-


-


-


-

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


-


-


-


-


33


-


-

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


-


(3)


13


2


-


(149)


(22)

Non-GAAP net loss attributable to iQIYI


(560)


(2,939)


(3,243)


(472)


(3,470)


(8,703)


(1,265)
















Net income attributable to Baidu


4,159


12,396


2,081


303


18,301


27,573


4,010

Add: Share-based compensation expenses


977


1,151


1,444


210


3,244


4,454


648

Add: Loss associated with the dilution of or accretion relating to equity method investments, net of tax


87


45


179


26


652


451


66

Add: Disposal loss(gain), net of tax


5


(6,569)


282


41


(5,456)


(5,684)


(827)

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


338


298


185


27


503


566


82

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


-


(636)


450


65


-


(4,036)


(587)

Non-GAAP net income attributable to Baidu


5,566


6,685


4,621


672


17,244


23,324


3,392































Diluted earnings per ADS


12.38


35.26


5.93


0.86


52.41


78.03


11.35

Add:  Accretion of the redeemable noncontrolling interests


(0.54)


-


0.01


-


(0.05)


0.37


0.05

Add:  Non-GAAP adjustments to earnings per ADS


4.00


(16.25)


7.24


1.06


(3.02)


(12.09)


(1.76)

Non-GAAP diluted earnings per ADS


15.84


19.01


13.18


1.92


49.34


66.31


9.64

Weighted average number of ADS used in computing non-
GAAP diluted earnings per ADS


351,239,027


351,587,467


350,443,377


350,443,377


349,523,907


351,710,430


351,710,430































Net cash provided by operating activities - Baidu Core


8,722


10,361


8,409


1,223


28,817


33,083


4,812

Less: Capital expenditures


(1,011)


(2,026)


(2,900)


(422)


(3,757)


(8,160)


(1,187)

Free cash flow - Baidu Core


7,711


8,335


5,509


801


25,060


24,923


3,625
















Net cash provided by operating activities - iQIYI


1,053


994


528


77


4,011


2,884


419

Less: Capital expenditures


(177)


(193)


(178)


(26)


(1,022)


(612)


(89)

Free cash flow - iQIYI


876


801


350


51


2,989


2,272


330
















Net cash provided by operating activities - Baidu


9,775


11,355


8,937


1,300


32,828


35,967


5,231

Less: Capital expenditures


(1,188)


(2,219)


(3,078)


(448)


(4,779)


(8,772)


(1,276)

Free cash flow - Baidu


8,587


9,136


5,859


852


28,049


27,195


3,955

 

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Source: Baidu, Inc.
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