Baidu Announces Third Quarter 2023 Results

BEIJING, Nov. 21, 2023 /PRNewswire/ -- Baidu, Inc. (NASDAQ: BIDU and HKEX: 9888 (HKD Counter) and 89888 (RMB Counter)), ("Baidu" or the "Company"), a leading AI company with strong Internet foundation, today announced its unaudited financial results for the third quarter ended September 30, 2023.

"Baidu reported solid third-quarter financial results, demonstrating resilience in a challenging economic climate," said Robin Li, Co-founder and CEO of Baidu. "I am particularly pleased with our continuous technological enhancements and product improvements against the backdrop of emerging opportunities in generative AI and foundation models. Notably, we launched ERNIE 4.0, our most powerful foundation model. We have also harnessed the power of ERNIE and ERNIE Bot to reinvent our consumer-facing and enterprise-facing products, as well as our own operations, providing AI-native experiences and driving efficiency gains. Meanwhile, we've fully opened ERNIE API to cloud enterprises, empowering them to develop their own AI-native applications and solutions. Our AI-centric business and product strategy should set the stage for sustained multi-year revenue and profit expansion within our ERNIE and ERNIE Bot ecosystem."

"Baidu Core maintained stable margins in the quarter," said Rong Luo, CFO of Baidu. "Our ongoing investments in AI have underpinned technological and product innovations. Moving forward, while we will continue prioritizing investments in AI, especially in generative AI and foundation models, we will do so with an unrelenting focus on efficiency and strategic resource allocation."

Third Quarter 2023 Financial Highlights^[1]

Operational Highlights

Corporate

• Baidu launched ERNIE 4.0 (EB4) in October 2023. EB4 is now accessible to users on ERNIE Bot. In addition, enterprise customers can use EB4 via our cloud API.
• Baidu returned US$126 million to shareholders since the beginning of Q3 2023, bringing the cumulative repurchase to US$351 million under the current share repurchase program.
• Baidu established the Technology Ethics Committee in October 2023 to guide the practices of technology professionals.

Intelligent Driving

• Apollo Go, Baidu's autonomous ride-hailing service, provided 821K rides in the third quarter of 2023, up 73% year over year. As of September 30, 2023, the cumulative rides provided to the public by Apollo Go reached 4.1 million.

Mobile Ecosystem

• In September 2023, Baidu App's MAUs reached 663 million, up 5% year over year.
• Managed Page accounted for 53% of Baidu Core's online marketing revenue in the third quarter of 2023.

iQIYI

• iQIYI's average daily number of total subscribing members for the quarter was 107.5 million, compared to 101.0 million for the third quarter of 2022 and 111.2 million for the second quarter of 2023. More importantly, iQIYI's monthly average revenue per membership (ARM^[3]) for the quarter was RMB15.54, compared to RMB13.90 for the third quarter of 2022 and RMB14.82 for the second quarter of 2023, increasing 12% year over year.

[3] The monthly ARM for the quarter is calculated by dividing iQIYI's total revenues from membership services during a given quarter by the average daily number of total subscribing members for that quarter and the number of months in the quarter.

Third Quarter 2023 Financial Results 

Total revenues were RMB 34.4 billion ($4.72 billion), increasing 6% year over year.

• Revenue from Baidu Core was RMB 26.6 billion ($3.64 billion), increasing 5% year over year; online marketing revenue was RMB 19.7 billion ($2.70 billion), up 5% year over year, and non-online marketing revenue was RMB 6.9 billion ($943 million), up 6% year over year.
• Revenue from iQIYI was RMB 8.0 billion ($1.10 billion), increasing 7% year over year.

Cost of revenues was RMB 16.3 billion ($2.23 billion), which remained essentially unchanged compared to the same period last year.

Selling, general and administrative expenses were RMB 5.8 billion ($792 million), increasing 11% year over year, primarily due to an increase in channel spending and promotional marketing expenses.

Research and development expenses were RMB 6.1 billion ($836 million), increasing 6% year over year, primarily due to an increase in server depreciation expenses and server custody fees which support ERNIE Bot research inputs.

Operating income was RMB 6.3 billion ($860 million). Baidu Core operating income was RMB 5.5 billion ($754 million), and Baidu Core operating margin was 21%. Non-GAAP operating income was RMB 7.6 billion ($1.04 billion). Non-GAAP Baidu Core operating income was RMB 6.7 billion ($914 million), and non-GAAP Baidu Core operating margin was 25%.

Total other income, net was RMB 1.9 billion ($261 million), compared to total other loss, net of RMB 4.8 billion for the same period last year, mainly due to: (1) a recognition of RMB 338 million gain versus RMB 3.1 billion loss for the same period last year from fair value changes in long-term investments; and (2) a decrease in impairment of long-term investments by RMB 1.4 billion.

Income tax expense was RMB 1.3 billion ($175 million), increasing 41% year over year, primarily due to an increase in profit before tax.

Net income attributable to Baidu was RMB 6.7 billion ($916 million), and diluted earnings per ADS was RMB 18.22 ($2.50). Net income attributable to Baidu Core was RMB 6.4 billion ($882 million), and net margin for Baidu Core was 24%. Non-GAAP net income attributable to Baidu was RMB 7.3 billion ($996 million). Non-GAAP diluted earnings per ADS was RMB 20.40 ($2.80). Non-GAAP net income attributable to Baidu Core was RMB 7.0 billion ($953 million), and non-GAAP net margin for Baidu Core was 26%.

Adjusted EBITDA was RMB 9.5 billion ($1.30 billion) and adjusted EBITDA margin was 28%. Adjusted EBITDA for Baidu Core was RMB 8.5 billion ($1.17 billion) and adjusted EBITDA margin for Baidu Core was 32%.

As of September 30, 2023, cash, cash equivalents, restricted cash and short-term investments were RMB 202.7 billion ($27.78 billion), and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB 197.4 billion ($27.06 billion). Free cash flow was RMB 6.0 billion ($822 million), and free cash flow excluding iQIYI was RMB 5.2 billion ($709 million).

Recent Development

Baidu has appointed Ms. Sandy Ran Xu as an independent director of the Board of Directors of the Company (the "Board"), effective from January 1, 2024.

Ms. Xu has served as CEO and executive director of JD.com since May 2023. Prior to her current role, Ms. Xu served as CFO of JD.com from June 2020 to May 2023. Prior to joining JD.com, Ms. Xu was an audit partner and spent nearly 20 years with PricewaterhouseCoopers Zhong Tian LLP, Beijing office and PricewaterhouseCoopers, San Jose office. Ms. Xu currently also serves as a director of Yonghui Supermarket Co., Ltd. Ms. Xu was a Certified Public Accountant in both China and the United States. Ms. Xu received her bachelor's degree with a double major in information science and economics from Peking University.

Conference Call Information

Baidu's management will hold an earnings conference call at 7.30 AM on November 21, 2023, U.S. Eastern Time (8.30 PM on November 21, 2023, Beijing Time).

Please register in advance of the conference call using the link provided below. It will automatically direct you to the registration page of "Baidu Inc Q3 2023 Earnings Conference Call". Please follow the steps to enter your registration details, then click "Register". Upon registering, you will then be provided with the dial-in number, the passcode, and your unique access PIN. This information will also be emailed to you as a calendar invite.

For pre-registration, please click:
https://s1.c-conf.com/diamondpass/10034602-0jdhg4.html

In the 10 minutes prior to the call start time, you may use the conference access information (including dial-in number(s), the passcode and unique access PIN) provided in the calendar invite that you have received following your pre-registration.

Additionally, a live and archived webcast of this conference call will be available at https://ir.baidu.com.

About Baidu

Founded in 2000, Baidu's mission is to make the complicated world simpler through technology. Baidu is a leading AI company with strong Internet foundation, trading on NASDAQ under "BIDU" and HKEX under "9888". One Baidu ADS represents eight Class A ordinary shares.

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, 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 announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Baidu's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Baidu's growth strategies; its future business development, including development of new products and services; its ability to attract and retain users and customers; competition in the Chinese Internet search and newsfeed market; competition for online marketing customers; changes in the Company's revenues and certain cost or expense items as a percentage of its revenues; the outcome of ongoing, or any future, litigation or arbitration, including those relating to intellectual property rights; the expected growth of the Chinese-language Internet search and newsfeed 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, and announcements on the website of the Hong Kong Stock Exchange. Baidu does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of the press release, and Baidu undertakes no duty to update such information, except as required under applicable law.

Non-GAAP Financial Measures

To supplement Baidu's consolidated financial results presented in accordance with GAAP, Baidu uses the following non-GAAP financial measures: non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) attributable to Baidu, non-GAAP net margin, non-GAAP diluted earnings per ADS, adjusted EBITDA, adjusted EBITDA margin and free cash flow. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

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 non-cash charges or non-operating 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, amortization and impairment of intangible assets resulting from business combinations, and contingent loss pertaining to legal proceeding in relation to former advertising agencies.

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

Non-GAAP diluted earnings per ADS represents diluted earnings per ADS calculated by dividing non-GAAP net income attributable to Baidu, by the weighted average number of ordinary shares expressed in ADS. Adjusted EBITDA represents operating income excluding depreciation, amortization and impairment of intangible assets resulting from business combinations, share-based compensation expenses, and contingent loss pertaining to legal proceeding in relation to former advertising agencies.

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