Baidu Announces Second Quarter 2020 Results
BEIJING, Aug. 13, 2020 /PRNewswire/ -- Baidu, Inc. (NASDAQ: BIDU) ("Baidu" or the "Company"), a leading search engine, knowledge and information centered Internet platform and AI company, today announced its unaudited financial results for the second quarter ended June 30, 2020(1).
"With COVID-19 becoming more manageable in China, Baidu's business is steadily rebounding. We are pleased that in-app revenue grew in the second quarter, despite a challenging macro environment, further validating our strategy to make Baidu App a super app through AI-powered building blocks and marketing cloud platform." said Robin Li, Co-founder and CEO of Baidu. "Baidu's new AI businesses, including cloud, smart devices and smart transportation, saw double-digit growth in the second quarter and stand to become an important revenue driver in the years to come."
"In addition to investing in new AI businesses, Baidu is also diversifying our revenue streams through membership, online games and others to increase the ARPU of our existing traffic." said Herman Yu, CFO of Baidu. "The healthy growth of Baidu App and new AI businesses have enabled Baidu Core's adjusted EBITDA margin to reach 41% in the second quarter. We plan to continue heavy investments in technology to maximize Baidu's future growth potential."
Second Quarter 2020 Financial Highlights
Baidu, Inc.
(In millions except per ADS,
Q2
Q1 Q2
unaudited) 2019 2020 2020 YOY QOQ
RMB
RMB
RMB US$
Total revenues 26,326 22,545 26,034 3,685 (1%) 15%
Operating income (loss) 233 (437) 3,644 516 1464% -
Operating income (non-GAAP
)
2 1,955 1,437 5,605 793 187% 290%
Net income to Baidu 2,412 41 3,579 507 48% 8629%
Net income to Baidu (non-GAAP
)
2 3,635 3,082 5,082 719 40% 65%
Diluted earnings per ADS 6.57 0.02 10.31 1.46 57% 51450%
Diluted earnings per ADS (non-GAAP
)
2 10.11 8.84 14.73 2.08 46% 67%
Adjusted EBITDA 2 3,355 2,852 7,015 993 109% 146%
Adjusted EBITDA margin 13% 13% 27% 27%
Baidu Core
(In millions, unaudited)
Q2
Q1 Q2
2019 2020 2020 YOY QOQ
RMB
RMB
RMB US$
Total revenues 19,540 15,268 18,926 2,679 (3%) 24%
Operating income 2,109 1,848 4,966 703 135% 169%
Operating income (non-GAAP)
2 3,485 3,348 6,482 917 86% 94%
Net income to Baidu Core 3,731 1,698 4,424 626 19% 161%
Net income to Baidu Core (non-GAAP) 2 4,740 4,519 5,656 801 19% 25%
Adjusted EBITDA2 4,766 4,641 7,771 1,100 63% 67%
Adjusted EBITDA margin 24% 30% 41% 41%
Other Highlights
Corporate
-- As part of corporate social responsibilities, Baidu is partnering with
healthcare professionals and government organizations to tackle public
health risks and improve the quality of life, using Baidu AI for public
health monitoring, drug development and disease diagnosis. Baidu AI
healthcare solutions have been adopted by nearly 2,000 hospitals and
primary healthcare institutions across 27 provinces.
-- Baidu returned US$540 million to shareholders under the 2020 Share
Repurchase Program in the second quarter, bringing the Company's
cumulative repurchase for the last two years to approximately US$1.9
billion.
-- Baidu's board of directors recently approved a change to the 2020 Share
Repurchase Program, increasing the repurchase authorization from US$1
billion to US$3 billion, which is effective through December 31, 2022.
Mobile Ecosystem
-- Baidu App daily active users ("DAUs") reached 204 million in June 2020,
adding 16 million users in the last 12 months.
-- As a leading Internet platform for content and services, Baidu has
attracted a large variety of knowledge and information-based videos to
its platform, including live and short videos. Over 800 sessions of
topical live streaming were broadcasted in the second quarter, with
sessions like Baidu Wiki Virtual Zoo, Summer Art Festival and Wandering
through Civilization Season 2, attracting over 40,000,000 views.
-- Baijiahao ("BJH") publisher accounts reached 3.4 million, up 52% year
over year, in June 2020. The large scale of Baidu's platform is drawing
more original content creators to join BJH, which allows easy sharing of
content across Baidu App, Haokan, Quanmin and Baidu's full set of
knowledge products.
-- Baidu Smart Mini Program ("SMP") is becoming more lively with the number
of SMPs joining Baidu's network growing over five folds in the last
year, and SMP monthly active users ("MAUs") on Baidu App reaching 339
million, up 25% year over year. App developers are migrating to SMP,
which enables users native-app like, closed-loop experience on
third-party content and services, without having to leave Baidu and
download the host apps.
-- Revenue from Baidu Managed Page increased to approximately 30% of Baidu
Core's online marketing services revenue in the second quarter of 2020.
Merchants with HTML5 websites across many industries are switching to
Managed Page, as the landing page for their search results.
DuerOS
-- In June 2020, DuerOS monthly voice queries on Xiaodu devices reached 2.8
billion, nearly doubling from last year, and DuerOS total monthly voice
queries reached 5.8 billion, up 57% from last year.
-- DuerOS skills store now offers 4,000 skills in wide ranging genres,
including education, video, online game and live streaming. DuerOS
developer community has grown to over 42,000 members.
-- JD.com announced that Xiaodu series of smart displays and smart speakers
was the best-selling in the smart speaker category on its platform
during this year's June 18 Shopping Festival.
Cloud, AI Services & AI Platform
-- Baidu formed a strategic partnership with China National Building
Materials Group (CNBM Group), the parent of 13 listed companies. CNBM
Group plans to use Baidu AI PaaS, equipped with big data and IoT edge
computing capabilities, to provide intelligent logistics, intelligent
factory and industrial autonomous driving. For example, CNBM Group plans
to use Baidu AI PaaS paired with Baidu intelligent map to improve the
routing efficiency of its logistics vehicles and track the vehicles
whereabouts to optimize operational costs and increase traffic safety.
-- Baidu's AI open platform, built on top of Baidu Cloud, offers over 260
AI capabilities, which are tapped by over 2.1 million developers.
-- At the World Artificial Intelligence Conference, Baidu's natural
language processing framework ERNIE (Enhanced Representation through
kNowledge IntEgration) earned the distinction of the SAIL (Super AI
Leader) Award, recognizing inspiring technology breakthroughs,
application innovations and AI projects that change people's lives.
Apollo
-- The Apollo robotaxi operations in Beijing, Changsha and Cangzhou have
expanded into larger networks and more complex road conditions, such as
downtown streets.
-- In May 2020, Baidu completed the 145,000 square feet Apollo Park in
Beijing, an autonomous driving and V2X testing facility that supports
testing, operational command center, cloud control system, vehicle
warehousing, maintenance and calibration.
iQIYI
-- iQIYI subscribers reached 104.9 million, up 4% year over year, in June
2020, and membership revenue was up 19% year over year. iQIYI's large
subscriber base further strengthens iQIYI's foundation to produce
entertainment blockbuster originals.
Second Quarter 2020 Results
Total revenues reached RMB 26.0 billion ($3.69 billion), decreasing 1% year over year. Online marketing revenues were RMB 17.7 billion ($2.50 billion), decreasing 8% year over year. Other revenues were RMB 8.3 billion ($1.18 billion), increasing 18% year over year, driven by the strong growth of iQIYI membership and Baidu's cloud and smart transportation solutions.
Revenue from Baidu Core reached RMB 18.9 billion ($2.68 billion), decreasing 3% year over year. Revenue from iQIYI reached RMB 7.4 billion ($1.05 billion), up 4% year over year. iQIYI membership revenue grew 19% year over year, partially offset by online advertising revenue declining 28% year over year.
Cost of revenues was RMB 13.1 billion ($1.86 billion), decreasing 19% year over year, primarily due to a decrease in traffic acquisition costs, sales tax and surcharges, and costs of goods sold. The decrease in traffic acquisition costs reflected decreasing union revenues, as the Company focused on optimizing profitability over revenue growth.
Selling, general and administrative expenses were RMB 4.4 billion ($625 million), decreasing 16% year over year, primarily due to decreased marketing spending and personnel related expenses.
Research and development expenses were RMB 4.8 billion ($685 million), increasing 2% year over year.
Operating income was RMB 3.6 billion ($516 million) and operating margin was 14%. Baidu Core operating income was RMB 5.0 billion ($703 million) and Baidu Core operating margin was 26%.
Non-GAAP operating income was RMB 5.6 billion ($793 million), and non-GAAP operating margin was 22%. Non-GAAP Baidu Core operating income was RMB 6.5 billion ($917 million), and non-GAAP Baidu Core operating margin was 34%.
Total other income was RMB 366 million ($53 million), decreasing 70% year over year, primarily due to loss from equity method investments, which is booked a quarter in arrears and reflects the impact of COVID-19 on its investees.
Income tax expense was RMB 1.2 billion ($174 million), which included tax withholding accrual for dividend distribution to offshore entities, compared to RMB 416 million in Q2 2019.
Net income attributable to Baidu was RMB 3.6 billion ($507 million), and diluted earnings per ADS was RMB 10.31 ($1.46). Net income attributable to Baidu Core was RMB 4.4 billion ($626 million). Non-GAAP net income attributable to Baidu was RMB 5.1 billion ($719 million), and non-GAAP net margin was 20%. Non-GAAP diluted earnings per ADS amounted to RMB 14.73 ($ 2.08). Non-GAAP net income attributable to Baidu Core was RMB 5.7 billion ($801 million), and non-GAAP net margin for Baidu Core was 30%.
Adjusted EBITDA was RMB 7.0 billion ($993 million) and adjusted EBITDA margin was 27%. Adjusted EBITDA for Baidu Core was RMB 7.8 billion ($1.1 billion) and adjusted EBITDA margin for Baidu Core was 41%.
As of June 30, 2020, cash, cash equivalents, restricted cash and short-term investments were RMB 154.1 billion ($21.80 billion), and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB 144.6 billion ($20.46 billion). Free cash flow was RMB 7.3 billion ($1.04 billion). Free cash flow excluding iQIYI was RMB 8.8 billion ($1.24 billion).
For more information on the adoption of ASU 2019-02 beginning January 1, 2020, in accordance with the new accounting standard, please see explanation under "Non-GAAP Financial Measures."
Financial Guidance
For the third quarter of 2020, Baidu expects revenues to be between RMB 26.3 billion ($3.7 billion) and RMB 28.7 billion ($4.1 billion), representing a growth rate of -6% to 2% year over year, which assumes that Baidu Core revenue will grow between -7% and 3% year over year. The COVID-19 situation in China is evolving, and business visibility is very limited. The above 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 9:15 PM on August 13, 2020, U.S. Eastern Time (9:15 AM on August 14, 2020, Beijing/Hong Kong Time).
Please register in advance of the conference call using the link provided below. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID by email.
For pre-registration, please click http://apac.directeventreg.com/registration/event/2568424. It will automatically direct you to the registration page of "Baidu Q2 2020 Earnings Conference Call", where you may fill in your details for RSVP. If it requires you to enter a participant conference ID, please enter "2568424".
In the 10 minutes prior to the call start time, you may use the conference access information (including dial-in number(s), Direct Event passcode and unique registrant ID) provided in the confirmation email that you have received following your pre-registration.
Additionally, a live and archived webcast of this conference call will be available at http://ir.baidu.com.
A replay of the conference call may be accessed by phone at the following number until August 21, 2020:
International: +61 2 8199 0299
Passcode: 2568424
About Baidu
Baidu, Inc. is a leading search engine, knowledge and information centered Internet platform and AI company. The Company's mission is to make the complicated 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: +86-10-5992-8888
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 third quarter of 2020, 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 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. 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 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 and amortization and impairment of intangible assets resulting from business combinations.
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, 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 shares, 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, which is adjusted for accretion for the redeemable non-controlling interests, 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, and share-based compensation expenses.
Free cash flow represents net cash provided by operating activities less capital expenditures. Starting from January 1, 2020, Baidu adopted ASU 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials, which reclassifies cash outflows for costs incurred to acquire licensed contents from investing activities to operating activities. To increase comparability, 2019 free cash flow has been retrospectively adjusted to include cash outflows of acquisition of licensed copyrights, which is presented on the same basis as 2020 and going forward.
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) Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.0651 to US$1.00, the exchange rate in effect as of June 30, 2020 as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Translations are provided solely for the convenience of the reader.
(2) Non-GAAP measures are defined in Non-GAAP Financial Measures section. Also see the table captioned "Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures" for more details.
Baidu, Inc.
Condensed Consolidated Statements of Income (Loss)
(In millions except for share, per share (or ADS) information, unaudited)
Three Months Ended
Six Months Ended
June 30, March 31, June 30, June 30, June 30, June 30, June 30,
2019 2020 2020 2020 2019 2020 2020
RMB
RMB
RMB
US$(2)
RMB
RMB
US$(2)
Revenues:
Online marketing services 19,237 14,243 17,688 2,504 36,894 31,931 4,520
Others 7,089 8,302 8,346 1,181 13,555 16,648 2,355
Total revenues 26,326 22,545 26,034 3,685 50,449 48,579 6,875
Costs and expenses:
Cost of revenues(1) 16,116 14,687 13,134 1,859 30,955 27,821 3,938
Selling, general and administrative(1) 5,243 3,852 4,417 625 11,297 8,269 1,170
Research and development(1) 4,734 4,443 4,839 685 8,900 9,282 1,313
Total costs and expenses 26,093 22,982 22,390 3,169 51,152 45,372 6,421
Operating income (loss) 233 (437) 3,644 516 (703) 3,207 454
Other income (loss):
Interest income 1,205 1,441 1,312 186 2,277 2,753 390
Interest expense (805) (751) (820) (116) (1,498) (1,571) (222)
Foreign exchange income (loss), net 216 (98) 55 8 (97) (43) (6)
Gain (loss) from equity method investments 429 181 (1,732) (245) (431) (1,551) (220)
Other income (loss), net 193 (1,816) 1,551 220 1,887 (265) (37)
Total other income (loss), net 1,238 (1,043) 366 53 2,138 (677) (95)
Income (loss) before income taxes 1,471 (1,480) 4,010 569 1,435 2,530 359
Income tax expense 416 198 1,222 174 710 1,420 201
Net income (loss) 1,055 (1,678) 2,788 395 725 1,110 158
Net loss attributable to noncontrolling interests (1,357) (1,719) (791) (112) (1,360) (2,510) (355)
Net income attributable to Baidu 2,412 41 3,579 507 2,085 3,620 513
Earnings per ADS (1 Class A ordinary share equals 10 ADSs):
-Basic 6.84 0.05 10.34 1.46 5.86 10.37 1.47
-Diluted 6.57 0.02 10.31 1.46 5.72 10.32 1.46
Earnings per share for Class A and Class B ordinary shares:
-Basic 68.38 0.52 103.44 14.64 58.60 103.66 14.67
-Diluted 65.69 0.23 103.06 14.59 57.22 103.20 14.61
Weighted average number of Class A and Class B ordinary shares outstanding:
Basic 34,996,791 34,577,763 34,377,658 34,377,658 34,981,800 34,477,710 34,477,710
Diluted 35,044,719 34,757,943 34,505,617 34,505,617 35,055,695 34,631,780 34,631,780
(1) Includes share-based compensation expenses as follows:
Cost of revenues 99 81 108 15 165 189 27
Selling, general and administrative 503 464 550 78 1,019 1,014 144
Research and development 1,022 945 1,188 168 1,648 2,133 302
Total share-based compensation expenses 1,624 1,490 1,846 261 2,832 3,336 473
(2) All translations from RMB to U.S. dollars are made at a rate of RMB 7.0651 to US$1.00, the exchange rate in effect as of June 30, 2020 as set forth in the H.10
statistical release of The Board of Governors of the Federal Reserve System.
Baidu, Inc.
Condensed Consolidated Balance Sheets
(In millions except for share information, unaudited)
December 31, June 30, June 30,
2019 2020 2020
RMB RMB US$
ASSETS
Current assets:
Cash and cash equivalents 33,443 20,349 2,880
Restricted cash 996 1,528 216
Short-term investments 112,924 132,174 18,708
Accounts receivable, net 7,416 6,706 949
Amounts due from related parties 1,594 1,637 232
Other current assets, net 9,189 9,654 1,366
Total current assets 165,562 172,048 24,351
Non-current assets:
Fixed assets, net 18,311 16,894 2,391
Licensed copyrights, net 6,287 5,743 813
Intangible assets, net 1,600 1,633 231
Goodwill 18,250 18,767 2,656
Long-term investments, net 69,410 68,625 9,713
Amounts due from related parties 3,564 3,585 507
Deferred tax assets, net 2,193 1,399 198
Operating lease right-of-use assets 7,332 7,352 1,041
Other non-current assets 8,807 8,422 1,193
Total non-current assets 135,754 132,420 18,743
Total assets 301,316 304,468 43,094
LIABILITIES AND EQUITY
Current liabilities:
Short-term loans 2,618 3,619 512
Accounts payable and accrued liabilities 32,701 31,986 4,527
Customer deposits and deferred revenue 11,062 11,601 1,642
Deferred income 529 507 72
Long-term loans, current portion 737 7,506 1,062
Notes payable, current portion 5,219
Amounts due to related parties 2,231 2,850 403
Operating lease liabilities 2,283 2,379 337
Total current liabilities 57,380 60,448 8,555
Non-current liabilities:
Deferred income 17 44 6
Deferred revenue 1,009 756 107
Amounts due to related parties 3,846 3,853 545
Long-term loans 7,804 887 126
Notes payable 38,090 45,681 6,466
Convertible senior notes 12,297 12,694 1,797
Deferred tax liabilities 3,273 3,511 497
Operating lease liabilities 4,486 4,404 623
Other non-current liabilities 299 394 57
Total non-current liabilities 71,121 72,224 10,224
Total liabilities 128,501 132,672 18,779
Redeemable noncontrolling interests 1,109 1,173 166
Equity
Total Baidu shareholders' equity 163,599 164,509 23,284
Noncontrolling interests 8,107 6,114 865
Total equity 171,706 170,623 24,149
Total liabilities, redeemable noncontrolling 301,316 304,468 43,094
interests, and equity
Baidu, Inc.
Selected Information
(In millions except for per ADS information, unaudited)
Three months ended
Three months ended
Three months ended Three months ended
June 30, 2019 (RMB) March 31, 2020 (RMB) June 30, 2020 (RMB) June 30, 2020 (US$)
Baidu iQIYI
Elim & Baidu, Baidu iQIYI
Elim & Baidu, Baidu iQIYI
Elim & Baidu, Baidu iQIYI
Elim & Baidu,
Core adj(2) Inc. Core adj(2) Inc. Core adj(2) Inc. Core adj(2) Inc.
Total revenues 19,540 7,110 (324) 26,326 15,268 7,650 (373) 22,545 18,926 7,412 (304) 26,034 2,679 1,049 (43) 3,685
YOY (3%) 4% (1%)
QOQ 24% (3%) 15%
Costs and expenses:
Cost of revenues (1) 9,453 6,981 (318) 16,116 7,088 7,903 (304) 14,687 6,555 6,834 (255) 13,134 928 967 (36) 1,859
Selling, general and administrative (1) 3,898 1,346 (1) 5,243 2,560 1,311 (19) 3,852 3,230 1,196 (9) 4,417 457 169 (1) 625
Research and development (1) 4,080 655 (1) 4,734 3,772 678 (7) 4,443 4,175 664 4,839 591 94 685
Total costs and expenses 17,431 8,982 (320) 26,093 13,420 9,892 (330) 22,982 13,960 8,694 (264) 22,390 1,976 1,230 (37) 3,169
YOY
Cost of revenues (31%) (2%) (19%)
Selling, general and administrative (17%) (11%) (16%)
Research and development 2% 1% 2%
Cost and expenses (20%) (3%) (14%)
Operating income (loss) 2,109 (1,872) (4) 233 1,848 (2,242) (43) (437) 4,966 (1,282) (40) 3,644 703 (181) (6) 516
YOY 135% (32%) 1464%
QOQ 169% (43%)
Operating margin 11% (26%) 1% 12% (29%) (2%) 26% (17%) 14%
Add: total other income (loss),net 1,664 (426) 1,238 (414) (629) (1,043) 507 (141) 366 73 (20) 53
Less: income tax expense 410 6 416 193 5 198 1,206 16 1,222 172 2 174
Less: net income (loss) attributable to NCI (368) 23 (1,012) (3) (1,357) (457) (1) (1,261) (3) (1,719) (157) 3 (637) (3) (791) (22) (90) (3) (112)
Net income(loss) attributable to Baidu 3,731 (2,327) 1,008 2,412 1,698 (2,875) 1,218 41 4,424 (1,442) 597 3,579 626 (203) 84 507
YOY 19% (38%) 48%
QOQ 161% (50%) 8629%
Net margin 19% (33%) 9% 11% (38%) 0% 23% (19%) 14%
Non-GAAP financial measures:
Operating income (loss) (non-GAAP) 3,485 (1,526) 1,955 3,348 (1,868) 1,437 6,482 (837) 5,605 917 (118) 793
YOY 86% (45%) 187%
QOQ 94% (55%) 290%
Operating margin (non-GAAP) 18% (21%) 7% 22% (24%) 6% 34% (11%) 22%
Net income (loss) attributable to Baidu 4,740 (1,962) 3,635 4,519 (2,482) 3,082 5,656 (956) 5,082 801 (135) 719
(non-GAAP)
YOY 19% (51%) 40%
QOQ 25% (61%) 65%
Net margin (non-GAAP) 24% (28%) 14% 30% (32%) 14% 30% (13%) 20%
Adjusted EBITDA 4,766 (1,407) 3,355 4,641 (1,746) 2,852 7,771 (716) 7,015 1,100 (101) 993
YOY 63% (49%) 109%
QOQ 67% (59%) 146%
Adjusted EBITDA margin 24% (20%) 13% 30% (23%) 13% 41% (10%) 27%
(1) Includes share-based compensation as follows:
Cost of revenues 58 41 99 34 47 81 49 59 108 7 8 15
Selling, general and administrative 327 176 503 273 191 464 331 219 550 47 31 78
Research and development 959 63 1,022 877 68 945 1,102 86 1,188 156 12 168
Total share-based compensation 1,344 280 1,624 1,184 306 1,490 1,482 364 1,846 210 51 261
(2) Relates to intersegment eliminations and adjustments
(3) Relates to the net loss attributable to iQIYI noncontrolling interests
Baidu, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions,unaudited)
Three months ended Three months ended Three months ended Three months ended
June 30, 2019 (RMB) March 31, 2020 (RMB) June 30, 2020 (RMB) June 30, 2020 (US$)
Baidu iQIYI Baidu, Baidu iQIYI Baidu, Baidu iQIYI Baidu, Baidu iQIYI Baidu,
excl. Inc. excl. Inc. excl. Inc. excl. Inc.
iQIYI iQIYI iQIYI iQIYI
Net cash provided by (used in) operating 6,074 891 6,965 2,801 (604) 2,197 9,547 (1,358) 8,189 1,351 (192) 1,159
activities
Net cash provided by (used in) investing activities (2,713) (7,836) (10,549) (11,084) (1,610) (12,694) (8,854) 1,144 (7,710) (1,254) 162 (1,092)
Net cash provided by (used in) financing activities (8,822) 373 (8,449) (1,296) (79) (1,375) (2,211) 823 (1,388) (312) 116 (196)
Effect of exchange rate changes on cash, cash 235 170 405 139 64 203 26 (10) 16 3 (1) 2
equivalents and restricted cash
Net increase (decrease) in cash, cash (5,226) (6,402) (11,628) (9,440) (2,229) (11,669) (1,492) 599 (893) (212) 85 (127)
equivalents and restricted cash
Cash, cash equivalents and restricted cash
At beginning of period 20,541 14,026 34,567 27,529 6,910 34,439 18,089 4,681 22,770 2,560 663 3,223
At end of period 15,315 7,624 22,939 18,089 4,681 22,770 16,597 5,280 21,877 2,348 748 3,096
Net cash provided by (used in) operating 6,074 891 6,965 2,801 (604) 2,197 9,547 (1,358) 8,189 1,351 (192) 1,159
activities
Less: Capital expenditures (1,204) (155) (1,359) (478) (67) (545) (797) (57) (854) (113) (8) (121)
Less: Acquisition of licensed copyrights(1) (41) (2,906) (2,947)
Free cash flow 4,829 (2,170) 2,659 2,323 (671) 1,652 8,750 (1,415) 7,335 1,238 (200) 1,038
Note: Baidu excl. iQIYI represents Baidu, Inc. minus iQIYI's consolidated cash flows.
(1) Starting from January 1, 2020, Baidu adopted ASU 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials, which reclassifies cash outflows
for costs incurred to acquire licensed contents from investing activities to operating activities. To increase comparability, 2019 non-GAAP measure of free cash flow has been retrospectively
adjusted to include cash outflows of acquisition of licensed copyrights, which is presented on the same basis as 2020 and going forward.
Free cash flow, previously reported 4,870 736 5,606 2,323 2,056 4,379 8,750 1,290 10,040 1,238 183 1,421
Less: Acquisition of licensed copyrights (41) (2,906) (2,947) (2,727) (2,727) (2,705) (2,705) (383) (383)
Free cash flow, revised 4,829 (2,170) 2,659 2,323 (671) 1,652 8,750 (1,415) 7,335 1,238 (200) 1,038
Baidu, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
(In millions except for ADS and per ADS information, unaudited)
Three months ended Three months ended Three months ended Three months ended
June 30, 2019 (RMB) March 31, 2020 (RMB) June 30, 2020 (RMB) June 30, 2020 (US$)
Baidu iQIYI Baidu, Baidu iQIYI Baidu, Baidu iQIYI Baidu, Baidu iQIYI Baidu,
Core Inc. Core Inc. Core Inc. Core Inc.
Operating income (loss) 2,109 (1,872) 233 1,848 (2,242) (437) 4,966 (1,282) 3,644 703 (181) 516
Add: Share-based compensation expenses 1,344 280 1,624 1,184 306 1,490 1,482 364 1,846 210 51 261
Add: Amortization and impairment of intangible assets(1) 32 66 98 316 68 384 34 81 115 4 12 16
Operating income (loss) (non-GAAP) 3,485 (1,526) 1,955 3,348 (1,868) 1,437 6,482 (837) 5,605 917 (118) 793
Add: Depreciation of fixed assets 1,281 119 1,400 1,293 122 1,415 1,289 121 1,410 183 17 200
Adjusted EBITDA 4,766 (1,407) 3,355 4,641 (1,746) 2,852 7,771 (716) 7,015 1,100 (101) 993
Net income (loss) attributable to Baidu 3,731 (2,327) 2,412 1,698 (2,875) 41 4,424 (1,442) 3,579 626 (203) 507
Add: Share-based compensation expenses 1,337 280 1,495 1,177 306 1,348 1,473 364 1,676 208 51 237
Add: Amortization and impairment of intangible assets(1)(3) 8 52 37 143 54 173 19 65 55 4 9 8
Add: Disposal loss (gain)(3)(4) (181) (181) (252) (252) 453 453 64 64
Add: Impairment of long-term investments(3) 162 23 185 1,528 24 1,542 752 48 779 107 7 110
Add: Fair value loss (gain) of long-term investments(3) (285) (1) (286) (176) (176) (2,535) (2,535) (359) (359)
Add: Reconciling items on equity method investments(2) (32) 11 (27) 401 9 406 1,070 9 1,075 151 1 152
Net income (loss) attributable to Baidu (non-GAAP) 4,740 (1,962) 3,635 4,519 (2,482) 3,082 5,656 (956) 5,082 801 (135) 719
Diluted earnings per ADS 6.57 0.02 10.31 1.46
Add: Accretion of the redeemable noncontrolling interests 0.05 0.07 0.07 0.01
Add: Non-GAAP adjustments to earnings per ADS 3.49 8.75 4.35 0.61
Diluted earnings per ADS (non-GAAP) 10.11 8.84 14.73 2.08
(1) This represents amortization and impairment of intangible assets resulting from business combinations.
(2) This represents Baidu's share of equity method investments for other non-GAAP reconciling items, amortization and impairment of intangible assets not on the investee's books, accretion of their
redeemable noncontrolling 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 shares, adjusted for related income tax effects.
(3) Net of related tax impact
(4) Includes re-measurement gain or loss of previous held equity interest in the acquisition
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SOURCE Baidu, Inc.
