Baidu Announces Third Quarter 2020 Results
BEIJING, Nov. 16, 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 third quarter ended September 30, 2020([1]).
"Our revenue growth turned positive in the third quarter with many advertising verticals turning around, putting Baidu in a good position to further benefit from a recovery in the Chinese economy. The vibrant mobile ecosystem that Baidu has built in the last few years sets a strong foundation for us to grow our non-advertising business," said Robin Li, Co-founder and CEO of Baidu. "Our new AI businesses saw healthy growth in the third quarter, particularly from cloud, where we are differentiating with AI solutions."
"Our team executed in the third quarter with top line growth, resilient profitability and strong cash flow, a testament to the durability of Baidu's business, despite China experiencing a second wave of COVID-19 in July. Our focus on differentiating Baidu with open-platform, in-app search and new AI businesses has enabled Baidu Core's adjusted EBITDA margin to reach 46% in the third quarter," said Herman Yu, CFO of Baidu. "We also executed on our capital allocation strategy by selling down equity investments and continuing to execute on our share repurchase plan."
Financial Highlights
Baidu, Inc.
(In millions except per ADS,
Q3
Q2 Q3
unaudited) 2019 2020 2020
YOY
QOQ
RMB
RMB
RMB US$
Total revenues 28,080 26,034 28,232 4,158 1% 8%
Operating income 2,355 3,644 6,156 907 161% 69%
Operating income (non-GAAP
)
[2] 3,691 5,605 7,636 1,125 107% 36%
Net income (loss) to Baidu (6,373) 3,579 13,678 2,015 282%
Net income to Baidu (non-GAAP
)
[2] 4,387 5,082 6,988 1,029 59% 38%
Diluted earnings (loss) per ADS (18.37) 10.31 39.79 5.86 286%
Diluted earnings per ADS (non-GAAP
)
[2] 12.61 14.73 20.35 3.00 61% 38%
Adjusted EBITDA [2] 5,116 7,015 9,073 1,336 77% 29%
Adjusted EBITDA margin 18% 27% 32% 32%
Baidu Core
Q3 Q2 Q3
(In millions, unaudited) 2019 2020 2020 YOY QOQ
RMB RMB RMB US$
Total revenues 21,010 18,926 21,379 3,149 2% 13%
Operating income 5,191 4,966 7,404 1,090 43% 49%
Operating income (non-GAAP)
[2] 6,224 6,482 8,505 1,253 37% 31%
Net income (loss) to Baidu Core (4,287) 4,424 14,368 2,116 225%
Net income to Baidu Core (non-GAAP)
[2] 6,310 5,656 7,486 1,103 19% 32%
Adjusted EBITDA [
2] 7,525 7,771 9,822 1,447 31% 26%
Adjusted EBITDA margin 36% 41% 46% 46%
[1] Unless otherwise noted, all
translations from RMB to U.S. dollars
are made at a rate of RMB6.7896 to
US$1.00, the exchange rate in effect
as of September 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.
Other Highlights
Corporate
-- Baidu received an ESG rating of BB from MSCI and an ESG risk score of
21.5 from Sustainalytics, reflecting the progress the Company has made
through ESG policy changes and improved disclosure on corporate
governance.
-- Baidu World was held virtually in September 2020 in partnership with
CCTV, reaching an audience of over 60 million. This year's theme
centered on the "Intelligence of Everything," highlighting how Baidu AI
products and solutions can improve everyday life and empower enterprises
and the public sector to do more and do better in the areas of cloud
computing, smart transportation and autonomous driving.
-- Baidu entered into definitive agreements to raise financing for its
Smart Living Group ("SLG") at a post-money valuation of approximately
RMB 20 billion, or US$2.9 billion, in September 2020. The transaction is
expected to be completed in the fourth quarter of 2020, and Baidu is
expected to be a super majority shareholder.
-- Baidu completed a bond offering of US$950 million in October 2020,
consisting of US$650 million of 1.720% notes due 2026 and US$300 million
of 2.375% notes due 2030, the proceeds from which are expected to be
used to repay certain existing indebtedness.
-- Baidu returned US$596 million to shareholders in the third quarter of
2020, bringing the cumulative share repurchase over the last two years
to approximately US$2.0 billion.
Mobile Ecosystem
-- Baidu App's daily active users ("DAUs") reached 206 million and its
monthly active users ("MAUs") reached 544 million in September 2020.
-- The massive reach of Baidu App, along with other products in the
Company's product portfolio, is attracting a wide range of knowledge and
information-centric videos, including live and short videos. Topical
live streaming, such as Wander Planet and Who to Support, grew eight
folds sequentially.
-- Publishers are sharing more originals on Baijiahao ("BJH") accounts, to
take advantage of Baidu's large scale and easy sharing of content across
Baidu family of apps. BJH accounts reached 3.6 million, up 52% year over
year, in September 2020.
-- App developers are adopting Baidu Smart Mini Programs ("SMPs") to
provide users with native-app like experience on Baidu, without having
to download the host apps. The number of SMPs grew three folds, and SMP
monthly active users on Baidu App reached 355 million, up 22% year over
year, in September 2020.
-- Site merchants are switching to Managed Page as the landing page for
their search results to improve marketing effectiveness, resulting in
Managed Page revenue reaching almost 1/3 of Baidu Core's online
marketing services revenue in the third quarter of 2020.
DuerOS
-- DuerOS first-party monthly voice queries reached 2.7 billion, up 65%
from last year, and DuerOS total monthly voice queries reached 5.3
billion in September 2020.
-- Xiaodu Smart Display ranked #1 in smart display shipments globally, and
Xiaodu smart speakers ranked #1 in smart speaker shipments in China for
the second quarter of 2020, according to market research firms IDC,
Strategy Analytics and Canalys.
-- The DuerOS skills store, offering 4,300 skills in wide ranging genres,
including education, video, online game and live streaming, is supported
by a developer community of 45,000.
-- Xiaodu Smart Earphones was introduced in September 2020, allowing users
to navigate DuerOS skills using its voice assistant and hear instant
language translation. Xiaodu Smart Earphones broaden the use case of the
Xiaodu voice assistant from home, auto and hotel to anywhere with
mobile.
Cloud, AI Services & AI Platform
-- Baidu partners with Postal Savings Bank of China ("PSBC"), a top
consumer bank in China with 40,000 branches nationwide, to provide Baidu
AI PaaS, which can be trained to provide better credit risk management
by leveraging Baidu's advanced AI capabilities, such as big data and
natural language processing.
-- Baidu partners with the Economic and Technological Development Zone in
Guiyang, a major national data center hub in China, to provide its AI
PaaS platform that will be made available to the 400+ enterprises across
10 industries located in the economic development zone. Baidu's AI PaaS
can help businesses improve their operations and do more through
advanced AI, including deep learning, blockchain and computer vision,
-- Baidu's AI open platform built on Baidu Cloud offers over 270 AI
capabilities, attracting a developer community of over 2 million.
-- Baidu Translate, an AI cloud service leveraging Baidu's advanced natural
language processing, speech and vision processing technologies, supports
over 200 languages and processes over 100 billion bites a day,
attracting a developer community of 400,000.
Apollo
-- Baidu partners with the city of Guangzhou, Guangdong to provide smart
transportation solutions to improve traffic efficiency, air pollution
and road safety.
-- Apollo Go robotaxi is now opened to the public in Beijing, becoming the
third city following Changsha, Hunan and Cangzhou, Hebei. Apollo Go
rides may be ordered from Baidu Maps or Apollo Go app.
-- Baidu was granted China's first driverless test permit in Changsha.
iQIYI
-- iQIYI subscribers reached 104.8 million in September 2020, and
membership revenue was up 7% year over year. iQIYI's large subscriber
base further strengthens iQIYI's foundation to produce entertainment
blockbuster originals.
Third Quarter 2020 Results
Total revenues reached RMB 28.2 billion ($4.16 billion), increasing 1% year over year.
Revenue from Baidu Core reached RMB 21.4 billion ($3.15 billion), increasing 2% year over year. Online marketing revenue from Baidu Core was RMB 18.4 billion ($2.72 billion), which was basically flat from last year. Non-online marketing revenue from Baidu Core reached 2.9 billion ($434 million), increasing 14% year over year, primarily driven by the growth of cloud services.
Cost of revenues was RMB 12.8 billion ($1.89 billion), decreasing 22% year over year, primarily due to a decrease in content costs, traffic acquisition costs and costs of goods sold.
Selling, general and administrative expenses were RMB 4.7 billion ($692 million), increasing 1% year over year.
Research and development expenses were RMB 4.6 billion ($673 million), decreasing 3% year over year.
Operating income was RMB 6.2 billion ($907 million) and operating margin was 22%. Baidu Core operating income was RMB 7.4 billion ($1.09 billion) and Baidu Core operating margin was 35%.
Non-GAAP operating income was RMB 7.6 billion ($1.13 billion), and non-GAAP operating margin was 27%. Non-GAAP Baidu Core operating income was RMB 8.5 billion ($1.25 billion), and non-GAAP Baidu Core operating margin was 40%.
Total other income was RMB 8.9 billion ($1.31 billion), compared to total other loss of RMB 9.5 billion in Q3 2019. Total other income in Q3 2020 included fair value gain of RMB 9.0 billion from long-term investments.
Income tax expense was RMB 1.6 billion ($239 million), compared to RMB 934 million in Q3 2019.
Net income attributable to Baidu was RMB 13.7 billion ($2.02 billion), and diluted earnings per ADS was RMB 39.79 ($5.86). Net income attributable to Baidu Core was RMB 14.4 billion ($2.12 billion).
Non-GAAP net income attributable to Baidu was RMB 7.0 billion ($1.03 billion), and non-GAAP net margin was 25%. Non-GAAP diluted earnings per ADS amounted to RMB 20.35 ($3.00). Non-GAAP net income attributable to Baidu Core was RMB 7.5 billion ($1.10 billion), and non-GAAP net margin for Baidu Core was 35%.
Adjusted EBITDA was RMB 9.1 billion ($1.34 billion) and adjusted EBITDA margin was 32%. Adjusted EBITDA for Baidu Core was RMB 9.8 billion ($1.45 billion) and adjusted EBITDA margin for Baidu Core was 46%.
As of September 30, 2020, cash, cash equivalents, restricted cash and short-term investments were RMB 146.0 billion ($21.50 billion), and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB 138.5 billion ($20.41 billion). Free cash flow was RMB 6.3 billion ($925 million), and free cash flow excluding iQIYI was RMB 8.3 billion ($1.22 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 fourth quarter of 2020, Baidu expects revenues to be between RMB 28.6 billion ($4.2 billion) and RMB 31.3 billion ($4.6 billion), representing a growth rate of -1% to 8% year over year, which assumes that Baidu Core revenue will grow between -1% and 10% year over year.
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 8:15 PM on November 16, 2020, U.S. Eastern Time (9:15 AM on November 17, 2020, Beijing 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/2876397. It will automatically direct you to the registration page of "Baidu Q3 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 "2876397".
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 November 24, 2020:
International: +61 2 8199 0299
Passcode: 2876397
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 fourth 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."
Baidu, Inc.
Condensed Consolidated Statements of Income (Loss)
(In millions except for share, per share (or ADS) information, unaudited)
Three Months Ended
September 30, June 30,
September 30,
September 30,
2019 2020 2020 2020
RMB
RMB
RMB
US$(2)
Revenues:
Online marketing services 20,434 17,688 20,201 2,975
Others 7,646 8,346 8,031 1,183
Total revenues 28,080 26,034 28,232 4,158
Costs and expenses:
Cost of revenues(1) 16,378 13,134 12,815 1,886
Selling, general and administrative(1) 4,657 4,417 4,700 692
Research and development(1) 4,690 4,839 4,561 673
Total costs and expenses 25,725 22,390 22,076 3,251
Operating income 2,355 3,644 6,156 907
Other income (loss):
Interest income 1,687 1,312 1,297 191
Interest expense (788) (820) (755) (111)
Foreign exchange income (loss), net 29 55 (271) (40)
Gain (loss) from equity method investments (729) (1,732) (546) (80)
Other income (loss), net (9,683) 1,551 9,169 1,351
Total other income (loss), net (9,484) 366 8,894 1,311
Income (loss) before income taxes (7,129) 4,010 15,050 2,218
Income tax expense 934 1,222 1,618 239
Net income (loss) (8,063) 2,788 13,432 1,979
Net loss attributable to noncontrolling interests (1,690) (791) (246) (36)
Net income (loss) attributable to Baidu (6,373) 3,579 13,678 2,015
Earnings per ADS (1 Class A ordinary share equals 10 ADSs):
-Basic (18.37) 10.34 40.21 5.92
-Diluted (18.37) 10.31 39.79 5.86
Earnings per share for Class A and Class B ordinary shares:
-Basic (183.74) 103.44 402.06 59.22
-Diluted (183.74) 103.06 397.88 58.60
Weighted average number of Class A and Class B ordinary shares outstanding:
Basic 34,793,154 34,377,658 33,982,547 33,982,547
Diluted 34,793,154 34,505,617 34,339,438 34,339,438
(1) Includes share-based compensation expenses as follows:
Cost of revenues 70 108 81 12
Selling, general and administrative 336 550 403 60
Research and development 810 1,188 930 137
Total share-based compensation expenses 1,216 1,846 1,414 209
(2) All translations from RMB to U.S. dollars are made at a rate of RMB 6.7896 to US$1.00, the exchange rate in effect as of
September 30, 2020 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System.
Baidu, Inc.
Condensed Consolidated Balance Sheets
(In millions except for share information, unaudited)
December 31,
September 30,
September 30,
2019 2020 2020
RMB
RMB
US$
ASSETS
Current assets:
Cash and cash equivalents 33,443 18,423 2,713
Restricted cash 996 669 99
Short-term investments 112,924 126,876 18,687
Accounts receivable, net 7,416 7,046 1,038
Amounts due from related parties 1,594 1,307 193
Other current assets, net 9,189 8,831 1,301
Total current assets 165,562 163,152 24,031
Non-current assets:
Fixed assets, net 18,311 17,154 2,527
Licensed copyrights, net 6,287 6,062 893
Intangible assets, net 1,600 2,033 299
Goodwill 18,250 21,776 3,207
Long-term investments, net 69,410 81,289 11,973
Amounts due from related parties 3,564 3,639 536
Deferred tax assets, net 2,193 804 118
Operating lease right-of-use assets 7,332 9,648 1,421
Produced content, net 4,355 5,517 813
Other non-current assets 4,452 3,668 540
Total non-current assets 135,754 151,590 22,327
Total assets 301,316 314,742 46,358
LIABILITIES AND EQUITY
Current liabilities:
Short-term loans 2,618 3,804 560
Accounts payable and accrued liabilities 32,701 31,592 4,653
Customer deposits and deferred revenue 11,062 12,185 1,795
Deferred income 529 163 24
Long-term loans, current portion 737 7,506 1,106
Notes payable, current portion 5,219
Amounts due to related parties 2,231 1,747 257
Operating lease liabilities 2,283 4,636 683
Total current liabilities 57,380 61,633 9,078
Non-current liabilities:
Deferred income 17 57 8
Deferred revenue 1,009 609 90
Amounts due to related parties 3,846 3,689 543
Long-term loans 7,804 628 92
Notes payable 38,090 43,917 6,468
Convertible senior notes 12,297 12,307 1,813
Deferred tax liabilities 3,273 3,319 489
Operating lease liabilities 4,486 4,607 679
Other non-current liabilities 299 316 47
Total non-current liabilities 71,121 69,449 10,229
Total liabilities 128,501 131,082 19,307
Redeemable noncontrolling interests 1,109 1,248 184
Equity
Total Baidu shareholders' equity 163,599 176,291 25,965
Noncontrolling interests 8,107 6,121 902
Total equity 171,706 182,412 26,867
Total liabilities, redeemable noncontrolling 301,316 314,742 46,358
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
September 30, 2019 (RMB) June 30, 2020 (RMB) September 30, 2020 (RMB) September 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 21,010 7,397 (327) 28,080 18,926 7,412 (304) 26,034 21,379 7,188 (335) 28,232 3,149 1,059 (50) 4,158
YOY 2% (3%) 1%
QOQ 13% (3%) 8%
Costs and expenses:
Cost of revenues (1) 8,502 8,176 (300) 16,378 6,555 6,834 (255) 13,134 6,728 6,363 (276) 12,815 991 937 (42) 1,886
Selling, general and administrative (1) 3,320 1,350 (13) 4,657 3,230 1,196 (9) 4,417 3,354 1,364 (18) 4,700 494 201 (3) 692
Research and development (1) 3,997 703 (10) 4,690 4,175 664 4,839 3,893 671 (3) 4,561 574 99 673
Total costs and expenses 15,819 10,229 (323) 25,725 13,960 8,694 (264) 22,390 13,975 8,398 (297) 22,076 2,059 1,237 (45) 3,251
YOY
Cost of revenues (21%) (22%) (22%)
Selling, general and administrative 1% 1% 1%
Research and development (3%) (5%) (3%)
Cost and expenses (12%) (18%) (14%)
Operating income (loss) 5,191 (2,832) (4) 2,355 4,966 (1,282) (40) 3,644 7,404 (1,210) (38) 6,156 1,090 (178) (5) 907
YOY 43% (57%) 161%
QOQ 49% (6%) 69%
Operating margin 25% (38%) 8% 26% (17%) 14% 35% (17%) 22%
Add: total other income (loss),net (8,657) (827) (9,484) 507 (141) 366 8,827 67 8,894 1,301 10 1,311
Less: income tax expense 918 16 934 1,206 16 1,222 1,599 19 1,618 236 3 239
Less: net income (loss) attributable to NCI (97) 13 (1,606) (1,690) (157) 3 (637) (3) (791) 264 13 (523) (3) (246) 39 2 (77) (3) (36)
Net income(loss) attributable to Baidu (4,287) (3,688) 1,602 (6,373) 4,424 (1,442) 597 3,579 14,368 (1,175) 485 13,678 2,116 (173) 72 2,015
YOY (68%)
QOQ 225% (19%) 282%
Net margin (20%) (50%) (23%) 23% (19%) 14% 67% (16%) 48%
Non-GAAP financial measures:
Operating income (loss) (non-GAAP) 6,224 (2,529) 3,691 6,482 (837) 5,605 8,505 (831) 7,636 1,253 (123) 1,125
YOY 37% (67%) 107%
QOQ 31% (1%) 36%
Operating margin (non-GAAP) 30% (34%) 13% 34% (11%) 22% 40% (12%) 27%
Net income (loss) attributable to Baidu (non-GAAP) 6,310 (3,394) 4,387 5,656 (956) 5,082 7,486 (830) 6,988 1,103 (123) 1,029
YOY 19% (76%) 59%
QOQ 32% (13%) 38%
Net margin (non-GAAP) 30% (46%) 16% 30% (13%) 20% 35% (12%) 25%
Adjusted EBITDA 7,525 (2,405) 5,116 7,771 (716) 7,015 9,822 (711) 9,073 1,447 (106) 1,336
YOY 31% (70%) 77%
QOQ 26% (1%) 29%
Adjusted EBITDA margin 36% (33%) 18% 41% (10%) 27% 46% (10%) 32%
(1) Includes share-based compensation as follows:
Cost of revenues 25 45 70 49 59 108 29 52 81 4 8 12
Selling, general and administrative 207 129 336 331 219 550 187 216 403 28 32 60
Research and development 749 61 810 1,102 86 1,188 846 84 930 125 12 137
Total share-based compensation 981 235 1,216 1,482 364 1,846 1,062 352 1,414 157 52 209
(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
September 30, 2019 (RMB) June 30, 2020 (RMB) September 30, 2020 (RMB) September 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 8,508 293 8,801 9,547 (1,358) 8,189 9,716 (1,929) 7,787 1,431 (284) 1,147
activities
Net cash provided by (used in) investing activities (11,960) (922) (12,882) (8,854) 1,144 (7,710) (6,576) 343 (6,233) (969) 51 (918)
Net cash provided by (used in) financing activities (1,903) (160) (2,063) (2,211) 823 (1,388) (4,387) 238 (4,149) (646) 35 (611)
Effect of exchange rate changes on cash, cash 122 258 380 26 (10) 16 (77) (113) (190) (11) (17) (28)
equivalents and restricted cash
Net increase (decrease) in cash, cash (5,233) (531) (5,764) (1,492) 599 (893) (1,324) (1,461) (2,785) (195) (215) (410)
equivalents and restricted cash
Cash, cash equivalents and restricted cash
At beginning of period 15,315 7,624 22,939 18,089 4,681 22,770 16,597 5,280 21,877 2,444 778 3,222
At end of period 10,082 7,093 17,175 16,597 5,280 21,877 15,273 3,819 19,092 2,249 563 2,812
Net cash provided by (used in) operating 8,508 293 8,801 9,547 (1,358) 8,189 9,716 (1,929) 7,787 1,431 (284) 1,147
activities
Less: Capital expenditures (1,031) (181) (1,212) (797) (57) (854) (1,417) (90) (1,507) (209) (13) (222)
Less: Acquisition of licensed copyrights(1) (50) (2,689) (2,739)
Free cash flow 7,427 (2,577) 4,850 8,750 (1,415) 7,335 8,299 (2,019) 6,280 1,222 (297) 925
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 7,477 112 7,589 8,750 1,290 10,040 8,299 385 8,684 1,222 57 1,279
Less: Acquisition of licensed copyrights (50) (2,689) (2,739) (2,705) (2,705) (2,404) (2,404) (354) (354)
Free cash flow, revised 7,427 (2,577) 4,850 8,750 (1,415) 7,335 8,299 (2,019) 6,280 1,222 (297) 925
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
September 30, 2019 (RMB) June 30, 2020 (RMB) September 30, 2020 (RMB) September 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) 5,191 (2,832) 2,355 4,966 (1,282) 3,644 7,404 (1,210) 6,156 1,090 (178) 907
Add: Share-based compensation expenses 981 235 1,216 1,482 364 1,846 1,062 352 1,414 157 52 209
Add: Amortization and impairment of intangible assets(1) 52 68 120 34 81 115 39 27 66 6 3 9
Operating income (loss) (non-GAAP) 6,224 (2,529) 3,691 6,482 (837) 5,605 8,505 (831) 7,636 1,253 (123) 1,125
Add: Depreciation of fixed assets 1,301 124 1,425 1,289 121 1,410 1,317 120 1,437 194 17 211
Adjusted EBITDA 7,525 (2,405) 5,116 7,771 (716) 7,015 9,822 (711) 9,073 1,447 (106) 1,336
Net income (loss) attributable to Baidu (4,287) (3,688) (6,373) 4,424 (1,442) 3,579 14,368 (1,175) 13,678 2,116 (173) 2,015
Add: Share-based compensation expenses 974 235 1,106 1,473 364 1,676 1,056 352 1,252 156 52 184
Add: Amortization and impairment of intangible assets(1)(3) 21 50 47 19 65 55 31 23 44 5 3 6
Add: Disposal loss (gain)(3)(4) 453 453 (5) (5) (1) (1)
Add: Impairment of long-term investments(3) 8,023 8,023 752 48 779
Add: Fair value loss (gain) of long-term investments(3) 745 1 745 (2,535) (2,535) (8,464) (33) (8,483) (1,247) (5) (1,249)
Add: Reconciling items on equity method investments(2) 834 8 839 1,070 9 1,075 500 3 502 74 74
Net income (loss) attributable to Baidu (non-GAAP) 6,310 (3,394) 4,387 5,656 (956) 5,082 7,486 (830) 6,988 1,103 (123) 1,029
Diluted earnings per ADS (18.37) 10.31 39.79 5.86
Add: Accretion of the redeemable noncontrolling interests 0.06 0.07 0.04 0.01
Add: Non-GAAP adjustments to earnings per ADS 30.92 4.35 (19.48) (2.87)
Diluted earnings per ADS (non-GAAP) 12.61 14.73 20.35 3.00
(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.
