Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2018

Commission File Number: 000-51469

 

 

BAIDU, INC.

 

 

Baidu Campus

No. 10 Shangdi 10th Street

Haidian District, Beijing 100085

The People’s Republic of China

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BAIDU, INC.
By:  

/s/ Herman Yu

Name:   Herman Yu
Title:   Chief Financial Officer

Date: November 2, 2018


Exhibit Index

Exhibit 99.1—Press Release

EX-99.1

Exhibit 99.1

Baidu Announces Third Quarter 2018 Results

BEIJING, China, October 31, 2018 – Baidu, Inc. (NASDAQ: BIDU) (“Baidu” or the “Company”), the leading Chinese language Internet search provider, today announced its unaudited financial results for the third quarter ended September 30, 20181.

“Baidu delivered a solid third quarter with impressive results from search, feed and new AI businesses. Feed revenue has been a bright spot in driving Baidu’s revenue growth due to robust user traffic growth, as well as strong traction with Baidu’s video offerings,” said Robin Li, Chairman and CEO of Baidu. “On the AI side, DuerOS continues to see strong adoption with an installed base reaching 141 million and voice queries surpassing 800 million in September 2018. On Apollo, we are gaining valuable L4 operational experience, with fully autonomous Apolong minibuses powered by Apollo running in over 10 locations.”

“Baidu’s third quarter revenues were strong, growing 27%2 year over year to RMB 28.2 billion. Net income attributable to Baidu grew 56% year over year to RMB 12.4 billion, while non-GAAP net income attributable to Baidu grew 47% year over year to RMB 6.7 billion,” said Herman Yu, CFO of Baidu. “We are seeing strong traffic and revenue growth from feed in Baidu App and replicating this formula to develop other feed apps, such as Haokan, our short-video app.”

Third Quarter 2018 Financial Highlights

 

 

Total revenues were RMB 28.2 billion ($4.11 billion), increasing 27% year over year. Total revenues of Baidu Core were RMB 21.6 billion ($3.15 billion), increasing 25% year over year.

 

 

Operating income was RMB 4.4 billion ($645 million), decreasing 6% year over year, and operating margin was 16%, compared to 21% for the third quarter of 2017. Operating income of Baidu Core was RMB 7.0 billion ($1.02 billion), increasing 26% year over year, and operating margin was 32%, similar to the third quarter of 2017.

 

 

Non-GAAP operating income was RMB 5.7 billion ($825 million), increasing 2% year over year, and non-GAAP operating margin was 20%, compared to 25% for the third quarter of 2017. Non-GAAP operating income of Baidu Core was RMB 8.1 billion ($1.17 billion), increasing 26% year over year, and non-GAAP operating margin of Baidu Core was 37%, similar to the third quarter of 2017.

 

 

Net income attributable to Baidu was RMB 12.4 billion ($1.80 billion), increasing 56% year over year, and diluted earnings attributable to Baidu per ADS was RMB 35 ($5.13), increasing 47% year over year. Net income attributable to Baidu Core was RMB 14.3 billion ($2.08 billion), increasing 63% year over year.

 

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 RMB6.8680 to US$1.00, the effective noon buying rate as of September 28, 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 a 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.

 

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Non-GAAP net income attributable to Baidu3 was RMB 6.7 billion ($973 million), increasing 47% year over year, and non-GAAP diluted earnings per ADS4 was RMB 19 ($2.77), increasing 46% year over year. Non-GAAP net income attributable to Baidu Core was RMB 8.4 billion ($1.22 billion), increasing 57% year over year.

Other Highlights

Corporate

 

 

Baidu Input Method Editor (mobile keyboard) reached 320 million in average Daily Active Users (DAUs), up 23% year over year, in September 2018, driven by the popularity of IME’s voice input with daily voice queries surpassing 300 million, or an increase of 130% year over year.

 

 

Baidu is the first Chinese member to join the Partnership on AI, a technology industry consortium consisting of over 70 non-profit and for-profit partners in ten countries to study and formulate AI best practices, advance the public’s understanding of AI, and serve as an open platform for discussion about AI and its impact on people and society.

 

 

Baidu formed strategic partnerships with China Unicom and Intel to build up the 5G+AI innovation labs to integrate 5G networks into AI applications.

 

 

Baidu received the top award in the 2018 Google AI Open Images-Object Detection Track, a prestigious large-scale object detection global competition, for its use of dynamic sampling network technologies.

 

 

IDC presented Baidu with the Asia-Pacific City Award, which recognizes Baidu for innovation in energy conservation, security protection and smart building management.

 

 

Baidu completed the divestiture of its financial service business, Du Xiaoman Financial (“Du Xiaoman”) on August 22, 2018, the last of the announced divestitures. As a result of the transaction, Baidu holds a minority equity interest in Du Xiaoman, and Du Xiaoman was deconsolidated from Baidu’s consolidated financial statements.

 

 

As of September 30, 2018, Baidu has returned $487 million to its shareholders under the 2018 Share Repurchase Program announced in June 2018.

Search and Feed

 

 

Baidu App DAUs reached a peak of 161 million in August and averaged 151 million in September 2018, increasing 19% year over year.

 

 

Baijiahao, or BJH, accounts’ content ecosystem exceeded 1.5 million publishers in September 2018.

 

 

Initial feedback from developers for Baidu’s Smart Mini Programs during pilot testing has been very positive with monthly active users surpassing 100 million in September 2018. Baidu’s Smart Mini Programs has been open to all developers since the end of September 2018 and is expected to be open sourced at the end of the year.

 

3 

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, 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.

4 

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

 

2 / 8


 

Baidu received the Gold Net Digital Enterprise Award, which recognizes JD.com’s marketing campaign on Baidu for its creative integration of content, technology and marketing. Innovation and strong targeting capabilities on Baidu’s marketing platform also earned Baidu eight other industry awards, including the Social Marketing Gold Award, Big Data Marketing Gold Award and Mobile Marketing Gold Award.

 

 

During third quarter 2018, Baidu’s AI blocked over 430 million medical ad materials to combat misleading and low-quality medical advertisements. In addition, Baidu is developing a search solution to enable licensed medical institution verification, shift healthcare information into a structured format to enhance service comparison among medical institutions, and leverage AI to screen the quality of information on their landing pages. Baidu’s medical initiatives aim to aid the increase in accessibility and standardization of medical services from the private sector in China, to supplement state-own medical facilities and better serve the large Chinese population.

DuerOS

 

 

In September, DuerOS installed base reached 141 million, up from 100 million in July, and voice queries on DuerOS surpassed 800 million, which roughly doubled in the last three months.

 

 

DuerOS skills store, which has a community of 24,000 third-party developers, now offers over 800 skills, including education, cooking and game skills, such as VIPKID, Cooking Recipes and Digital Pets.

 

 

Baidu’s Xiaodu Smart Speaker was ranked the highest intelligence level, compared to other smart speakers at the 2018 Artificial Intelligence Developer Conference held by China Artificial Intelligence Industry Alliance.

 

 

Baidu released a PopIn Aladdin hybrid voice-activated lamp/TV projector powered by DuerOS in Japan, which received the 2018 Good Design Award and 2018 Kid Design Award.

 

 

Sony, TCL, and Skyworth released smart televisions powered by DuerOS, including the Sony A9F and Z9F, TCL XESS series, Skyworth MAX TV LED series and MAX TV OLED series, and Skyworth Quanshi AI G50 and G60 models.

 

 

iQIYI and Beijing Gehua Cable TV Network co-launched a hybrid TV box in Q3 2018, featuring DuerOS voice assistant, voice-activated video search, and children’s mode. The Gehua hybrid TV box enables users to access iQIYI videos and cable TV from one box, an industry first.

 

 

Baidu formed a multi-year strategic partnership UCAR Inc., a.k.a. Shenzhou Rental, a car rental and ride hailing service provider based in Beijing, to install DuerOS in its new fleet of vehicles.

Apollo

 

 

Apollo has garnered 130 OEM, Tier 1 parts supplier and other partners, adding recently Groupe PSA, WABCO, Changsha municipality, China Transinfo Technology Corporation and China Datang Corporation.

 

 

Activated users on Baidu Maps Intelligent Voice Assistant reached 140 million. Baidu Maps Intelligent Voice Assistant supports voice-activated wake word, multi-round conversation, and long and complex commands.

ABC Cloud and AI Solutions

 

 

Analysys recognized Baidu ABC Cloud as the fastest growing, and one of the top three most technologically advanced, cloud service providers in China in its China Cloud Service Enterprise Innovation and Development Research Report published in September 2018.

 

3 / 8


 

Baidu upgraded its Chinese-English simultaneous machine translation system with anticipation capabilities and controllable latency, representing a major breakthrough in natural language processing. The system significantly improves translation speed and accuracy and aims to make simultaneous translation more accessible to the general public.

 

 

Baidu has partnered with Beijing Haidian Park to provide visitors with an AI-powered experience, featuring Xiamen King Long Motors’ Apolong fully autonomous L4 mini buses powered by Apollo and smart speakers powered by DuerOS voice assistant at resting pavilions throughout the park.

 

 

Baidu has partnered with fourteen botanical gardens and twelve museums across China to provide visitors with AI-powered immersive, interactive experience. At the botanical gardens, visitors can perform visual search to identify a plant’s species and take a guided tour with AR maps. At the museums, users can perform visual and AR search to learn more about historical artifacts, as well as take a smart guided tour with indoor maps.

iQIYI

 

 

In September 2018, iQIYI’s subscribers reached 80.7 million, representing a record quarterly net addition of 13.5 million, driven by original blockbuster content.

 

 

iQiyi-original Story of Yanxi Palace garnered over 20 billion total video views during Q3 2018.

 

 

iQIYI ranked No. 1 across reach and engagement operating metrics in Q3 2018 according to third party market research firms.

 

 

The QIYU VR II headset from iQIYI reached the top ranking on both JD.com and TMall in the ‘Over 2,000 RMB mid-to-high-end VR all-in-one’ headset category. The QIYU VR II won the 2018 METIS Award for Virtual Reality/Augmented Reality Innovation, a.k.a. the AM Turing Award, representing one of the highest honors in the field.

Third Quarter 2018 Results

Total revenues reached RMB 28.2 billion ($4.11 billion), increasing 27% year over year. Online marketing revenues were RMB 22.5 billion ($3.27 billion), increasing 18% year over year. Baidu had approximately 522,000 active online marketing customers5, increasing 7% year over year. Revenue per online marketing customer was approximately RMB 43,100 ($6,300), increasing 12% year over year. Other revenues reached RMB 5.7 billion ($833 million), increasing 80% year over year, which was mainly due to the robust growth in iQIYI membership and other businesses.

Revenue from Baidu Core6 reached RMB 21.6 billion ($3.15 billion), increasing 25% year over year, while revenue from iQIYI reached RMB 6.9 billion ($1.01 billion), increasing 48% year over year.

 

5 

The number of active online marketing customers and revenue per online active customer exclude our group-buying and delivery related businesses for consistency with previous reporting.

6 

Since the beginning of 2017, we have disposed of certain non-core businesses including Baidu Mobile Games, Baidu Deliveries, Global DU businesses, and Du Xiaoman (our financial services business). Those businesses generated approximately RMB 1.0 billion revenues and 0.4 billion operating profit, excluding share-based compensation expenses, for the third quarter of 2018.

 

4 / 8


Content costs were RMB 6.7 billion ($981 million), representing a 73% increase year over year, mainly due to iQIYI’s increased content costs and, to a lesser extent, increased investment in BJH accounts, Baidu feeds’ content network.

Traffic acquisition cost was RMB 3.1 billion ($450 million), representing a 25% increase year over year.

Bandwidth costs were RMB 1.7 billion ($247 million), representing an 18% increase year over year.

Other cost of revenues, which includes depreciation, operation costs, sales tax and surcharges and share-based compensation, was RMB 2.7 billion ($393 million), increasing 1% year over year.

Selling, general and administrative expenses were RMB 5.6 billion ($821 million), increasing 51% year over year, primarily due to increased investment in channel and promotional marketing.

Research and development expenses were RMB 3.9 billion ($570 million), increasing 21% year over year, primarily due to the growth of personnel-related costs.

Operating income was RMB 4.4 billion ($645 million), decreasing 6% year over year. Non-GAAP operating income was RMB 5.7 billion ($825 million), increasing 2% year over year. Operating income of Baidu Core was RMB 7.0 billion ($1.02 billion), increasing 26% year over year. Non-GAAP operating income of Baidu Core was RMB 8.1 billion ($1.17 billion), increasing 26% year over year.

Total other income was RMB 9.0 billion ($1.31 billion), increasing 108% year over year, mainly due to gains from the disposal of Du Xiaoman, our financial services business, and Global DU businesses, in other income, net. For the third quarter of 2017, total other income was RMB 4.3 billion, mainly due to a gain from the disposal of Baidu Deliveries.

Income tax expense was RMB 2.1 billion ($299 million), compared to RMB 1.1 billion in the third quarter of 2017. Effective tax rate was 15%, compared to 12% last year, which benefited from the disposal of certain subsidiaries.

Net loss attributable to noncontrolling interests was RMB 1.0 billion ($146 million), which mainly consisted of losses from iQIYI allocated to noncontrolling interests. Noncontrolling interests were converted from preferred shares to ordinary shares in April 2018 upon the completion of iQIYI’s IPO, and, thus, losses were not allocable prior to the IPO.

Net income attributable to Baidu was RMB 12.4 billion ($1.80 billion), increasing 56% year over year. Diluted earnings per ADS amounted to RMB 35 ($5.13). Net income attributable to Baidu Core was RMB 14.3 billion ($2.08 billion), increasing 63% year over year. Non-GAAP net income attributable to Baidu was RMB 6.7 billion ($973 million), increasing 47% year over year. Non-GAAP diluted earnings per ADS amounted to RMB 19 ($2.77). Non-GAAP net income attributable to Baidu Core was RMB 8.4 billion ($1.22 billion), increasing 57% year over year.

 

5 / 8


Adjusted EBITDA reached RMB 6.8 billion ($988 million) and adjusted EBITDA margin was 24%. Adjusted EBITDA for Baidu Core reached RMB 9.0 billion ($1.31 billion) and adjusted EBITDA margin for Baidu Core was 42%.

As of September 30, 2018, cash, cash equivalents, restricted cash and short-term investments were RMB 104.5 billion ($15.22 billion). Free cash flow was RMB 9.1 billion ($1.33 billion). Excluding iQIYI, cash, cash equivalents, restricted cash and short-term investments were RMB 94.8 billion ($13.81 billion), as of September 30, 2018. Excluding iQIYI, free cash flow was RMB 8.3 billion ($1.21 billion)

Financial Guidance

For the fourth quarter of 2018, Baidu expects revenues to be between RMB 25.48 billion ($3.71 billion) and RMB 26.72 billion ($3.89 billion), representing a 15% to 20% increase year over year and, excluding revenues from announced divestures, 20% to 26% increase year over year.

Previously announced divestures together generated approximately RMB 1.0 billion in quarterly revenues for each of the first three quarters in 2018 and, fourth quarter guidance does not include any revenues from announced divestures, 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 9:15 PM on October 30, 2018, U.S. Eastern Time (9:15 AM on October 31, 2018, 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:

   8258806

A replay of the conference call may be accessed by phone at the following number until November 7, 2018:

 

6 / 8


International:

   +61 2 8199 0299

Passcode:

   8258806

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 fourth quarter of 2018, 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.

 

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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, 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.”

 

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Baidu, Inc.

Condensed Consolidated Statements of Income

 

     Three Months Ended  

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

   September 30,
2017
    June 30,
2018
    September 30,
2018
 
     Unaudited     Unaudited     Unaudited  

Revenues:

      

Online marketing services

     20,108       21,065       22,481  

Others

     3,381       4,907       5,722  
  

 

 

   

 

 

   

 

 

 

Total revenues (note 1)

     23,489       25,972       28,203  
  

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

      

Content costs

     3,897       5,213       6,736  

Traffic acquisition costs

     2,476       2,698       3,090  

Bandwidth costs

     1,440       1,550       1,695  

Others

     3,988       2,551       2,697  
  

 

 

   

 

 

   

 

 

 

Cost of revenues (note 2)

     11,801       12,012       14,218  

Selling, general and administrative (note 2)

     3,746       4,505       5,641  

Research and development (note 2)

     3,242       4,033       3,916  
  

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     18,789       20,550       23,775  
  

 

 

   

 

 

   

 

 

 

Operating income

     4,700       5,422       4,428  

Other income:

      

Interest income

     876       882       1,258  

Interest expense

     (557     (478     (479

Foreign exchange income(loss), net

     (130     30       (54

Income (loss) from equity method investments

     (73     69       419  

Other income, net

     4,229       231       7,877  
  

 

 

   

 

 

   

 

 

 

Total other income

     4,345       734       9,021  
  

 

 

   

 

 

   

 

 

 

Income before income taxes

     9,045       6,156       13,449  

Income taxes

     1,097       1,086       2,053  
  

 

 

   

 

 

   

 

 

 

Net income

     7,948       5,070       11,396  
  

 

 

   

 

 

   

 

 

 

Less: net income (loss) attributable to noncontrolling interests

     (1     (1,332     (1,000
  

 

 

   

 

 

   

 

 

 

Net income attributable to Baidu

     7,949       6,402       12,396  
  

 

 

   

 

 

   

 

 

 

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

      

-Basic

     24.25       18.32       35.53  

-Diluted

     24.05       18.14       35.26  

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

      

-Basic

     242.48       183.16       355.27  

-Diluted

     240.49       181.36       352.57  

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

      

Basic

     34,703,924       34,953,564       34,891,733  

Diluted

     34,991,177       35,299,428       35,158,747  

 

(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. 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.

 

     Three Months Ended  
     September 30,
2017
     June 30,
2018
     September 30,
2018
 
     Unaudited      Unaudited      Unaudited  

Gross revenues

     23,489        27,520        29,876  

Less: value added taxes

     1,320        1,548        1,673  
  

 

 

    

 

 

    

 

 

 

Net revenues

     22,169        25,972        28,203  
  

 

 

    

 

 

    

 

 

 

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

        

Cost of revenues

     53        60        58  

Selling, general and administrative

     252        302        545  

Research and development

     536        755        636  
  

 

 

    

 

 

    

 

 

 

Total share-based compensation expenses

     841        1,117        1,239  
  

 

 

    

 

 

    

 

 

 

 

1


Baidu, Inc.

Condensed Consolidated Balance Sheets

 

(In RMB millions except for share information)

   December 31,
2017
     September 30,
2018
 
     Audited      Unaudited  

ASSETS

     

Current assets:

     

Cash and cash equivalents

     11,084        15,775  

Restricted cash

     252        15  

Short-term investments

     89,381        88,716  

Other invested securities

     18,350        —    

Accounts receivable, net

     4,571        5,455  

Loans and interest receivable, net

     23,938        —    

Amounts due from related parties

     168        23,321  

Other assets, current

     3,425        6,700  
  

 

 

    

 

 

 

Total current assets

     151,169        139,982  
  

 

 

    

 

 

 

Non-current assets:

     

Fixed assets, net

     12,475        16,197  

Intangible assets, net

     5,467        8,732  

Goodwill

     15,806        17,051  

Long-term investments, net

     56,283        80,589  

Loans and interest receivable, net

     3,467        —    

Amounts due from related parties

     9        1,994  

Deferred tax assets, net

     1,532        1,049  

Other assets, non-current

     5,520        9,742  
  

 

 

    

 

 

 

Total non-current assets

     100,559        135,354  
  

 

 

    

 

 

 

Total assets

     251,728        275,336  
  

 

 

    

 

 

 

LIABILITIES AND EQUITY

     

Current liabilities:

     

Short-term loans

     1,244        1,173  

Amounts due to the third-party investors

     38,486        —    

Accounts payable and accrued liabilities

     27,523        33,743  

Customer advances and deposits

     6,785        7,599  

Deferred revenue

     788        1,840  

Deferred income

     568        519  

Long-term loans, current portion

     10        10  

Notes payable,current portion

     6,500        6,856  

Amounts due to related parties

     153        873  
  

 

 

    

 

 

 

Total current liabilities

     82,057        52,613  
  

 

 

    

 

 

 

Non-current liabilities:

     

Deferred income

     73        50  

Deferred revenue

     —          1,431  

Amounts due to related parties

     —          3,008  

Long-term loans

     6,701        7,069  

Notes payable

     29,111        34,142  

Deferred tax liabilities

     3,375        3,989  

Other non-current liabilities

     39        190  
  

 

 

    

 

 

 

Total non-current liabilities

     39,299        49,879  
  

 

 

    

 

 

 

Total liabilities

     121,356        102,492  
  

 

 

    

 

 

 

Redeemable noncontrolling interests

     11,022        —    

Equity

     

Class A Ordinary Shares, par value US$0.00005 per share, 825,000,000 shares authorized, and 27,614,978 shares and 27,654,802 shares issued and outstanding as at December 31, 2017 and September 30, 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 September 30, 2018

     —          —    

Additional paid-in capital

     12,088        32,090  

Retained earnings

     102,328        127,201  

Accumulated other comprehensive income

     930        399  
  

 

 

    

 

 

 

Total Baidu, Inc. shareholders’ equity

     115,346        159,690  
  

 

 

    

 

 

 

Noncontrolling interests

     4,004        13,154  
  

 

 

    

 

 

 

Total equity

     119,350        172,844  
  

 

 

    

 

 

 

Total liabilities, redeemable noncontrolling interests, and equity

     251,728        275,336  
  

 

 

    

 

 

 

 

2


Baidu, Inc.

Selected Information

 

     Three Months Ended  

(In RMB millions, unaudited)

   September 30,
2017
    June 30,
2018
    September 30,
2018
 

Baidu Core

     18,342       20,018       21,606  

iQIYI

     4,951       6,170       6,914  

Intersegment eliminations & adjustments

     196       (216     (317
  

 

 

   

 

 

   

 

 

 

Total Revenues

     23,489       25,972       28,203  

Baidu Core

     5,589       6,736       7,015  

iQIYI

     (1,067     (1,328     (2,591

Intersegment eliminations & adjustments

     178       14       4  
  

 

 

   

 

 

   

 

 

 

Operating income

     4,700       5,422       4,428  

Baidu Core

     32     34     32

iQIYI

     (23 %)      (22 %)      (37 %) 

Operating margin (note 1)

     21     21     16

Baidu Core

     6,377       7,769       8,050  

iQIYI

     (1,014     (1,244     (2,387

Intersegment eliminations & adjustments

     178       14       4  
  

 

 

   

 

 

   

 

 

 

Non-GAAP operating income

     5,541       6,539       5,667  

Baidu Core

     37     39     37

iQIYI

     (22 %)      (20 %)      (35 %) 

Non-GAAP operating margin (note 1)

     25     25     20

Baidu Core

     8,784       8,158       14,309  

iQIYI

     (1,052     (2,097     (3,140

Intersegment eliminations & adjustments(note 2)

     217       341       1,227  
  

 

 

   

 

 

   

 

 

 

Net income attributable to Baidu

     7,949       6,402       12,396  

Baidu Core

     51     41     66

iQIYI

     (23 %)      (34 %)      (45 %) 

Net margin (note 1)

     36     25     44

Baidu Core

     5,335       8,565       8,357  

iQIYI

     (966     (2,013     (2,939

Intersegment eliminations & adjustments (note 2)

     184       881       1,267  
  

 

 

   

 

 

   

 

 

 

Non-GAAP net income attributable to Baidu

     4,553       7,433       6,685  

Baidu Core

     31     43     39

iQIYI

     (21 %)      (33 %)      (43 %) 

Non-GAAP net margin (note 1)

     21     29     24

Baidu Core

     7,574       8,562       8,982  

iQIYI

     (907     (1,125     (2,150

Intersegment eliminations & adjustments

     178       (20     (43
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     6,845       7,417       6,789  

Baidu Core

     44     43     42

iQIYI

     (19 %)      (18 %)      (31 %) 

Adjusted EBITDA margin (note 1)

     31     29     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 our business performance and trends, 2017 net revenues have been used to calculate operating margin, non-GAAP operating margin, non-GAAP net income 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.

(2)

Primarily related to net loss attributable to iQIYI noncontrolling interests.

 

3


Baidu, Inc.

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

 

     Three months ended  

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

   September 30,
2017
    June 30,
2018
    September 30,
2018
 

Operating income - Baidu Core

     5,589       6,736       7,015  

Add: Share-based compensation expenses

     788       1,033       1,035  
  

 

 

   

 

 

   

 

 

 

Non-GAAP operating income - Baidu Core

     6,377       7,769       8,050  

Add: Depreciation of fixed assets

     868       760       885  

Add: Amortization of intangible assets

     329       33       47  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA - Baidu Core

     7,574       8,562       8,982  

Operating loss - iQIYI

     (1,067     (1,328     (2,591

Add: Share-based compensation expenses

     53       84       204  
  

 

 

   

 

 

   

 

 

 

Non-GAAP operating loss - iQIYI

     (1,014     (1,244     (2,387

Add: Depreciation of fixed assets

     89       74       81  

Add: Amortization of intangible assets

     18       45       156  

Adjusted EBITDA - iQIYI

     (907     (1,125     (2,150

Operating income - consolidated

     4,700       5,422       4,428  

Add: Share-based compensation expenses

     841       1,117       1,239  
  

 

 

   

 

 

   

 

 

 

Non-GAAP operating income - consolidated

     5,541       6,539       5,667  

Add: Depreciation of fixed assets

     957       834       966  

Add: Amortization of intangible assets

     347       44       156  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA-consolidated

     6,845       7,417       6,789  

Net income attributable to Baidu core

     8,784       8,158       14,309  

Add: Share-based compensation expenses

     788       1,033       1,035  

Add: Loss associated with the dilution of equity method investees, net of tax

     257       174       45  

Add: Disposal loss(gain), net of tax

     (4,659     (462     (6,697

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

     165       —         298  

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

     —         (338     (633
  

 

 

   

 

 

   

 

 

 

Non-GAAP net income attributable to Baidu core

     5,335       8,565       8,357  

Net loss attributable to iQIYI

     (1,052     (2,097     (3,140

Add: Share-based compensation expenses

     53       84       204  

Add: Loss associated with the dilution of equity method investees, 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
  

 

 

   

 

 

   

 

 

 

Non-GAAP net loss attributable to iQIYI

     (966     (2,013     (2,939

Net income attributable to Baidu

     7,949       6,402       12,396  

Add: Share-based compensation expenses

     841       1,081       1,151  

Add: Loss associated with the dilution of equity method investees, net of tax

     257       174       45  

Add: Disposal loss(gain), net of tax

     (4,659     114       (6,569

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

     165       —         298  

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

     —         (338     (636
  

 

 

   

 

 

   

 

 

 

Non-GAAP net income attributable to Baidu

     4,553       7,433       6,685  

 

4


     Three months ended  

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

   September 30,
2017
    June 30,
2018
    September 30,
2018
 

Diluted earnings per ADS

     24.05       18.14       35.26  

Add: Accretion of the redeemable noncontrolling interests

     (1.33     —         —    

Add: Non-GAAP adjustments to earnings per ADS

     (9.71     2.92       (16.25
  

 

 

   

 

 

   

 

 

 

Non-GAAP diluted earnings per ADS

     13.01       21.06       19.01  

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

     349,911,767       352,994,277       351,587,467  

Net cash provided by operating activities - Baidu Core

     9,391       6,972       10,361  

Less: Capital expenditures

     (1,185     (1,339     (2,026
  

 

 

   

 

 

   

 

 

 

Free cash flow - Baidu Core

     8,206       5,633       8,335  

Net cash provided by operating activities - iQIYI

     1,462       156       994  

Less: Capital expenditures

     (112     (166     (193
  

 

 

   

 

 

   

 

 

 

Free cash flow - iQIYI

     1,350       (10     801  

Net cash provided by operating activities - consolidated

     10,853       7,128       11,355  

Less: Capital expenditures

     (1,297     (1,505     (2,219
  

 

 

   

 

 

   

 

 

 

Free cash flow - consolidated

     9,556       5,623       9,136  

 

5