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 March 2020

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: March 4, 2020


Exhibit Index

 

Exhibit 99.1—Press Release

EX-99.1

Exhibit 99.1

Baidu Announces Fourth Quarter and Fiscal Year 2019 Results

BEIJING, China, February 27, 2020 – 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 fourth quarter and fiscal year ended December 31, 20191.

“We finished 2019 making tremendous progress in strengthening Baidu’s mobile ecosystem. Through the building blocks of BJH publisher accounts, Smart Mini Program and Managed Page, Baidu App provides users single log-on, native-app-like experience to a wide range of information and services dispersed across isolated mobile apps and HTML5 websites. Baidu App’s spanning mobile ecosystem has resulted in more users logging in, DAUs growing robustly to 195 million in December, up 21% year over year, and in-app search queries increasing almost 30% year over year,” said Robin Li, Chairman and CEO of Baidu. “Baidu new AI businesses have also made great strides in 2019, as we built leadership in smart devices, smart transportation and enterprise cloud solutions with Baidu’s leading AI technologies.”

“Baidu delivered solid fourth quarter results with increasing year-over-year revenue growth rate, allowing 2019 revenue to reach RMB 107 billion, or US$15.4 billion,” said Herman Yu, CFO of Baidu. “Baidu’s quarterly operating margin has also been improving, through the strengthening of Baidu’s mobile ecosystem and our focus on resource investment returns. Our leaner financial model and strong balance sheet put us in a good position to weather the slowing macro, while continuing to invest heavily in technology and new businesses, to optimize future growth.”

Fourth Quarter 2019 Financial Highlights

 

     Baidu, Inc.  
     For the three-month ended  
     December 31,
2018
    September 30,
2019
    December 31,
2019
    YOY     QOQ     December 31,
2019
 
(In millions except for per ADS information, unaudited)    RMB     RMB     RMB                 US$  

Total revenues

     27,195       28,080       28,884       6     3     4,149  

Operating income

     1,112       2,355       4,655       319     98     669  

Operating margin

     4     8     16      

Non-GAAP operating income

     2,747       3,691       6,753       146     83     970  

Non-GAAP operating margin

     10     13     23      

Net income (loss) attributable to Baidu

     2,081       (6,373     6,345       205     —         911  

Net margin

     8     (23 %)      22      

Non-GAAP net income attributable to Baidu

     4,703       4,387       9,193       95     110     1,320  

Non-GAAP net margin

     17     16     32      

Diluted earnings (loss) per ADS

     5.93       (18.37     18.25       208     —         2.62  

Non-GAAP diluted earnings per ADS

     13.42       12.61       26.54       98     110     3.81  

 

1 

Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB 6.9618 to US$1.00, the exchange rate in effect as of December 31, 2019 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.

 

1


     Baidu Core  
     For the three-month ended  
(In millions except for per ADS information, unaudited)    December 31,
2018
    September 30,
2019
    December 31,
2019
    YOY     QOQ     December 31,
2019
 
   RMB     RMB     RMB                 US$  

Total revenues

     20,520       21,010       21,711       6     3     3,119  

Operating income

     4,433       5,191       6,870       55     32     987  

Operating margin

     22     25     32      

Non-GAAP operating income

     5,788       6,224       8,492       47     36     1,220  

Non-GAAP operating margin

     28     30     39      

Net income (loss) attributable to Baidu Core

     4,050       (4,287     7,433       84     —         1,068  

Net margin

     20     (20 %)      34      

Non-GAAP net income attributable to Baidu Core

     6,513       6,310       9,950       53     58     1,429  

Non-GAAP net margin

     32     30     46      

Fiscal Year 2019 Financial Highlights

 

     Baidu, Inc.  
     For the twelve-month ended  
(In millions except for per ADS information, unaudited)    December 31,
2018
    December 31,
2019
    YOY     YOY2     December 31,
2019
 
   RMB     RMB                 US$  

Total revenues

     102,277       107,413       5     8     15,429  

Operating income

     15,530       6,307       (59 %)        906  

Operating margin

     15     6      

Non-GAAP operating income

     20,425       12,800       (37 %)        1,839  

Non-GAAP operating margin

     20     12      

Net income attributable to Baidu

     27,573       2,057       (93 %)        296  

Net margin

     27     2      

Non-GAAP net income attributable to Baidu

     23,976       18,182       (24 %)        2,612  

Non-GAAP net margin

     23     17      

Diluted earnings per ADS

     78.03       5.60       (93 %)        0.80  

Non-GAAP diluted earnings per ADS

     68.17       52.04       (24 %)        7.48  

 

2 

Excluding revenue from divested businesses, which was approximately RMB3.1 billion for the twelve-months ended December 31, 2018.

 

2


     Baidu Core  
     For the twelve-month ended  
(In millions except for per ADS information, unaudited)    December 31,
2018
    December 31,
2019
    YOY     YOY2     December 31,
2019
 
   RMB     RMB                 US$  

Total revenues

     78,271       79,711       2     6     11,450  

Operating income

     23,808       15,261       (36 %)        2,192  

Operating margin

     30     19      

Non-GAAP operating income

     28,020       20,311       (28 %)        2,917  

Non-GAAP operating margin

     36     25      

Net income attributable to Baidu Core

     33,605       7,580       (77 %)        1,089  

Net margin

     43     10      

Non-GAAP net income attributable to Baidu Core

     29,059       22,824       (21 %)        3,278  

Non-GAAP net margin

     37     29      

Other Highlights

Corporate

 

Baidu employees have devoted significant efforts to help contain the novel coronavirus outbreak and fulfill the Company’s corporate social responsibility, including the following:

 

   

On Baidu App, the Company launched a free medical consultation platform, to provide online access to doctors, answer pneumonia-related questions and save hospital resources. Baidu also partnered with medical experts to provide authoritative information on the novel coronavirus and leveraged its large platform reach to make available timely, reliable information to the public.

 

   

Baidu Maps is providing timely information, including the location of traffic control areas, designated hospitals and infected cases, to help users cope with the coronavirus outbreak. By leveraging big data, Baidu Maps helps track population migration and predict the spread of the epidemic in China.

 

   

Baidu leveraged its facial recognition and other AI technologies to develop and deploy many fever-screening systems to railway stations, hospitals and municipal government buildings in China. Baidu’s fever-screening system can remotely measure the temperature of up to 200 people per minute, detect body temperatures of people wearing face masks and hats, and identify those not wearing masks or wearing them improperly. Baidu’s AI model has also been open sourced, to further help reduce the spread of the coronavirus.

 

   

Baidu has pledged RMB 300 million to these efforts, provide awareness education and improve public health in China.

 

The Company reported its ESG progress for 2019, noting: 1) Baidu AI has helped reunite over 10,000 missing persons with their families; and 2) Baidu data centers reduced carbon emissions by over 180,000 tons in 2019, with the average power usage effectiveness (PUE) of its data centers reaching 1.14, far exceeding the global industry average of 1.67 according to Uptime Institute, a globally recognized data center advisory organization.

 

Baidu returned $149 million to its shareholders in the fourth quarter of 2019, under the 2019 Share Repurchase Program.

 

3


Mobile Ecosystem

 

Baidu App’s average daily active users (“DAUs”) reached 195 million, up 21% year over year, in December 2019.

 

Baidu App’s large user scale and unique search-plus-feed distribution channels are attracting more original content creators, with BJH publisher accounts for Baidu feed, reaching 2.6 million, up 38% year over year, in December 2019.

 

Baidu has partnered with major TV and provincial satellite stations, to provide TV streaming and VOD in Baidu App and short video apps. Through Baidu’s mobile building blocks, TV stations can leverage Baidu’s powerful content distribution channels to extend their reach and allow online users to engage with the TV shows.

 

Merchants with HTML5 websites across many industries are switching to Baidu Managed Page, as the landing page for their search result. Revenue from Baidu Managed Page reached almost a quarter of Baidu Core’s online marketing services revenue in the fourth quarter of 2019.

 

Merchants with app development capabilities are adopting Baidu Smart Mini Program, whose monthly active users (“MAUs”) reached 316 million, up 114% year over year, in December 2019.

 

All six major express delivery companies in China have adopted Baidu Smart Mini Program, which provides native-app-like experience to logged-in users, such as allowing them to check the shipping status of their e-commerce orders and request for an express delivery simply by searching “express delivery” in Baidu App.

 

Baidu Smart Mini Program is also extending its reach to government services. For example, employees in China can check the information of their housing fund, similar to social security in the U.S., by simply scanning their face with Baidu App, as a logged-in user.

DuerOS

 

Monthly voice queries on DuerOS, a leading voice assistant for the Chinese language, surpassed 5.0 billion, up over 3 fold year over year, in December 2019. Monthly voice queries from Xiaodu first-party devices were 2.3 billion, up over 7 fold year over year.

 

DuerOS skills store now offers over 3,600 skills in wide ranging genres, including online education, gaming and live streaming. DuerOS developer community has expanded to over 38,000 members.

 

Xiaodu smart speakers ranked #1 in smart speaker shipments in China and Xiaodu Smart Display ranked #1 in smart display shipments globally for full year 2019, according to well-recognized market analytics firms Strategy Analytics and Canalys.

 

Baidu released Xiaodu Smart Display X8 in December 2019, with enhanced capabilities powered by Baidu AI, allowing users to wake the device up with eye gestures, pause streaming content with hand gestures and receive report on moving objects in the house when the owner leaves home.

Cloud, AI Services & AI Platform

 

Baidu partnered with Shanghai Pudong Development Bank, to launch a blockchain alliance with major Chinese commercial banks for inter-bank information verification built on Baidu’s Blockchain as a Service (BaaS) platform.

 

4


In November 2019, Baidu released its end-to-end far-field Automatic Speech Recognition (ASR) solutions, based on in-house designed Baidu Honghu AI chip. Baidu Brain’s leading speech recognition capabilities are used across Baidu products, including Xiaodu smart speakers, DuerOS in-vehicle infotainment, Baidu Maps and Baidu call-center enterprise solutions. Developers have tapped Baidu Brain’s speech recognition engine on Baidu open AI platform more than 10 billion times.

 

Baidu is applying Baidu Kunlun, its high-performance AI chip, optimizing visual, speech, natural language processing and other AI capabilities, to power the Company’s cloud servers.

 

In December 2019, Baidu’s pre-training framework for language understanding, ERNIE (Enhanced Representation through kNowledge IntEgration), became the first to score above 90 on the General Language Understanding Evaluation benchmark, or GLUE, which is widely considered as the benchmark for testing AI language understanding and otherwise dominated by U.S. technology firms and universities. ERNIE powers Baidu search and Xiaodu smart devices, to provide the best user experience.

 

Baidu Maps has been selected by Tesla China to provide map cloud services, such as real-time traffic condition reporting, base map display and point-of-interest search. Baidu Maps is a leading location based service platform, supporting 1.8 million developers and tracking 2 billion daily kilometers.

Apollo

 

Baidu partnered with Cangzhou, Hebei province, to develop smart transportation using Baidu’s V2X solutions to improve traffic condition and safety. The adoption of Baidu’s V2X solutions has led to a second Apollo robotaxi pilot program, launched in November 2019, with an initial fleet of 30 vehicles.

 

Baidu also partnered with Yinchuan, Ningxia province, to provide the provincial capital with Baidu’s V2X solutions to support autonomous trucking.

 

At the Apollo Partner Conference in December 2019, Apollo v5.5 was released to support urban road point-to-point autonomous driving, as well as open-platform development for V2X and IoV solutions. Apollo has garnered 177 leading OEMs, suppliers and other partners, and over 36,000 developers worldwide.

 

Apollo fleet has reached 3 million test kilometers on the road in December 2019, spanning across 23 cities, including Beijing, Wuhan, Cangzhou and Changchun. The municipality of Beijing granted Baidu its first batch of 40 manned autonomous driving licenses in December 2019.

iQIYI

 

iQIYI subscribers reached 106.9 million in December 2019, adding 19.5 million subscribers year over year. iQIYI’s large subscriber base further strengthens iQIYI’s foundation to produce entertainment-oriented blockbuster originals.

Fourth Quarter 2019 Results

Total revenues reached RMB 28.9 billion ($4.15 billion), up 6% year over year and 3% quarter over quarter. Online marketing revenues were RMB 20.8 billion ($2.98 billion), decreasing 2% year over year and increasing 2% quarter over quarter. Other revenues were RMB 8.1 billion ($1.17 billion), increasing 35% year over year, driven mainly by the strong growth in cloud services, smart devices and iQIYI membership.

Revenue from Baidu Core reached RMB 21.7 billion ($3.12 billion), increasing 6% year over year and 3% quarter over quarter. Revenue from iQIYI reached RMB 7.5 billion ($1.08 billion), up 7% year over year.

 

 

5


iQIYI membership revenue grew 21% year over year, offset by online advertising revenue declining 15% year over year.

Cost of revenues, were RMB 15.5 billion ($2.23 billion), decreasing 1% year over year, primarily due to a decrease in content costs and traffic acquisition costs, offset by increases in hardware and cloud cost of goods sold, impairment and amortization of intangible assets and depreciation expenses.

Selling, general and administrative expenses were RMB 4.0 billion ($568 million), decreasing 33% year over year, primarily due to decreased investment in channel spending and promotional marketing, as well as lower personnel related expenses.

Research and development expenses were RMB 4.8 billion ($683 million), increasing 5% year over year, primarily due to an increase in personnel related expenses.

Operating income was RMB 4.7 billion ($669 million) and operating margin was 16%. Baidu Core operating income was RMB 6.9 billion ($987 million), and Baidu Core operating margin was 32%.

Non-GAAP operating income was RMB 6.8 billion ($970 million), and non-GAAP operating margin was 23%. Non-GAAP Baidu Core operating income was RMB 8.5 billion ($1.22 billion), and non-GAAP Baidu Core operating margin was 39%.    

Total other income was RMB 699 million ($101 million), compared to total other loss of RMB 60 million for Q4 2018.

Income tax expense was RMB 304 million ($44 million), compared to RMB 484 million in Q4 2018.

Net income attributable to Baidu was RMB 6.3 billion ($ 911 million), and diluted earnings per ADS was RMB 18 ($2.62). Net income attributable to Baidu Core was RMB 7.4 billion ($1.07 billion). Non-GAAP net income attributable to Baidu was RMB 9.2 billion ($1.32 billion), and non-GAAP net margin was 32%. Non-GAAP diluted earnings per ADS amounted to RMB 27 ($3.81). Non-GAAP net income attributable to Baidu Core was RMB 10.0 billion ($1.43 billion), and non-GAAP net margin for Baidu Core was 46%.

Adjusted EBITDA was RMB 8.2 billion ($1.17 billion) and adjusted EBITDA margin was 28%. Adjusted EBITDA to Baidu Core was RMB 9.8 billion ($1.41 billion) and adjusted EBITDA margin for Baidu Core was 45%.

As of December 31, 2019, cash, cash equivalents, restricted cash and short-term investments were RMB 147.4 billion ($21.17 billion), and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB 135.9 billion ($19.52 billion). Free cash flow was RMB 10.1 billion ($1.46 billion). Free cash flow excluding iQIYI was RMB 8.0 billion ($1.15 billion).

 

6


Fiscal Year 2019 Results

Total revenues reached RMB 107.4 billion ($15.43 billion), increasing 5% year over year, or 8% year over year, excluding the impact of announced divestures2. Online marketing revenues were RMB 78.1 billion ($11.22 billion), decreasing 5 % year over year. Other revenues were RMB 29.3 billion ($4.21 billion), increasing 44% year over year, driven mainly by the strong growth in iQIYI membership, cloud services and smart devices.

Revenue from Baidu Core reached RMB 79.7 billion ($11.45 billion), increasing 2% year over year, or increasing 6% year over year, excluding the impact of announced divestures2. Revenue from iQIYI reached RMB 29.0 billion ($4.17 billion), up 16% year over year. iQIYI membership revenue grew 36% year over year, offset by online advertising revenue declining 11% year over year.

Cost of revenues were RMB 62.9 billion ($9.03 billion), increasing 21% year over year, primarily due to increases in hardware and cloud cost of goods sold, content costs, depreciation expense, traffic acquisition costs and bandwidth costs.

Selling, general and administrative expenses were RMB 19.9 billion ($2.86 billion), increasing 4% year over year.

Research and development expenses were RMB 18.3 billion ($2.64 billion), increasing 16% year over year, primarily due to an increase in personnel related expenses.

Operating income was RMB 6.3 billion ($906 million) and operating margin was 6%. Baidu Core operating income was RMB 15.3 billion ($2.19 billion), and Baidu Core operating margin was 19%.

Non-GAAP operating income was RMB 12.8 billion ($1.84 billion), and non-GAAP operating margin was 12%. Non-GAAP Baidu Core operating income was RMB 20.3 billion ($2.92 billion), and non-GAAP Baidu Core operating margin was 25%.

Total other loss was RMB 6.6 billion ($955 million), mainly due to loss on equity investment arising from other-than-temporary decline, compared to total other income of RMB 11.8 billion for 2018, which was mainly due to disposal gains from Du Xiaoman and Global DU businesses. In Q4 2015, following a transaction where the Company exchanged shares of its majority-owned subsidiary Qunar for a minority stake in Trip.com, the Company deconsolidated Qunar, recorded its investment in Trip.com at the closing-date market value and recognized a non-cash accounting gain of RMB 24.4 billion. Since then, the market value of Trip.com shares has declined, and the continued low market price in 2019 resulted in the Company recognizing a non-cash impairment loss of RMB 8.9 billion in Q3 2019. In October 2019, the Company sold down its holding in Trip.com, reducing its interest from 19% to 12% of Trip.com’s outstanding shares.

Income tax expense was RMB 1.9 billion ($279 million), compared to RMB 4.7 billion in 2018. The decrease in income tax expense was mainly due to lower taxable income from Baidu Core.

 

7


Net income attributable to Baidu was RMB 2.1 billion ($296 million), and diluted earnings per ADS was RMB 6 ($0.80). Net income attributable to Baidu Core was RMB 7.6 billion ($1.09 billion). Non-GAAP net income attributable to Baidu was RMB 18.2 billion ($2.61 billion), and non-GAAP net margin was 17%. Non-GAAP diluted earnings per ADS amounted to RMB 52 ($7.48). Non-GAAP net income attributable to Baidu Core was RMB 22.8 billion ($3.28 billion), and non-GAAP net margin for Baidu Core was 29%.

Adjusted EBITDA was RMB 18.4 billion ($2.65 billion) and adjusted EBITDA margin was 17%. Adjusted EBITDA to Baidu Core was RMB 25.5 billion ($3.66 billion) and adjusted EBITDA margin for Baidu Core was 32%.

Free cash flow was RMB 22.0 billion ($3.17 billion). Free cash flow excluding iQIYI was RMB 18.9 billion ($2.71 billion).

Financial Guidance

For the first quarter of 2020, Baidu expects revenues to be between RMB 21.0 billion ($3.0 billion) and RMB 22.9 billion ($3.3 billion), representing a decline of 5% to 13% year over year, which assumes that Baidu Core revenue will decline between 10% and 18% year over year. The Coronavirus 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 8:15 PM on February 27, 2020, U.S. Eastern Time (9:15 AM on February 28, 2020, 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:        1571908

A replay of the conference call may be accessed by phone at the following number until March 6, 2020:

 

International:

   +61 2 8199 0299

Passcode:

   1571908

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

 

8


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 a 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 first 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.

 

9


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 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 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 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.

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.”

 

10


Baidu, Inc.

Condensed Consolidated Balance Sheets

(In millions except for share information, unaudited)

 

    December 31,
2018
    December 31,
2019
    December 31,
2019
 
    RMB     RMB     USD  

ASSETS

     

Current assets:

     

Cash and cash equivalents

    27,638       33,443       4,804  

Restricted cash

    2,189       996       143  

Short-term investments

    111,626       112,924       16,221  

Accounts receivable, net

    6,015       7,416       1,065  

Amounts due from related parties

    785       1,594       229  

Other assets, current

    6,841       9,189       1,320  
 

 

 

   

 

 

   

 

 

 

Total current assets

    155,094       165,562       23,782  
 

 

 

   

 

 

   

 

 

 

Non-current assets:

     

Fixed assets, net

    17,903       18,311       2,630  

Intangible assets, net

    9,181       7,887       1,133  

Goodwill

    18,536       18,250       2,621  

Long-term investments, net

    80,454       69,410       9,970  

Amounts due from related parties

    4,297       3,564       512  

Deferred tax assets, net

    2,324       2,193       315  

Operating lease right-of-use assets

    —         7,332       1,053  

Other assets, non-current

    9,777       8,807       1,264  
 

 

 

   

 

 

   

 

 

 

Total non-current assets

    142,472       135,754       19,498  
 

 

 

   

 

 

   

 

 

 

Total assets

    297,566       301,316       43,280  
 

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

     

Current liabilities:

     

Short-term loans

    3,046       2,618       376  

Accounts payable and accrued liabilities

    35,381       32,701       4,698  

Customer deposits and deferred revenue

    9,221       11,062       1,589  

Deferred income

    523       529       76  

Long-term loans, current portion

    84       737       106  

Notes payable, current portion

    6,871       5,219       750  

Amounts due to related parties

    1,727       2,231       320  

Operating lease liabilities

    —         2,283       328  
 

 

 

   

 

 

   

 

 

 

Total current liabilities

    56,853       57,380       8,243  
 

 

 

   

 

 

   

 

 

 

Non-current liabilities:

     

Deferred income

    54       17       2  

Deferred revenue

    1,309       1,009       145  

Amounts due to related parties

    4,360       3,846       552  

Long-term loans

    7,456       7,804       1,121  

Notes payable

    42,735       38,090       5,471  

Convertible senior notes

    4,712       12,297       1,766  

Deferred tax liabilities

    4,099       3,273       470  

Operating lease liabilities

    —         4,486       644  

Other non-current liabilities

    236       299       44  
 

 

 

   

 

 

   

 

 

 

Total non-current liabilities

    64,961       71,121       10,215  
 

 

 

   

 

 

   

 

 

 

Total liabilities

    121,814       128,501       18,458  
 

 

 

   

 

 

   

 

 

 

Redeemable noncontrolling interests

    716       1,109       159  

Equity

     

Class A Ordinary Shares, par value US$0.00005 per share, 825,000,000 shares authorized, and 27,733,692 shares and 27,381,621 shares issued and outstanding as at December 31, 2018 and December 31, 2019

    —         —         —    

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, 2018 and December 31, 2019

    —         —         —    

Additional paid-in capital

    33,441       38,714       5,561  

Retained earnings

    129,246       126,268       18,137  

Accumulated other comprehensive income

    210       (1,383     (199
 

 

 

   

 

 

   

 

 

 

Total Baidu shareholders’ equity

    162,897       163,599       23,499  
 

 

 

   

 

 

   

 

 

 

Noncontrolling interests

    12,139       8,107       1,164  
 

 

 

   

 

 

   

 

 

 

Total equity

    175,036       171,706       24,663  
 

 

 

   

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interests, and equity

    297,566       301,316       43,280  
 

 

 

   

 

 

   

 

 

 

 

11


Baidu, Inc.

Condensed Consolidated Statements of Income (Loss)

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

 

    Three Months Ended     Twelve Months Ended  
    December 31,
2018
    September 30,
2019
    December 31,
2019
    December 31,
2019
    December 31,
2018
    December 31,
2019
    December 31,
2019
 
    RMB     RMB     RMB     USD     RMB     RMB     USD  

Revenues:

             

Online marketing services

    21,197       20,434       20,765       2,983       81,912       78,093       11,217  

Others

    5,998       7,646       8,119       1,166       20,365       29,320       4,212  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    27,195       28,080       28,884       4,149       102,277       107,413       15,429  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

             

Cost of revenues(1)

    15,611       16,378       15,517       2,229       51,744       62,850       9,028  

Selling, general and administrative(1)

    5,943       4,657       3,956       568       19,231       19,910       2,860  

Research and development(1)

    4,529       4,690       4,756       683       15,772       18,346       2,635  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

    26,083       25,725       24,229       3,480       86,747       101,106       14,523  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    1,112       2,355       4,655       669       15,530       6,307       906  

Other income (loss):

             

Interest income

    1,490       1,687       2,096       301       4,451       6,060       870  

Interest expense

    (574     (788     (674     (97     (1,883     (2,960     (425

Foreign exchange income (loss), net

    (50     29       35       5       (122     (33     (5

Loss from equity method investment

    (390     (729     (94     (14     (79     (1,254     (180

Other income (loss), net

    (536     (9,683     (664     (94     9,428       (8,460     (1,215
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (loss), net

    (60     (9,484     699       101       11,795       (6,647     (955
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    1,052       (7,129     5,354       770       27,325       (340     (49

Income tax expense

    484       934       304       44       4,743       1,948       279  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    568       (8,063     5,050       726       22,582       (2,288     (328
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: net income (loss) attributable to noncontrolling interests

    (1,513     (1,690     (1,295     (185     (4,991     (4,345     (624
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Baidu

    2,081       (6,373     6,345       911       27,573       2,057       296  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

             

-Basic

    5.96       (18.37     18.28       2.63       78.64       5.68       0.82  

-Diluted

    5.93       (18.37     18.25       2.62       78.03       5.60       0.80  

Earnings (loss) per share for Class A and Class B ordinary shares:

             

-Basic

    59.55       (183.74     182.82       26.26       786.36       56.84       8.16  

-Diluted

    59.32       (183.74     182.53       26.22       780.27       55.96       8.04  

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

             

Basic

    34,909,960       34,793,154       34,586,035       34,586,035       34,898,589       34,834,497       34,834,497  

Diluted

    35,044,338       34,793,154       34,613,834       34,613,834       35,171,043       34,884,854       34,884,854  

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

    

Cost of revenues

    71       70       92       13       224       327       47  

Selling, general and administrative

    587       336       413       60       1,725       1,768       254  

Research and development

    884       810       1,073       154       2,727       3,531       507  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation expenses

    1,542       1,216       1,578       227       4,676       5,626       808  

 

(2)

All translations from RMB to U.S. dollars are made at a rate of RMB 6.9618 to US$1.00, the exchange rate in effect as of December 31, 2019 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System.

 

12


Baidu, Inc.

Selected Information

(In millions except for per ADS information, unaudited)

 

    Three months ended
December 31, 2018
(RMB)
    Three months ended
September 30, 2019 (RMB)
    Three months ended
December 31, 2019
(RMB)
    Three months ended
December 31, 2019
(USD)
 
    Baidu
Core
    iQIYI     Elim &
adj(2)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(2)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(2)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(2)
    Baidu,
Inc.
 

Total revenues

    20,520       7,028       (353     27,195       21,010       7,397       (327     28,080       21,711       7,497       (324     28,884       3,119       1,077       (47     4,149  

YOY

                    6     7       6        

QOQ

                    3     1       3        

Operating costs and expenses:

                               

Cost of revenues (1)

    7,374       8,523       (286     15,611       8,502       8,176       (300     16,378       8,215       7,914       (612     15,517       1,180       1,137       (88     2,229  

Selling, general and administrative (1)

    4,790       1,222       (69     5,943       3,320       1,350       (13     4,657       2,575       1,400       (19     3,956       370       201       (3     568  

Research and development (1)

    3,923       608       (2     4,529       3,997       703       (10     4,690       4,051       711       (6     4,756       582       102       (1     683  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

    16,087       10,353       (357     26,083       15,819       10,229       (323     25,725       14,841       10,025       (637     24,229       2,132       1,440       (92     3,480  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

YOY

                    (8 %)      (3 %)        (7 %)         

Cost of revenues

                    11     (7 %)        (1 %)         

Selling, general and administrative

                    (46 %)      15       (33 %)         

Research and development

                    3     17       5        

Operating income (loss)

    4,433       (3,325     4       1,112       5,191       (2,832     (4     2,355       6,870       (2,528     313       4,655       987       (363     45       669  

YOY

                    55     (24 %)        319        

QOQ

                    32     (11 %)        98        

Operating margin

    22     (47 %)        4     25     (38 %)        8     32     (34 %)        16        

Add: total other income (loss),net

    (30     (35     5       (60     (8,657     (827       (9,484     624       75       —         699       90       11       —         101  

Less: income tax expense

    405       79       —         484       918       16         934       281       23       —         304       41       3       —         44  

Less: net income (loss) attributable to NCI

    (52     38       (1,499 )(3)      (1,513     (97     13       (1,606 )(3)      (1,690     (220     18       (1,093 )(3)      (1,295     (32     3       (156 )(3)      (185
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income(loss) attributable to Baidu

    4,050       (3,477     1,508       2,081       (4,287     (3,688     1,602       (6,373     7,433       (2,494     1,406       6,345       1,068       (358     201       911  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

YOY

                    84     (28 %)        205        

QOQ

                    —         (32 %)        —            

Net margin

    20     (49 %)        8     (20 %)      (50 %)        (23 %)      34     (33 %)        22        

Other Key Metrics:

                               

Non-GAAP operating income (loss)

    5,788       (3,045       2,747       6,224       (2,529       3,691       8,492       (2,052       6,753       1,220       (295       970  

YOY

                    47     (33 %)        146        

QOQ

                    36     (19 %)        83        

Non-GAAP operating margin

    28     (43 %)        10     30     (34 %)        13     39     (27 %)        23        

Non-GAAP net income (loss) attributable to Baidu

    6,513       (3,196       4,703       6,310       (3,394       4,387       9,950       (1,901       9,193       1,429       (273       1,320  

YOY

                    53     (41 %)        95        

QOQ

                    58     (44 %)        110        

Non-GAAP net margin

    32     (45 %)        17     30     (46 %)        16     46     (25 %)        32        

Adjusted EBITDA

    6,870       (2,952       3,922       7,525       (2,405       5,116       9,788       (1,926       8,175       1,406       (277       1,174  

Adjusted EBITDA margin

    33     (42 %)        14     36     (33 %)        18     45     (26 %)        28        

(1)   Includes share-based compensation as follows:

    

Cost of revenues

    43       28         71       25       45         70       43       49         92       6       7         13  

Selling, general and administrative

    435       152         587       207       129         336       220       193         413       32       28         60  

Research and development

    843       41         884       749       61         810       1,001       72         1,073       144       10         154  
 

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total share-based compensation

    1,321       221         1,542       981       235         1,216       1,264       314         1,578       182       45         227  

 

(2)

Relates to intersegment eliminations and adjustments

(3)

Relates to the net loss attributable to iQIYI noncontrolling interests

 

13


Baidu, Inc.

Selected Information

(In millions except for per ADS information, unaudited)

 

    Twelve months ended
December 31, 2018 (RMB)
    Twelve months ended
December 31, 2019 (RMB)
    Twelve months ended
December 31, 2019 (USD)
 
    Baidu
Core
    iQIYI     Elim &
adj(3)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(3)
    Baidu,
Inc.
    Baidu
Core
    iQIYI     Elim &
adj(3)
    Baidu,
Inc.
 

Total revenues

    78,271       24,989       (983     102,277       79,711       28,994       (1,292     107,413       11,450       4,165       (186     15,429  

YOY

            2     16       5        

YOY excluding revenue from divested businesses(1)

            2         5        

Operating costs and expenses:

                       

Cost of revenues (2)

    25,370       27,133       (759     51,744       34,019       30,348       (1,517     62,850       4,887       4,359       (218     9,028  

Selling, general and administrative (2)

    15,310       4,168       (247     19,231       14,733       5,237       (60     19,910       2,116       753       (9     2,860  

Research and development (2)

    13,783       1,994       (5     15,772       15,698       2,667       (19     18,346       2,255       383       (3     2,635  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

    54,463       33,295       (1,011     86,747       64,450       38,252       (1,596     101,106       9,258       5,495       (230     14,523  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

YOY

            18     15       17        

Cost of revenues

            34     12       21        

Selling, general and administrative

            (4 %)      26       4        

Research and development

            14     34       16        

Operating income (loss)

    23,808       (8,306     28       15,530       15,261       (9,258     304       6,307       2,192       (1,330     44       906  

YOY

            (36 %)      11       (59 %)         

Operating margin

    30     (33 %)        15     19     (32 %)        6        

Add: total other income (loss),net

    13,169       (676     (698     11,795       (5,680     (967     —         (6,647     (816     (139     —         (955

Less: income tax expense

    4,664       79       —         4,743       1,896       52       —         1,948       272       7       —         279  

Less: net income (loss) attributable to NCI

    (1,292     49       (3,748 )(4)      (4,991     105       46       (4,496 )(4)      (4,345     15       7       (646 )(4)      (624
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income(loss) attributable to Baidu

    33,605       (9,110     3,078       27,573       7,580       (10,323     4,800       2,057       1,089       (1,483     690       296  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

YOY

            (77 %)      13       (93 %)         

Net margin

    43     (36 %)        27     10     (36 %)        2        

Other Key Metrics:

                       

Non-GAAP operating income (loss)

    28,020       (7,623       20,425       20,311       (7,815       12,800       2,917       (1,122       1,839  

YOY

            (28 %)      3       (37 %)         

Non-GAAP operating margin

    36     (31 %)        20     25     (27 %)        12        

Non-GAAP net income (loss) attributable to Baidu

    29,059       (8,599       23,976       22,824       (8,765       18,182       3,278       (1,258       2,612  

YOY

            (21 %)      2       (24 %)         

Non-GAAP net margin

    37     (34 %)        23     29     (30 %)        17        

Adjusted EBITDA

    31,438       (7,311       24,155       25,451       (7,339       18,416       3,655       (1,054       2,646  

Adjusted EBITDA margin

    40     (29 %)        24     32     (25 %)        17        

(1)   Excluding revenue from divested businesses, which was approximately RMB3.1 billion for the twelve months ended December 31, 2018.

(2)   Includes share-based compensation as follows:

    

    

Cost of revenues

    141       83         224       156       171         327       22       25         47  

Selling, general and administrative

    1,356       369         1,725       1,092       676         1,768       157       97         254  

Research and development

    2,623       104         2,727       3,293       238         3,531       473       34         507  
 

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total share-based compensation

    4,120       556         4,676       4,541       1,085         5,626       652       156         808  

 

(3)

Relates to intersegment eliminations and adjustments

(4)

Relates to the net loss attributable to iQIYI noncontrolling interests

 

14


Baidu, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions, unaudited)

 

    Three months ended
December 31, 2018 (RMB)
    Three months ended
September 30, 2019 (RMB)
    Three months ended
December 31, 2019 (RMB)
    Three months ended
December 31, 2019 (USD)
 
    Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
    Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
    Baidu
excl.
iQIYI
    iQIYI     Baidu, Inc.     Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
 

Net cash provided by operating activities

    8,409       528       8,937       8,508       293       8,801       8,688       2,343       11,031       1,248       337       1,585  

Net cash provided by (used in) investing activities

    (5,146     (6,412     (11,558     (11,960     (922     (12,882     10,194       (2,089     8,105       1,464       (300     1,164  

Net cash provided by (used in) financing activities

    10,084       6,923       17,007       (1,903     (160     (2,063     (1,181     (259     (1,440     (170     (37     (207

Effect of exchange rate changes on cash, cash equivalents and restricted cash

    (239     (110     (349     122       258       380       (254     (178     (432     (36     (26     (62
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

    13,108       929       14,037       (5,233     (531     (5,764     17,447       (183     17,264       2,506       (26     2,480  

Cash, cash equivalents and restricted cash

                       

At beginning of period

    9,959       5,831       15,790       15,315       7,624       22,939       10,082       7,093       17,175       1,448       1,019       2,467  

At end of period

    23,067       6,760       29,827       10,082       7,093       17,175       27,529       6,910       34,439       3,954       993       4,947  

Net cash provided operating activities

    8,409       528       8,937       8,508       293       8,801       8,688       2,343       11,031       1,248       337       1,585  

Less: Capital expenditures

    (2,900     (178     (3,078     (1,031     (181     (1,212     (652     (232     (884     (94     (33     (127
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

    5,509       350       5,859       7,477       112       7,589       8,036       2,111       10,147       1,154       304       1,458  
    Twelve months ended
December 31, 2018 (RMB)
    Twelve months ended
December 31, 2019 (RMB)
    Twelve months ended
December 31, 2019 (USD)
       
    Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
    Baidu
excl.
iQIYI
    iQIYI     Baidu,
Inc.
    Baidu
excl.
iQIYI
    iQIYI     Baidu, Inc.                    

Net cash provided by operating activities

    33,083       2,884       35,967       24,552       3,906       28,458       3,527       561       4,088        

Net cash used in investing activities

    (13,511     (20,949     (34,460     (8,225     (11,749     (19,974     (1,181     (1,688     (2,869      

Net cash provided by (used in) financing activities

    (8,393     23,475       15,082       (11,753     7,880       (3,873     (1,688     1,132       (556      

Effect of exchange rate changes on cash, cash equivalents and restricted cash

    1,285       617       1,902       (112     113       1       (16     16       —          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Net increase in cash, cash equivalents and restricted cash

    12,464       6,027       18,491       4,462       150       4,612       642       21       663        

Cash, cash equivalents and restricted cash

                       

At beginning of period

    10,603       733       11,336       23,067       6,760       29,827       3,312       972       4,284        

At end of period

    23,067       6,760       29,827       27,529       6,910       34,439       3,954       993       4,947        

Net cash provided operating activities

    33,083       2,884       35,967       24,552       3,906       28,458       3,527       561       4,088        

Less: Capital expenditures

    (8,160     (612     (8,772     (5,688     (740     (6,428     (817     (106     (923      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Free cash flow

    24,923       2,272       27,195       18,864       3,166       22,030       2,710       455       3,165        

Note: Baidu excl. iQIYI represents Baidu, Inc. minus iQIYI’s consolidated cash flows.

 

15


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  
    December 31, 2018 (RMB)     September 30, 2019 (RMB)     December 31, 2019 (RMB)     December 31, 2019 (USD)  
    Baidu
Core
    iQIYI     Baidu,
Inc.
    Baidu
Core
    iQIYI     Baidu,
Inc.
    Baidu
Core
    iQIYI     Baidu,
Inc.
    Baidu
Core
    iQIYI     Baidu,
Inc.
 

Operating income (loss)

    4,433       (3,325     1,112       5,191       (2,832     2,355       6,870       (2,528     4,655       987       (363     669  

Add: Share-based compensation expenses

    1,321       221       1,542       981       235       1,216       1,264       314       1,578       182       45       227  

Add: Amortization and impairment of intangible assets(1)

    34       59       93       52       68       120       358       162       520       51       23       74  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income (loss)

    5,788       (3,045     2,747       6,224       (2,529     3,691       8,492       (2,052     6,753       1,220       (295     970  

Add: Depreciation of fixed assets

    1,082       93       1,175       1,301       124       1,425       1,296       126       1,422       186       18       204  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

    6,870       (2,952     3,922       7,525       (2,405     5,116       9,788       (1,926     8,175       1,406       (277     1,174  

Net income (loss) attributable to Baidu

    4,050       (3,477     2,081       (4,287     (3,688     (6,373     7,433       (2,494     6,345       1,068       (358     911  

Add: Share-based compensation expenses

    1,319       221       1,444       974       235       1,106       1,257       314       1,433       181       45       206  

Add: Amortization and impairment of intangible assets(1)(4)

    19       47       46       21       50       47       15       131       88       2       19       13  

Add: Disposal gain(4)

    282       —         282       —         —         —         445       —         445       64       —         64  

Add: Impairment of long-term investments(4)

    185       —         185       8,023       —         8,023       465       141       544       66       20       78  

Add: Fair value change of long-term investments(4)

    16       13       23       745       1       745       (60     (1     (61     (9     —         (9

Add: Reconciling items on equity method investments(4)

    642       —         642       834       8       839       395       8       399       57       1       57  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income (loss) attributable to Baidu

    6,513       (3,196     4,703       6,310       (3,394     4,387       9,950       (1,901     9,193       1,429       (273     1,320  

Diluted earnings (loss) per ADS

        5.93           (18.37         18.25           2.62  

Add: Accretion of the redeemable noncontrolling interests

        0.01           0.06           0.06           0.01  

Add: Non-GAAP adjustments to earnings per ADS

        7.48           30.92           8.23           1.18  
     

 

 

       

 

 

       

 

 

       

 

 

 

Non-GAAP diluted earnings per ADS

        13.42           12.61           26.54           3.81  

(1)   This represents amortization of intangible assets resulting from business combinations.

(2)   This represents Baidu’s share of equity method investments for other non-GAAP reconciling items, amortization 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)   Non-GAAP measures are adjusted retroactively to exclude: 1) amortization of intangible assets resulting from business combinations ; and 2) share-based compensation and amortization of intangible assets not on their books, resulting from equity method pick-up; and 3) fair value change of the investees’ long-term investments, net of tax, as follows:

    

(4)   Net of related tax impact

    

Non-GAAP operating income, previously reported

    5,754       (3,104     2,654       6,172       (2,597     3,571       8,134       (2,214     6,233       1,169       (318     896  

Add: Amortization and impairment of intangible assets(1)

    34       59       93       52       68       120       358       162       520       51       23       74  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income, revised

    5,788       (3,045     2,747       6,224       (2,529     3,691       8,492       (2,052     6,753       1,220       (295     970  

Non-GAAP net income attributable to Baidu, previously reported

    6,458       (3,243     4,621       6,052       (3,452     4,098       9,847       (2,040     9,013       1,414       (293     1,294  

Add: Adjustments relating to equity-method investments, net of tax

    36       —         36       237       8       242       88       8       92       13       1       13  

Add: Amortization and impairment of intangible assets(1), net of tax

    19       47       46       21       50       47       15       131       88       2       19       13  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income attributable to Baidu, revised

    6,513       (3,196     4,703       6,310       (3,394     4,387       9,950       (1,901     9,193       1,429       (273     1,320  

Adjusted EBITDA, previously reported

    6,887       (2,877     3,970       7,542       (2,345     5,153       9,803       (1,549     8,208       1,408       (223     1,179  

Less: Adjustments to amortization/impairment of intangible assets

    (17     (75     (48     (17     (60     (37     (15     (377     (33     (2     (54     (5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA, revised

    6,870       (2,952     3,922       7,525       (2,405     5,116       9,788       (1,926     8,175       1,406       (277     1,174  

 

16


Baidu, Inc.

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

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

 

    Twelve months ended     Twelve months ended     Twelve months ended  
    December 31, 2018 (RMB)     December 31, 2019 (RMB)     December 31, 2019 (USD)  
    Baidu
Core
    iQIYI     Baidu,
Inc.
    Baidu
Core
    iQIYI     Baidu,
Inc.
    Baidu
Core
    iQIYI     Baidu,
Inc.
 

Operating income (loss)

    23,808       (8,306     15,530       15,261       (9,258     6,307       2,192       (1,330     906  

Add: Share-based compensation expenses

    4,120       556       4,676       4,541       1,085       5,626       652       156       808  

Add: Amortization and impairment of intangible assets(1)

    92       127       219       509       358       867       73       52       125  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income (loss)

    28,020       (7,623     20,425       20,311       (7,815     12,800       2,917       (1,122     1,839  

Add: Depreciation of fixed assets

    3,418       312       3,730       5,140       476       5,616       738       68       807  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

    31,438       (7,311     24,155       25,451       (7,339     18,416       3,655       (1,054     2,646  

Net income (loss) attributable to Baidu

    33,605       (9,110     27,573       7,580       (10,323     2,057       1,089       (1,483     296  

Add: Share-based compensation expenses

    4,118       556       4,454       4,515       1,085       5,126       649       156       736  

Add: Amortization and impairment of intangible assets(1)(4)

    59       104       123       71       282       226       10       41       32  

Add: Disposal gain(4)

    (6,388     —         (5,684     233       1       234       33       —         34  

Add: Impairment of long-term investments(4)

    566       —         566       8,929       164       9,031       1,283       24       1,298  

Add: Fair value change of long-term investments(4)

    (4,124     (149     (4,279     (658     (1     (660     (95     —         (95

Add: Reconciling items on equity method investments(4)

    1,223       —         1,223       2,154       27       2,168       309       4       311  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income (loss) attributable to Baidu

    29,059       (8,599     23,976       22,824       (8,765     18,182       3,278       (1,258     2,612  

Diluted earnings per ADS

        78.03           5.60           0.80  

Add: Accretion of the redeemable noncontrolling interests

        0.37           0.22           0.03  

Add: Non-GAAP adjustments to earnings per ADS

        (10.23         46.22           6.65  
     

 

 

       

 

 

       

 

 

 

Non-GAAP diluted earnings per ADS

        68.17           52.04           7.48  

(1)   This represents amortization of intangible assets resulting from business combinations.

(2)   This represents Baidu’s share of equity method investments for other non-GAAP reconciling items, amortization 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)   Non-GAAP measures are adjusted retroactively to exclude: 1) amortization of intangible assets resulting from business combinations ; and 2) share-based compensation and amortization of intangible assets not on their books, resulting from equity method pick-up; and 3) fair value change of the investees’ long-term investments, net of tax, as follows:

    

(4)   Net of related tax impact

    

Non-GAAP operating income, previously reported

    27,928       (7,750     20,206       19,802       (8,173     11,933       2,844       (1,174     1,714  

Add: Amortization and impairment of intangible assets(1)

    92       127       219       509       358       867       73       52       125  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income, revised

    28,020       (7,623     20,425       20,311       (7,815     12,800       2,917       (1,122     1,839  

Non-GAAP net income attributable to Baidu, previously reported

    28,471       (8,703     23,324       21,841       (9,074     17,030       3,137       (1,303     2,446  

Add: Adjustments relating to equity-method investments, net of tax

    529       —         529       912       27       926       131       4       134  

Add: Amortization and impairment of intangible assets(1), net of tax

    59       104       123       71       282       226       10       41       32  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income attributable to Baidu, revised

    29,059       (8,599     23,976       22,824       (8,765     18,182       3,278       (1,258     2,612  

Adjusted EBITDA, previously reported

    31,503       (7,091     24,315       25,512       (6,768     18,569       3,664       (972     2,668  

Less: Adjustments to amortization/impairment of intangible assets

    (65     (220     (160     (61     (571     (153     (9     (82     (22
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA, revised

    31,438       (7,311     24,155       25,451       (7,339     18,416       3,655       (1,054     2,646  

 

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