BEIJING, July 27, 2015 /PRNewswire/ -- Baidu, Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the second quarter ended June 30, 2015[1].

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"With Baidu's cornerstone search business delivering solid growth and enjoying ample runway ahead, and with powerful mobile gateways to leverage, we are ideally positioned to capture the O2O e-commerce opportunity and build the 'Next Baidu'," said Robin Li, chairman and CEO of Baidu. "As we continue to connect people with services and enable closed loop transactions, we are creating a transactional business model as Baidu grows and evolves in the age of mobile."

"We delivered solid financial results in the second quarter of 2015, with our core search business exhibiting strong growth and attractive profitability," said Jennifer Li, CFO of Baidu. "With the solid base of our core search business, coupled with upward momentum of our O2O e-commerce initiatives, we continue to invest decisively in the 'Next Baidu'. We are delighted by the progress we have achieved and are confident that these investments will generate long term shareholder value. Going forward, we will report the financial impact of the new initiatives, namely O2O & Other[2] and iQiyi."

Second Quarter 2015 Operational Highlights


    --  Mobile search monthly active users (MAUs) were 629 million for the month
        of June 2015, an increase of 24% year-over-year
    --  Mobile maps MAUs were 304 million for the month of June 2015, an
        increase of 48% year-over-year
    --  Gross merchandise value[3] (GMV) for O2O services totaled RMB40.5
        billion ($6.5 billion) for the second quarter of 2015, an increase of
        109% year-over-year

Second Quarter 2015 Financial Highlights


    --  Total revenues in the second quarter of 2015 were RMB16.575 billion
        ($2.673 billion), a 38.3% increase from the corresponding period in
        2014. Mobile revenue represented 50% of total revenues for the second
        quarter of 2015, flat from the first quarter of 2015.
    --  Operating profit in the second quarter of 2015 was RMB3.470 billion
        ($559.6 million), a 2.5% decrease from the corresponding period in 2014.
        O2O & Other reduced operating margins by 25.3 percentage points and
        iQiyi reduced operating margins by 5.1 percentage points.
    --  Net income attributable to Baidu in the second quarter of 2015 was
        RMB3.662 billion ($590.6 million), a 3.3% increase from the
        corresponding period in 2014. Diluted earnings attributable to Baidu per
        ADS for the second quarter of 2015 were RMB10.19 ($1.64); diluted
        earnings attributable to Baidu per ADS excluding share-based
        compensation expenses (non-GAAP) for the second quarter of 2015 were
        RMB11.19 ($1.81).

Second Quarter 2015 Results

Baidu reported total revenues of RMB16.575 billion ($2.673 billion) for the second quarter of 2015, representing a 38.3% increase from the corresponding period in 2014.

Online marketing revenues for the second quarter of 2015 were RMB16.227 billion ($2.617 billion), representing a 37.1% increase from the corresponding period in 2014. Baidu had about 590,000 active online marketing customers[4] in the second quarter of 2015, representing a 20.9% increase from the corresponding period in 2014 and a 12.6% increase from the first quarter of 2015. Revenue per online marketing customer for the second quarter was approximately RMB27,400 ($4,419), a 13.2% increase from the corresponding period in 2014 and a 15.1% increase compared to the first quarter of 2015.

Traffic acquisition cost as a component of cost of revenues was RMB2.112 billion ($340.6 million), representing 12.7% of total revenues, flat from the corresponding period in 2014 and compared to 13.5% in the first quarter of 2015.

Bandwidth costs as a component of cost of revenues were RMB896.2 million ($144.5 million), representing 5.4% of total revenues, compared to 5.8% in the corresponding period in 2014. Depreciation costs as a component of cost of revenues were RMB616.1 million ($99.4 million), representing 3.7% of total revenues, compared to 3.9% in the corresponding period in 2014.

Content costs as a component of cost of revenues were RMB840.2 million ($135.5 million), representing 5.1% of total revenues, compared to 3.0% in the corresponding period in 2014 and 4.8% in the previous quarter. The year-over-year increase was mainly due to iQiyi's increased content costs.

Selling, general and administrative expenses were RMB3.890 billion ($627.4 million), representing an increase of 81.0% from the corresponding period in 2014, primarily due to an increase in promotional spending for O2O.

Research and development expenses were RMB2.713 billion ($437.5 million), a 56.2% increase from the corresponding period in 2014. The increase was primarily due to an increase in the number of research and development personnel.

Share-based compensation expenses, which were allocated to related operating costs and expense line items, were RMB354.7 million ($57.2 million) in the second quarter of 2015, compared to RMB220.6 million in the corresponding period in 2014 and RMB291.1 million in the first quarter of 2015. The increase from the corresponding period was a result of increased share grants to employees.

Operating profit was RMB3.470 billion ($559.6 million), representing a 2.5% decrease from the corresponding period in 2014. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB3.824 billion ($616.8 million), a 1.2% increase from the corresponding period in 2014.

Income tax expense was RMB763.0 million ($123.1 million), compared to an income tax expense of RMB605.6 million in the corresponding period in 2014. The effective tax rate for the second quarter of 2015 was 19.0% compared to 15.4% for the corresponding period in 2014 and 20.7% in the first quarter of 2015.

Net income attributable to Baidu was RMB3.662 billion ($590.6 million), representing a 3.3% increase from the corresponding period in 2014. Basic and diluted earnings per ADS for the second quarter of 2015 amounted to RMB10.22 ($1.65) and RMB10.19 ($1.64), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB4.017 billion ($647.9 million), a 6.6% increase from the corresponding period in 2014. Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2015 amounted to RMB11.23 ($1.81) and RMB11.19 ($1.81), respectively.

As of June 30, 2015, the Company had cash, cash equivalents and short-term investments of RMB74.959 billion ($12.090 billion). Net operating cash inflow for the second quarter of 2015 was RMB5.727 billion ($923.8 million). Capital expenditures for the second quarter of 2015 were RMB923.1 million ($148.9 million).

Adjusted EBITDA (non-GAAP), defined in this announcement as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, was RMB4.707 billion ($759.1 million) for the second quarter of 2015, representing a 4.7% increase from the corresponding period in 2014.

Outlook for Third Quarter 2015

Baidu currently expects to generate total revenues in an amount ranging from RMB18.170 billion ($2.931 billion) to RMB18.580 billion ($2.997 billion) for the third quarter of 2015, representing a 34.4% to 37.4% year-over-year increase. This forecast reflects Baidu's current and preliminary view, which is subject to change.

Conference Call Information

Baidu's management will hold an earnings conference call at 8:00 PM on July 27, 2015, U.S. Eastern Time (8:00 AM on July 28, 2015, 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 2030598139

    Hong Kong:                 +852 30186771


    Passcode for all regions:       79830113

A replay of the conference call may be accessed by phone at the following number until August 4, 2015:



    International:                                 +61 2 8199 0299


    Passcode:                                             79830113

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. As a technology-based media company, Baidu aims to provide the best way for people to find information. In addition to serving individual Internet search users, Baidu provides an effective platform for businesses to reach potential customers. Baidu's ADSs trade on the NASDAQ Global Select Market under the symbol "BIDU". Currently, ten ADSs represent one Class A ordinary share.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the outlook for the third quarter 2015 and quotations from management in this announcement, as well as Baidu's 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 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: our growth strategies; our future business development, including development of new products and services; our ability to attract and retain users and customers; competition in the Chinese and other Internet search markets; competition for online marketing customers; changes in our revenues and certain cost or expense items as a percentage of our 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 our 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.

About Non-GAAP Financial Measures

To supplement Baidu's consolidated financial results presented in accordance with GAAP, Baidu uses the following measures defined as non-GAAP financial measures by the SEC: adjusted EBITDA, operating profit excluding share-based compensation expenses, net income excluding share-based compensation expenses, and basic and diluted earnings per ADS excluding share-based compensation expenses. 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. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" and "Reconciliation from net cash provided by operating activities to adjusted EBITDA" set forth at the end of this release.

Baidu believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding certain expenses, particularly share-based compensation expenses, that may not be indicative of its operating performance or financial condition from a cash perspective. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our 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. Baidu has computed its non-GAAP financial measures using the same consistent method from quarter to quarter since April 1, 2006. We believe 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 share-based compensation charge that has been and will continue to be for the foreseeable future a significant recurring expense in our results of operations. A limitation of using non-GAAP adjusted EBITDA is that it does not include all items that impact our net income for the period. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to the non-GAAP financial measures.

For investor and media inquiries, please contact:

Sharon Ng
Baidu, Inc.
Tel: +86-10-5992-4958
Email: ir@baidu.com


    [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
                    RMB6.2000 to US$1.00, the effective
                    noon buying rate as of June 30,
                    2015 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]             O2O (online to offline) & Other
                    includes Qunar, Baidu Nuomi, Baidu
                    Takeout Delivery, Baidu Maps, Baidu
                    Connect, Baidu Wallet and other
                    products.

    [3]             Gross merchandise value (GMV) for
                    O2O services is defined as GMV
                    generated by Qunar, Baidu Nuomi and
                    Baidu Takeout Delivery. GMV
                    generated by Qunar is defined as
                    the value of confirmed orders of
                    products and services, excluding
                    cancellations. GMV generated by
                    Baidu Nuomi and Baidu Takeout
                    Delivery is defined as the value of
                    confirmed orders of products and
                    services, regardless of whether the
                    service has been consumed or
                    delivered.

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


    Baidu, Inc.

    Condensed Consolidated Statements of Income

                                                                                Three Months Ended
                                                                                ------------------

                                                                                     June 30,              June 30,             March 31,

    (In RMB thousands except for share, per share (or ADS) information)                              2015                  2014                    2015
    ------------------------------------------------------------------                               ----                  ----                    ----

                                                                                    Unaudited             Unaudited             Unaudited

     Revenues:

     Online marketing services                                                                 16,227,496            11,836,858              12,518,757

     Other services                                                                               347,742               148,924                 205,859

     Total revenues                                                                            16,575,238            11,985,782              12,724,616
                                                                                               ----------            ----------              ----------


     Operating costs and expenses:

     Cost of revenues (note 1, 2)                                                             (6,503,020)          (4,541,422)            (5,326,103)

     Selling, general and administrative (note 2)                                             (3,889,844)          (2,148,874)            (2,956,867)

     Research and development (note 2)                                                        (2,712,681)          (1,737,216)            (2,286,333)

     Total operating costs and expenses                                                      (13,105,545)          (8,427,512)           (10,569,303)
                                                                                              -----------            ----------             -----------


     Operating profit                                                                           3,469,693             3,558,270               2,155,313
                                                                                                ---------             ---------               ---------


     Other income:

     Interest income                                                                              612,523               463,802                 561,213

     Interest expense                                                                           (213,522)            (146,045)              (199,128)

     Foreign exchange income, net                                                                   5,396                    81                   8,992

     Loss from equity method investments                                                          (2,417)              (5,501)                (7,979)

     Other income, net                                                                            142,382                66,888                  90,875

     Total other income                                                                           544,362               379,225                 453,973
                                                                                                  -------               -------                 -------


     Income before income taxes                                                                 4,014,055             3,937,495               2,609,286
                                                                                                ---------             ---------               ---------


     Income taxes                                                                               (762,951)            (605,614)              (541,000)


     Net income                                                                                 3,251,104             3,331,881               2,068,286
                                                                                                =========             =========               =========

     Less: net loss attributable to noncontrolling interests                                    (410,909)            (214,815)              (380,994)

     Net income attributable to Baidu, Inc.                                                     3,662,013             3,546,696               2,449,280
                                                                                                =========             =========               =========



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

    Net income attributable to Baidu, Inc.-Basic                                                   102.23                101.19                   67.86

    Net income attributable to Baidu, Inc.-Diluted                                                 101.86                100.91                   67.57


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

    Net income attributable to Baidu, Inc.-Basic                                                    10.22                 10.12                    6.79

    Net income attributable to Baidu, Inc.-Diluted                                                  10.19                 10.09                    6.76


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

    Basic                                                                                      35,141,734            35,050,662              35,112,842

    Diluted                                                                                    35,268,366            35,148,579              35,267,371


     (1) Cost of revenues are detailed as follows:

     Sales tax and surcharges                                                                 (1,175,617)            (872,086)              (948,209)

     Traffic acquisition costs                                                                (2,111,734)          (1,517,128)            (1,721,629)

     Bandwidth costs                                                                            (896,156)            (700,473)              (849,628)

     Depreciation costs                                                                         (616,072)            (461,927)              (582,437)

     Operational costs                                                                          (850,503)            (627,052)              (607,068)

     Content costs                                                                              (840,223)            (354,294)              (608,420)

     Share-based compensation expenses                                                           (12,715)              (8,462)                (8,712)

     Total cost of revenues                                                                   (6,503,020)          (4,541,422)            (5,326,103)
                                                                                               ==========            ==========              ==========


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

     Cost of revenues                                                                            (12,715)              (8,462)                (8,712)

     Selling, general and administrative                                                        (130,418)             (97,030)              (117,855)

     Research and development                                                                   (211,592)            (115,060)              (164,509)

     Total share-based compensation expenses                                                    (354,725)            (220,552)              (291,076)
                                                                                                 ========              ========                ========


    Baidu, Inc.

    Condensed Consolidated Balance Sheets


                                          June 30             December 31

    (In RMB thousands except
     for number of shares and
     per share data)                                     2015                   2014
    -------------------------                            ----                   ----

                                                    Unaudited               Audited


    ASSETS

        Current assets:

     Cash and cash equivalents                     21,296,827             13,852,725

     Restricted cash                                  646,400                413,010

     Short-term investments                        53,661,977             43,818,037

     Accounts receivable, net                       3,804,167              3,664,447

     Amounts due from related
      parties                                              50                     50

     Deferred tax assets, net                         985,126                684,952

     Other assets, current                          4,053,862              3,407,427

        Total current assets                       84,448,409             65,840,648
                                                   ----------             ----------


        Non-current assets:

     Fixed assets, net                              9,863,213              8,705,364

     Intangible assets, net                         3,633,241              3,574,359

     Goodwill                                      17,727,971             17,418,895

     Long-term investments, net                     5,582,952              2,878,922

     Deferred tax assets, net                         258,011                259,127

     Other assets, non-current                      1,197,292                893,952
                                                                            -------

        Total non-current assets                   38,262,680             33,730,619
                                                   ----------             ----------


    Total assets                                  122,711,089             99,571,267
                                                  ===========             ==========


    LIABILITIES AND EQUITY

       Current liabilities:

            Short-term loans                           49,650                 93,000

    Accounts payable and
     accrued liabilities                           16,057,112             12,964,893

    Customer advances and
     deposits                                       4,691,757              4,296,440

    Deferred revenue                                  313,442                164,809

    Deferred income                                   522,625                518,543

    Long-term loans, current
     portion                                        2,171,870              2,167,405

    Capital lease obligation                           48,768                 57,346

    Due to Related Parties,
     Current                                            1,521                  8,385

        Total current liabilities                  23,856,745             20,270,821
                                                   ----------             ----------


        Non-current liabilities:

    Deferred income                                    42,413                 39,626

    Long-term loans                                 1,861,890              1,860,000

    Notes payable                                  31,795,845             21,556,782

    Amounts due to related
     parties                                                -                     8

    Deferred tax liabilities                        1,107,326              1,143,821

    Capital lease obligation                           27,159                 50,079

    Other Non Current
     Liabilities                                      170,337                144,542

        Total non-current
         liabilities                               35,004,970             24,794,858
                                                   ----------             ----------


    Total liabilities                              58,861,715             45,065,679
                                                   ----------             ----------


    Redeemable noncontrolling
     interests                                      2,032,524              1,894,502


    Equity

    Class A Ordinary Shares,
     par value US$0.00005 per
     share,                                                12                     12

    825,000,000 shares
     authorized, and
     27,613,315 shares and

    27,657,626 shares issued
     and outstanding as at
     December

    31, 2014 and June 30, 2015

    Class B Ordinary Shares,
     par value US$0.00005 per
     share,                                                 3                      3

    35,400,000 shares
     authorized, and  7,492,921
     shares and

    7,492,921 shares issued and
     outstanding as at December
     31,

    2014 and June 30, 2015

    Additional paid-in capital                      5,497,383              3,633,919

    Retained earnings                              53,619,055             47,659,772

    Accumulated other
     comprehensive income
     (loss)                                         1,028,775                231,923
                                                                            -------

        Total Baidu, Inc.
         shareholders' equity                      60,145,228             51,525,629

        Noncontrolling interests                    1,671,622              1,085,457

    Total equity                                   61,816,850             52,611,086
                                                   ----------             ----------


    Total liabilities,
     redeemable noncontrolling
     interests, and equity                        122,711,089             99,571,267
                                                  ===========             ==========



    Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures (*) (in RMB thousands, unaudited)


                                                             Three months ended June 30, 2014   Three months ended March 31, 2015        Three months ended June 30, 2015
                                                             --------------------------------   ---------------------------------        --------------------------------

                                                                        GAAP Result                         Adjustment                           Non-GAAP Results                 GAAP Result           Adjustment         Non-GAAP Results           GAAP Result           Adjustment         Non-GAAP Results
                                                                        -----------                         ----------                           ----------------                 -----------           ----------         ----------------           -----------           ----------         ----------------

    Operating profit                                                                3,558,270                              220,552                                      3,778,822             2,155,313            291,076                  2,446,389             3,469,693            354,725                  3,824,418


                                                             Three months ended June 30, 2014   Three months ended March 31, 2015        Three months ended June 30, 2015
                                                             --------------------------------   ---------------------------------        --------------------------------

                                                                        GAAP Result                         Adjustment                           Non-GAAP Results                 GAAP Result           Adjustment         Non-GAAP Results           GAAP Result           Adjustment         Non-GAAP Results
                                                                        -----------                         ----------                           ----------------                 -----------           ----------         ----------------           -----------           ----------         ----------------

    Net income                                                                      3,546,696                              220,552                                      3,767,248             2,449,280            291,076                  2,740,356             3,662,013            354,725                  4,016,738
    attributable to Baidu,

    Inc.


    (*) The adjustment is only for share-based compensation.


    Reconciliation from net cash provided by operating activities to free cash flow (in RMB thousands, unaudited)



                                                                                                                  Three months ended             As a % of         Three months ended                 As a % of           Three months ended                 As a % of
                                                                                                                  ------------------             ---------         ------------------                 ---------           ------------------                 ---------

                                                                                                                    June 30, 2014              total revenues        March 31, 2015                 total revenues          June 30, 2015                  total revenues
                                                                                                                    -------------              --------------        --------------                 --------------          -------------                  --------------

    Net cash provided by operating activities                                                                                        4,127,577                 34%                       2,839,481                   22%                       5,727,404                     35%


    Less:  Capital expenditures                                                                                                      (863,717)                -7%                     (1,021,341)                  -8%                       (923,146)                    -6%


    Free cash flow                                                                                                                   3,263,860                 27%                       1,818,140                   14%                       4,804,258                     29%
                                                                                                                                     =========                 ===                        =========                   ===                        =========                     ===

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SOURCE Baidu, Inc.