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Baidu Announces Fourth Quarter and Fiscal Year 2005 Results
23 February 2006 Baidu.com, Inc. (Nasdaq: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2005(1).
Fourth Quarter and Fiscal Year 2005 Highlights
* Fourth quarter 2005 total revenues increased to RMB114.9 million ($14.2
million), representing a 29.2% increase from the previous quarter and a
167.7% increase from the corresponding period in 2004.
* Fiscal year 2005 total revenues increased to RMB319.2 million ($39.6
million), representing a 171.8% increase from 2004.
* Fourth quarter 2005 net income increased to RMB24.5 million ($3.0
million), representing a 188.7% increase from the previous quarter and a
285.6% increase from the corresponding period in 2004. Basic and diluted
earnings per share ("EPS") for the fourth quarter 2005 were RMB0.75
($0.09) and RMB0.71 ($0.09), respectively; basic and diluted EPS
excluding share-based compensation expenses (non-GAAP) for the fourth
quarter of 2005 were RMB1.06 ($0.13) and RMB1.01 ($0.13), respectively.
* Fiscal year 2005 net income increased to RMB47.6 million ($5.9 million),
representing a 296.5% increase from 2004. Basic and diluted EPS for 2005
were RMB2.40 ($0.30) and RMB1.49 ($0.18), respectively; basic and
diluted EPS excluding share-based compensation expenses (non-GAAP) for
2005 were RMB4.10 ($0.51) and RMB2.53 ($0.31), respectively.
* The number of active online marketing customers during the fourth
quarter grew to over 63,000, an increase of 18.6% from the previous
quarter.
"We are pleased that Baidu has achieved another quarter of strong revenue and earnings growth despite increased efforts by our peers in the Chinese language search market," said Robin Li, Baidu's Chairman and CEO. "The strength of the Baidu brand has helped us further enhance our market leadership position in 2005. We are proud to have won the confidence of millions of Chinese search users."
"Continued traffic growth, customer base expansion and the scalability inherent in our pay-for-performance business model contributed to strong financial results for the quarter," said Shawn Wang, Baidu's CFO.
"We achieved robust earnings growth while making significant investments in search technology, products, network capacity, sales and distribution, and most importantly, in people," continued Mr. Wang.
Baidu was named one of China's Top Ten Employers of the Year in 2005 by China Central Television.
"Going forward, we will continue to make aggressive yet focused investments in order to take advantage of the vast potential of China's search market," Mr. Wang concluded.
Fourth Quarter 2005 Results
Baidu reported total revenues of RMB114.9 million ($14.2 million) for the fourth quarter ended December 31, 2005, representing a 29.2% increase from the previous quarter and a 167.7% increase from the corresponding period in 2004. This result exceeded the top end of our previous revenue guidance of RMB106 million ($13.1 million) for the fourth quarter of 2005.
Online marketing revenues for the fourth quarter were RMB111.7 million ($13.8 million), representing a 30.1% increase sequentially and a 179.3% increase from fourth quarter 2004. The growth was driven by the increases in both the number of customers and revenue per customer. Baidu had more than 63,000 active online marketing customers as of December 31, 2005, representing an 18.6% increase from the previous quarter. Revenue per online marketing customer for the fourth quarter was RMB1,772.9 ($219.7), representing a 9.7% increase from the previous quarter.
Depreciation expenses of servers and other equipment as a component of cost of revenues were RMB9.1 million ($1.1 million). Bandwidth costs as a component of cost of revenues were RMB6.7 million ($0.8 million). Both figures increased slightly from the previous quarter. Capital expenditures for the fourth quarter of 2005 were RMB21.2 million ($2.6 million), compared to RMB38.9 million ($4.8 million) for the previous quarter. We substantially completed the expansion of a major data center by the end of the third quarter, and as a result, depreciation expenses and bandwidth cost in the forth quarter remained at similar levels as the previous quarter, and capital expenditures in fixed assets declined.
Traffic acquisition cost as a component of cost of revenues was RMB8.9 million ($1.1 million), representing 7.8% of total revenues, compared to 7.0% in the corresponding period in 2004.
Selling, general and administrative expenses for the fourth quarter were RMB42.4 million ($5.3 million), representing an increase of 40.5% from the previous quarter and 210.9% from the corresponding quarter in 2004, mainly due to expansion of direct sales force as well as incremental expenditures associated with being a public company.
Research and development expenses were RMB11.0 million ($1.4 million), remaining stable from the previous quarter and representing an increase of 197.0% from the corresponding period in 2004 primarily due to the expansion of R&D headcount.
Operating profit on a GAAP basis was RMB14.2 million ($1.8 million), representing a 105.6% increase from the previous quarter and a 137.1% increase from the corresponding period in 2004. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB24.7 million ($3.1 million) for the fourth quarter of 2005, a 39.2% increase sequentially and a 124.6% increase from the corresponding period in 2004.
Net income on a GAAP basis was RMB24.5 million ($3.0 million), representing a 188.7% increase from the previous quarter and a 285.6% increase from the corresponding period in 2004. Net income excluding share-based compensation expenses (non-GAAP) was RMB35.0 million ($4.3 million), an 81.3% increase from the previous quarter and a 208.3% increase from the corresponding period in 2004. Basic and diluted EPS for the fourth quarter of 2005 amounted to RMB0.75 ($0.09) and RMB0.71 ($0.09), respectively. Basic and diluted EPS excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2005 was RMB1.06 ($0.13) and RMB1.01 ($0.13), respectively.
Adjusted EBITDA (non-GAAP), which is defined in this announcement as earnings before interest, taxes, depreciation, amortization, other non- operating income and share-based compensation expenses, were RMB36.6 million ($4.5 million) for the fourth quarter of 2005, representing a 31.6% increase from the previous quarter and a 143.5% increase from the corresponding period in 2004.
Fiscal Year 2005 Results
Total revenues for 2005 were RMB319.2 million ($39.6 million), representing a 171.8% increase from the previous year.
Online marketing revenues were RMB307.4 million ($38.1 million), representing a 187.6% increase from the previous year.
Depreciation expenses of servers and other equipment as a component of cost of revenues were RMB25.3 million ($3.1 million), representing a 257.2% increase from the previous year. Bandwidth costs as a component of cost of revenues were RMB21.3 million ($2.6 million), representing a 151.0% increase from the previous year. Capital expenditures totaled RMB88.7 million ($11.0 million) for 2005, representing a 248.8% increase from the previous year. These increases were primarily attributable to expenses and costs associated with the major data center expansion to strengthen our ability to support increasing traffic.
Traffic acquisition costs in 2005 were RMB21.2 million ($2.6 million), representing 6.6% of total revenues compared to 9.3% in 2004, reflecting the faster growth of our organic traffic compared to that of union traffic for the whole year.
Selling, general and administrative expenses in 2005 were RMB112.0 million ($13.9 million), representing an increase of 187.1% from the previous year, mainly due to increased investment in branding, expansion of direct sales force, strengthening of our distributor network, and incremental expenditures associated with being a public company in the third and fourth quarters.
Research and development expenses totaled RMB34.4 million ($4.3 million) in 2005, representing a 201.7% increase from 2004 primarily due to expansion of R&D headcount.
Operating profit in 2005 on a GAAP basis was RMB35.8 million ($4.4 million), a 225.7% increase from 2004. Operating profit excluding share-based compensation expenses (non-GAAP) in 2005 was RMB69.4 million ($8.6 million), representing a 152.3% increase from 2004.
Net income in 2005 on a GAAP basis was RMB47.6 million ($5.9 million), representing a 296.5% increase from 2004. Net income excluding share-based compensation expenses (non-GAAP) in 2005 was RMB81.2 million ($10.1 million), reflecting a 184.7% increase from 2004. Basic and diluted EPS for 2005 amounted to RMB2.40 ($0.30) and RMB1.49 ($0.18), respectively. Basic and diluted EPS excluding share-based compensation expenses (non-GAAP) for 2005 was RMB4.10 ($0.51) and RMB2.53 ($0.31), respectively.
Adjusted EBITDA (non-GAAP) were RMB103.2 million ($12.8 million) in 2005, representing a 175.6% increase from 2004.
As of December 31, 2005, the Company had cash and cash equivalents of RMB900.6 million ($111.6 million). Full year net operating cash flow and capital expenditures were RMB162.4 million ($20.1 million) and RMB88.7 million ($11.0 million), respectively. We made a pre-payment of RMB77.2 million ($9.6 million) against non-current asset in 2005 in connection with our acquisition of the land use right for approximately 44,000 square meters of land intended for building a new headquarter in Beijing. The aggregate consideration for acquiring the land use right is approximately RMB92.4 million ($11.4 million).
As of December 31, 2005, Baidu had 1,307 full time employees, up from 349 at the end of 2004.
Outlook for First Quarter 2006
Baidu currently expects to generate total revenues in an amount ranging from RMB125 million ($15.5 million) to RMB130 million ($16.1 million) for the first quarter of 2006, representing a 174% to 185% increase from the corresponding period in 2005. 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 P.M. on February 21, 2006 U.S. Eastern Standard Time (9 AM on February 22, 2006 Beijing/Hong Kong time).
Dial-in details for the conference call are as follows:
US: 617 847 8705
UK: 44 207 365 8426
Hong Kong: 852 3002 1672
Passcode for all regions: 86834403
A replay of the conference call may be accessed by phone at the following number until 11 P.M. on February 24, 2006 U.S. Eastern Standard Time.
International: 617 801 6888
Passcode: 89696538
Additionally, a live and archived webcast of this conference call will be available at http://ir.baidu.com.
About Baidu
Baidu.com, 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, each of which represents one Class A ordinary share, currently trade on the NASDAQ Global Market under the symbol "BIDU".
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" and similar statements. Among other things, the outlook for first quarter 2006 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 on forms 20-F and 6-K, etc., 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, results of operations and financial condition; our ability to attract and retain users and customers; competition in the Chinese language Internet search market; 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 copyright and other intellectual property rights; the expected growth of the Chinese language Internet search market and the number of Internet and broadband users in China; and Chinese governmental policies relating to the Internet and Internet content providers. Further information regarding these and other risks is included in our registration statement on Form F-1, as amended, 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.
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 EPS 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 both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Baidu's liquidity and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Baidu's historical liquidity. Baidu computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
(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 based on the effective exchange rate as of December 31,
2005, which was RMB8.0702 to US$1.00.
Baidu.com, Inc.
Condensed Consolidated Statements of Income
For the Three Months Ended
(in RMB thousands except for December December September
share, per share information) 31, 31, 30,
2005 2004 2005
Unaudited Unaudited Unaudited
Revenues:
Online marketing services 111,739 40,003 85,884
Others 3,161 2,916 3,052
Total revenues 114,900 42,919 88,936
Operating costs and expenses:
Cost of revenues (note 1) (36,852) (14,600) (30,042)
Selling, general and administrative (42,378) (13,631) (30,166)
Research and development (10,994) (3,702) (11,004)
Share-based compensation (note 2) (10,453) (4,986) (10,807)
Total operating costs and expenses (100,677) (36,919) (82,019)
Operating profit 14,223 6,000 6,917
Interest income 8,162 740 3,721
Foreign exchange loss, net (109) - (550)
Other income, net 125 107 285
Total other income 8,178 847 3,456
Net income before tax 22,401 6,847 10,373
Taxation 2,148 (481) (1,869)
Net income 24,549 6,366 8,504
Earnings per share for Class A and
Class B ordinary shares:
Basic 0.75 0.56 0.35
Diluted 0.71 0.22 0.26
Weighted average aggregate number of
Class A and Class B ordinary shares
outstanding:
Basic 32,945,046 11,304,795 24,010,660
Diluted 34,584,637 29,233,297 32,904,458
Pro forma earnings per share for
Class A and Class B ordinary
shares(2):
Basic 0.75 0.23 0.27
Diluted 0.71 0.22 0.26
Pro forma weighted average aggregate
number of Class A and Class B
ordinary shares outstanding
on an as converted basis for Class A
and Class B ordinary shares:
Basic 32,945,046 27,953,672 31,249,302
Diluted 34,584,637 29,233,297 32,904,458
(1) Cost of revenues is detailed as
follows:
Business tax and surcharges (7,470) (2,476) (5,723)
Traffic acquisition costs (8,943) (3,025) (5,660)
Bandwidth costs (6,728) (4,169) (6,693)
Depreciation costs (9,117) (2,532) (7,711)
Operational costs excluding share
based compensation (4,594) (2,398) (4,255)
Total cost of revenues (36,852) (14,600) (30,042)
(2) Share-based compensation expenses
are allocated as follows:
Cost of revenues (170) (367) (343)
Selling, general and
administrative (6,981) (3,719) (6,776)
Research and development (3,302) (900) (3,688)
(10,453) (4,986) (10,807)
Twelve Months Ended
(in RMB thousands except for December December
share, per share information) 31, 31,
2005 2004
Unaudited Unaudited
Revenues:
Online marketing services 307,363 106,854
Others 11,852 10,597
Total revenues 319,215 117,451
Operating costs and expenses:
Cost of revenues (note 1) (103,427) (39,527)
Selling, general and administrative (111,967) (39,004)
Research and development (34,407) (11,406)
Share-based compensation (note 2) (33,571) (16,510)
Total operating costs and expenses (283,372) (106,447)
Operating profit 35,843 11,004
Interest income 13,580 1,135
Foreign exchange loss, net (659) -
Other income, net 752 347
Total other income 13,673 1,482
Net income before tax 49,516 12,486
Taxation (1,911) (481)
Net income 47,605 12,005
Earnings per share for Class A and
Class B ordinary shares:
Basic 2.40 1.09
Diluted 1.49 0.43
Weighted average aggregate number of
Class A and Class B ordinary shares
outstanding:
Basic 19,808,058 10,983,478
Diluted 32,043,888 28,124,327
Pro forma earnings per share for Class
A and Class B ordinary shares(2):
Basic 1.58 0.45
Diluted 1.49 0.43
Pro forma weighted average aggregate
number of Class A and Class B
ordinary shares outstanding
on an as converted basis for Class A
and Class B ordinary shares:
Basic 30,213,606 26,696,323
Diluted 32,043,888 28,124,327
(1) Cost of revenues is detailed as
follows:
Business tax and surcharges (20,770) (6,542)
Traffic acquisition costs (21,212) (10,901)
Bandwidth costs (21,274) (8,475)
Depreciation costs (25,259) (7,072)
Operational costs excluding share
based compensation (14,912) (6,537)
Total cost of revenues (103,427) (39,527)
(2) Share-based compensation expenses
are allocated as follows:
Cost of revenues (974) (1,665)
Selling, general and administrative (22,804) (11,720)
Research and development (9,793) (3,125)
(33,571) (16,510)
(2) Pro forma basic and diluted earnings per share are computed by
dividing net income by weighted average number of ordinary shares
outstanding for the period plus the number of ordinary shares
resulting from the assumed conversion of all the outstanding
redeemable convertible preferred share upon closing of the initial
public offering as if the conversion had occurred at the beginning of
the period, or when the preferred shares were issued, if later.
Baidu.com, Inc.
Condensed Consolidated Balance Sheets
December September December
31, 30, 31,
(in RMB thousands) 2005 2005 2004
Unaudited Unaudited Audited
ASSETS
Current assets:
Cash and cash equivalents 900,593 966,309 200,196
Accounts receivable, net 22,353 21,456 9,645
Prepaid expenses and other
current assets 10,957 8,797 2,421
Deferred tax asset, net 1,449 - -
Total current assets 935,352 996,562 212,262
Non-current assets:
Fixed assets, net 96,420 91,362 35,932
Prepayment for land use rights 77,200 - -
Intangible assets, net 13,303 13,169 12,953
Goodwill 9,287 8,741 -
Investments under cost method 2,018 2,023 -
Deferred tax asset, net 2,843 - -
Others - - 1,059
Total non-current assets 201,071 115,295 49,944
TOTAL ASSETS 1,136,423 1,111,857 262,206
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED SHARES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accrued expenses and other
liabilities 53,137 74,309 21,900
Customers' deposits 70,327 57,367 25,990
Deferred revenue 7,658 7,954 6,302
Deferred income 124 - -
Total current liabilities 131,246 139,630 54,192
Non-current liabilities:
Deferred income 124 - -
Total liabilities 131,370 139,630 54,192
Redeemable convertible preferred shares - - 211,352
Shareholders' equity (deficit)
Ordinary Shares, Par value US$0.00005
per share, 853,751,123 shares
authorized and 11,306,372 shares
issued and outstanding as at
December 31, 2004 - - 4
Class A Ordinary Shares, Par value
US$0.00005 per share, 825,000,000
shares authorized and 9,460,426
shares issued and outstanding as at
December 31, 2005 4 2 -
Class B Ordinary Shares, Par value
US$0.00005 per share, 35,400,000
shares authorized and 23,485,336
shares issued and outstanding as at
December 31, 2005 10 12 -
Additional paid-in capital 1,009,488 999,001 43,261
Foreign currency translation
adjustment (5,451) (3,241) -
Retained earnings / Accumulated
losses 1,002 (23,547) (46,603)
Total shareholders' equity (deficit) 1,005,053 972,227 (3,338)
TOTAL LIABILITIES, REDEEMABLE
CONVERTIBLE PREFERRED SHARES AND
SHAREHOLDERS' EQUITY (DEFICIT) 1,136,423 1,111,857 262,206
Reconciliations of non-GAAP
results of operations measures
to the nearest comparable GAAP
measures(*) (in RMB thousands,
unaudited)
Three months ended Three months ended
December 31, 2004 September 30, 2005
Non- Non-
GAAP Adjust- GAAP GAAP Adjust- GAAP
Result ment Results Result ment Results
Operating profit 6,000 4,986 10,986 6,917 10,807 17,724
Three months ended
December 31, 2005
Non-
GAAP Adjust- GAAP
Result ment Results
Operating profit 14,223 10,453 24,676
Twelve months ended Twelve months ended
December 31, 2005 December 31, 2004
Non- Non-
GAAP Adjust- GAAP GAAP Adjust- GAAP
Result ment Results Result ment Results
Operating Profit 35,843 33,571 69,414 11,004 16,510 27,514
Three months ended Three months ended
December 31, 2004 September 30, 2005
Non- Non-
GAAP Adjust- GAAP GAAP Adjust- GAAP
Result ment Results Result ment Results
Net income 6,366 4,986 11,352 8,504 10,807 19,311
Three months ended
December 31, 2005
Non-
GAAP Adjust- GAAP
Result ment Results
Net income 24,549 10,453 35,002
Twelve month ended 2005 Twelve month ended 2004
Non- Non-
GAAP Adjust- GAAP GAAP Adjust- GAAP
Result ment Results Result ment Results
Net income 47,605 33,571 81,176 12,005 16,510 28,515
(*) The adjustment is only for share-based compensation.
Reconciliation from net cash provided by operating activities to adjusted EBITDA(*) (in RMB thousands, unaudited):
Three Three Three
months months months
ended As a ended As a ended As a
December % of September % of December % of
31, 2004 revenues 30, 2005 revenues 31, 2005 revenues
Net cash provided
by operating
activities 21,376 50% 53,462 60% 62,045 54%
Changes in assets
and liabilities,
net of effects of
acquisitions (5,997) -14% (24,094) -27% (15,155) -13%
Provision for income
taxes 481 1% 1,869 2% (2,148) -2%
Interest income and
other, net (847) -2% (3,456) -4% (8,178) -7%
Adjusted EBITDA 15,013 35% 27,781 31% 36,564 32%
Twelve Twelve
months months
ended As a ended As a
December % of December % of
31, 2005 revenues 31, 2004 revenues
Net cash provided
by operating
activities 162,352 51% 56,509 48%
Changes in assets
and liabilities,
net of effects of
acquisitions (47,374) -15% (18,051) -15%
Provision for income
taxes 1,911 1% 481 0%
Interest income and
other, net (13,673) -4% (1,482) -1%
Adjusted EBITDA 103,216 33% 37,457 32%
(*) Definition of adjusted EBITDA: earnings before interest, taxes,
depreciation, amortization, other non-operating income and share-
based compensation expenses.
Source: prnewswire
All trademarks and copyrighted information contained herein are the property of their respective owners.
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