Thursday, October 27, 2011

Baidu Reports Another Record-Breaking Quarter! (Financial Charts) *EPS +15% QoQ & +79% YoY* BIDU

● Baidu Planet 

Baidu reported Q3 2011 financial results on October 27, 2011
*Charts and commentary have been updated for Baidu Q3 2011 financial results*
* Unless otherwise noted, currency amounts are in Chinese Renminbi (RMB) *

Baidu Reports Another Record-Breaking Quarter: EPS +15% QoQ & +79% YoY!

Baidu Summary Q3 2011 Baidu reported another record-breaking quarter. New record highs were reported for total revenues, operating income, net income, and earnings per share. Gross, operating, and net margins dipped slightly from the prior quarter. Return on assets continues at an astronomical level of 44.72%. As expected, the current Q3 exceeded prior Q2 and Q4 is expected to surpass the current Q3. The expectations continue sky high for Baidu in the world's largest Internet market. Financial position is strong and liquid. Robin Li, Chairman and CEO, attributed the stellar financial performance to "rapid growth in customer spending and user traffic". The currency translation at September 30, 2011 utilized by Baidu was RMB6.3780 to US$1.00.

Baidu Income Statement Q3 2011 Baidu financial performance was yet another record-breaking quarter with record total revenues RMB4.18 billion, record net income RMB1.88 billion, and record earnings per share RMB5.38 ADS. From the prior record setting quarter Q2 2011, QoQ, total revenues were up +22%, net income up +15%, and earnings per share up +15%. From the prior year Q3 2010, YoY, these were up +85%, +80%, and +79%, respectively. Gross, operating, and net margins dipped QoQ to 73.51%, 53.32%, and 44.92% compared to prior year Q3 2010 of 74.57%, 52.37%, and 46.40%, respectively.

Baidu Balance Sheet Q3 2011 Total assets increased an impressive +45% QoQ and an astounding +125% YoY to a record high RMB20.87 billion. The capital to assets ratio (total stockholders' equity divided by total assets) is a solid 62.95%, but a multi-year low. Baidu is liquid with a current ratio (current assets divided by total assets) of 66.42%, which is also a multi-year low.  Baidu has over RMB11.4+ billion in cash, cash equivalents, and short-term investments. Return on assets of 42.25% continues at astronomical levels, but slightly decreased QoQ.

Baidu Outlook Q4 2011 The Baidu outlook for Q4 2011 is strong, and record-breaking, total revenues of RMB4.41 billion to RMB4.535 billion, which would exceed the Q3 2011 quarterly record of RMB43.18 billion. If the gross and net margins can be sustained at the current very high levels, the next quarter looks outstanding. Baidu states, "Baidu currently expects to generate total revenues in an amount ranging from RMB4.410 billion($691.4 million) to RMB4.535 billion ($711.0 million) for the fourth quarter of 2011, representing a 79.9% to 85.0% year-over-year increase. This forecast reflects Baidu's current and preliminary view, which is subject to change." Baidu may provide additional information on their outlook in the earnings conference call.

Baidu Financial Performance by the Quarters (Charts)

Baidu Earnings Per Share Below is a chart of quarterly earnings per share. Current Earnings per Share of RMB5.38 increased +15% QoQ and +79% YoY and is a record high. Earnings per Share have increased 6 of the past 7 quarters and 7 of the past 9. The EPS chart average is RMB2.70. Recent chart data is:
Quarter, Earnings per Diluted Share
Sep10: RMB3.00
Dec10: RMB3.32
Mar11: RMB3.06
Jun11: RMB4.67
Sep11: RMB5.38

Baidu Cash Flow Per Share Below is a chart of quarterly cash flow from operations per share. Current Cash Flow per Share of RMB35.40 decreased -15% QoQ but increased +39% YoY. Cash Flow per share has increased 6 of the past 9 quarters QoQ. The all-time high was Q2 2011 of RMB59.56. The CFS chart average is RMB33.08. Recent chart data is:
Quarter, Cash Flow per Diluted Share
Sep10: RMB36.21
Dec10: RMB50.64
Mar11: RMB27.96
Jun11: RMB59.56
Sep11: RMB50.36

Baidu Total Revenues, Operating Income, and Net Income Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of RMB4.18 billion is a record high, increased impressively +22% QoQ and +85% YoY, and have increased 6 of the past 7 quarters. Current Operating Income of RMB2.23 billion is a record high and has increased 6 of the past 7 quarters. Current Net Income of RMB1.88 billion is a record high, increased an impressive +15% QoQ and +80% YoY, and has increased 6 of the past 7 quarters. The TR, OI, and NI chart averages are RMB 1.94B, 929M, and 824M, respectively. Recent chart data is:
Quarter, Total Revenues, Operating Income, Net Income
Sep10: RMB 2.26B, 1.18B, 1.05B
Dec10: RMB 2.45B, 1.27B, 1.16B
Mar11: RMB 2.44B, 1.19B, 1.07B
Jun11: RMB 3.42B, 1.86B, 1.63B
Sep11: RMB 4.18B, 2.23B, 1.88B

Baidu Gross Margin, Operating Margin, and Net Margin Below is a chart of quarterly gross margin, operating margin, and net margin. Overall, these have been incredible margins. Current Gross Margin of 73.51% dipped QoQ and YoY, but is above the historical average. Gross Margin has now been above 70% for 6 consecutive quarters. Current Operating Margin of 53.32% dipped QoQ but increased YoY. Operating Margin has been above 50% for 5 of the past 6 quarters. That one quarter below, Q1 2011, was 49.04%. Current Net Margin of 44.92% dipped QoQ and YoY but has been above 40% for 6 consecutive quarters. The GM, OM, and NM chart averages are 68.76%, 43.93%, and 39.42%, respectively. Recent chart data is:
Quarter, Gross Margin, Operating Margin, Net Margin
Sep10: 74.57%, 52.37%, 46.40%
Dec10: 74.26%, 52.01%, 47.35%
Mar11: 72.51%, 49.04%, 43.94%
Jun11: 74.22%, 54.42%, 47.81%
Sep11: 73.51%, 53.32%, 44.92%

Baidu Return on Assets Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. ROA continues at astronomical levels. Current Return on Assets of +42.25% dipped QoQ, after increasing 6 consecutive quarters on the chart. ROA increased YoY. The ROA chart average is +39.23%. Recent chart data is:
Quarter, Return on Assets
Sep10: 39.61%
Dec10: 43.19%
Mar11: 43.70%
Jun11: 44.72%
Sep11: 42.25%

Baidu Growth Rates Below is a chart of the annual (YoY, Y/Y, annual change) growth rates for revenues and earnings per share. Baidu, as with some other technology companies, has an annual cyclical high in Q4 and an annual cyclical low in Q1. Therefore, comparing YoY growth rates best reflects Baidu's growth. Baidu has been a high growth technology company and stock. Current Total Revenues Growth of +85.09% continues the amazing growth. Current Earnings per Share Growth of +79.33% also continues the very strong growth, but is "slowing". The TRG and EPSG chart averages are 82.83% and 116.09%, respectively. Recent chart data is:
Quarter, Total Revenues Growth %, Earnings per Share Growth %
Sep10: +76.42, +24.98%
Dec10: +94.38%, +169.92%
Mar11: +88.28%, +121.74%
Jun11: +78.39%, +94.58%
Sep11: +85.09%, +79.33%

Traffic Acquisition Costs Below is a chart of traffic acquisition costs (TAC) as a percentage (%) of total revenues. This is a direct cost and the net is the gross profit before other expenses are allocated to cost of revenues. TAC has been trending downwards which means increased gross profit for Baidu. Current Traffic Acquisition Costs of 8.00% continues the the 4th consecutive quarter in the 8.00% area. TAC increased slightly QoQ and decreased YoY. The TAC chart average is 10.01%. Recent chart data is:
Quarter, TAC as a % of Total Revenues
Sep10: 8.94%
Dec10: 8.14%
Mar11: 8.15%
Jun11: 7.88%
Sep11: 8.00%

Operating Expense Ratio Below is a chart of the quarterly operating expense ratio, which is operating expenses divided by total revenues. The current Operating Expense Ratio of 20.19% is historically below average, increased QoQ, and decreased YoY. This indicates in the current quarter both a slight decreased efficiency plus a slightly lower proportion of revenues reaching the bottom line, net income and earnings per share. The OER chart average is 24.83%. Recent chart data is:
Quarter, Operating Expense Ratio
Sep10: 22.21%
Dec10: 22.24%
Mar11: 23.47%
Jun11: 19.80%
Sep11: 20.19%

Baidu Announces Third Quarter 2011 Financial Results

BEIJING, October 27, 2011 /PRNewswire via COMTEX/ -- Baidu, Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the third quarter ended September 30, 2011 (1).

Third Quarter 2011 Highlights
* Total revenues in the third quarter of 2011 were RMB4.175 billion ($654.7 million), a 85.1% increase from the corresponding period in 2010.
* Operating profit in the third quarter of 2011 was RMB2.226 billion ($349.1 million), a 88.5% increase from the corresponding period in 2010.
* Net income attributable to Baidu in the third quarter of 2011 was RMB1.882 billion ($295.0 million), a 79.8% increase from the corresponding period in 2010.
* Diluted earnings attributable to Baidu per ADS (2) for the third quarter of 2011 were RMB5.38 ($0.84); diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the third quarter of 2011 were RMB5.49 ($0.86).

(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 RMB6.3780 to US$1.00, the effective noon buying rate as of September 30, 2011 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) Effective on May 12, 2010, Baidu adjusted the ratio of its American depositary shares ("ADSs") representing Class A ordinary shares from one (1) ADS for one (1) Class A ordinary share to ten (10) ADSs for one (1) Class A ordinary share. All earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change.

Robin Li, chairman and chief executive officer of Baidu commented, "Baidu recorded stellar results in the third quarter driven by rapid growth in customer spending and user traffic. In particular, spending by large customers significantly outperformed our expectations as we continued to build strong relationships with high quality companies. China's search industry is still in its early stages, and as the clear industry leader we see enormous room for continuing growth as users and online marketing customers become increasingly sophisticated."

"On the user front, during the third quarter we launched a personalized homepage feature which provides users with a Baidu experience uniquely tailored to their individual online behavior, as well as instant and centralized access to their online social activities," Mr. Li continued. "As we continue to create new ways for users to engage with the Internet, we believe that more and more people will rely on Baidu as their online gateway, further solidifying Baidu's position at the heart of China's Internet ecosystem."

Jennifer Li, Baidu's chief financial officer, commented, "We enjoyed another strong quarter of top and bottom line growth, while maintaining a robust level of investment in R&D, infrastructure development and new strategic opportunities to support our future growth."

"In this quarter, we completed the acquisition of Qunar, a leading travel search engine in China, and for the first time consolidated Qunar's financial results. In addition, to support the rapid growth of our online video service provider Qiyi, we made a $23 million cash contribution and incurred a chargebased on equity method accounting. Our EPADS would have been $0.91 without this charge associated with Qiyi."

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 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 Select Market under the symbol "BIDU".

The Baidu Story

Many people have asked about the meaning of our name. "Baidu" was inspired by a poem written more than 800 years ago during the Song Dynasty. The poem compares the search for a retreating beauty amid chaotic glamour with the search for one's dream while confronted by life's many obstacles. "…hundreds and thousands of times, for her I searched in chaos, suddenly, I turned by chance, to where the lights were waning, and there she stood." Baidu, whose literal meaning is hundreds of times, represents persistent search for the ideal.

Baidu chose a poetic Chinese name because it wants the world to remember its heritage. As a native speaker of the Chinese language and a talented engineer, Baidu focuses on what it knows best - Chinese language search. Applying avant-garde technology to the world's most ancient and complex language is as challenging as it is exciting. At least people here at Baidu think so. As having diligently disclosed in the Prospectus of our recent Initial Public Offering, we believe there are at least 38 ways of saying "I" in Chinese. It is important that we master all the ways of addressing oneself in Chinese because our users depend on us to address every one of their daily queries. And trust us, pin pointing queries in the Chinese language is an art rather than a science.

Our mission is to provide the best way for people to find information. To do this we listen carefully to our users' needs and wants. Have we collected all the Chinese web pages they want to see? Are the pages current and up to date? Are the search results closely related to their queries? Did we return those search results instantly? To improve user experience, we constantly make improvements to our products and services. For example, we introduced "phonetic" or "pin-yin" search which allows our users to type in Chinese keywords using English alphabets. This feature is designed to skip the switching from English inputting to Chinese inputting and for when the user is not sure of the written form of a keyword. Our users definitely notice the many little things that we do differently to ensure a simple and reliable search experience every time.

In addition to serving individual users, we also serve as a media platform for online marketing customers. We not only provide our customers easy access to one of the largest online audiences in China but also targeted groups with defined interests as indicated by queries. Unlike traditional online advertising services which charge by flat fee, our marketing products and services are performance based. Our Pay for Performance model has taken the market by storm because it is cost effective and measurable.

We know that a lot of interesting things are going on in the Internet space, but we don't want to lose focus. China's Internet search industry is only a newly discovered territory. We see vast untapped grounds in our home base and we believe there are still plenty of prizes to be claimed by the best players.

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