Baidu Planet: Baidu Reports Near-Record Q1 2011 Earnings (Financial Charts, Review) *Strong outlook, margins dip* BIDU

● Baidu Planet ●

Baidu reported Q1 2011 financial results on Wednesday, April 27, 2011

*Charts and commentary have been updated for Baidu Q1 March 2011 financial results*

* Unless otherwise noted, currency amounts are in Chinese Renminbi (RMB) *

Baidu Reports Near-Record Q1 2011 Earnings

Baidu Summary Q1 2011 Baidu reported near-record financial results, but dipped slightly below the record (and stellar) Q4 2010 results. Although management attributed this to "usual seasonal weakness" for Q1, which is typical for the Internet and technology sectors, after Q4 is the annual cyclical peak, there was some hope to exceed the record Q4 financial results as the Chinese Internet is expanding explosively. Accordingly, Q1 should be the seasonal "bottom" for Baidu and the remaining 2011 quarters should each be record-setting. The bar has been set high for Baidu in the world's largest Internet market. Financial position is very strong and very liquid. The currency translation at March 31, 2011 utilized was RMB6.5483 to US$1.00.

Baidu Income Statement Q1 2011 Baidu financial performance was excellent with total revenues RMB 2.44B, net income RMB 1.07B, earnings per share RMB 3.06 ADS. From the prior record-setting quarter Q4 2010, QoQ, total revenues were slightly down -0.60%, net income down +7.76%, and earnings per share down -7.80%. From the prior year Q1 2010, these were up +88.28%, +122.78%, and +121.74%, respectively. Gross, operating, and net margins decreased QoQ to 72.51%, 49.04%, and 43.94% compared to Q4 2010 of 74.26%, 52.01%, and 47.35%, respectively. All 3 improved YoY compared to Q1 2010. All of this data is summarized in the charts below.

Baidu Balance Sheet Q1 2011 Total assets increased +12.58% QoQ and an astounding +89.61% YoY to a record RMB 12.44B. The capital to assets ratio (total stockholders' equity divided by total assets) is a very solid 76.47%. Baidu is incredibly liquid with a current ratio (current assets divided by total assets) of 76.96%. Baidu has over RMB 8.5B+ in cash, cash equivalents, and marketable securities.

Baidu Outlook Q2 2011 The Baidu outlook for Q2 2011 is very strong total revenues of RMB 3.23B to RMB 3.30B, which would easily exceed the Q4 2010 quarterly record of RMB 2.45B. If the gross and net margins can be sustained at the current very high levels, the remainder of 2011 looks outstanding. Baidu states, "Baidu currently expects to generate total revenues in an amount ranging from RMB3.230 billion ($493.3 million) to RMB3.300 billion ($503.9 million) for the second quarter of 2011, representing a 68.7% to 72.4% 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, which is not reviewed here.

Baidu Financial Performance by the Quarters (Charts)

Baidu Earnings Per Share (Chart) Below is a chart of quarterly earnings per share. Earnings per share have increased 5 of the last 7 quarters, but dipped in Q1 2011 after 4 consecutive quarterly increases. The chart covers from June 2009 through the latest quarter reported. Recent chart data is:

Quarter, Earnings per Diluted Share

Jun10: RMB 2.40

Sep10: RMB 3.00

Dec10: RMB 3.32

Mar11: RMB 3.06

Baidu Total Revenues, Operating Income, and Net Income (Chart) Below is a chart of quarterly total revenues, operating income, and net income. Total revenues increased for 7 consecutive quarters, but dipped in Q1 2011 which was the first decrease since Q1 2009. Operating income dipped in Q1 2011, after 4 consecutive quarterly increases. Net income also dipped in Q1 2011, after 4 consecutive quarterly increases. The chart covers from December 2008 through the latest quarter reported. Recent chart data is:

Quarter, Total Revenues, Operating Income, Net Income

Jun10: RMB 1.91B, 972M, 837M

Sep10: RMB 2.26B, 1.18B, 1.05B

Dec10: RMB 2.45B, 1.27B, 1.16B

Mar11: RMB 2.44B, 1.19B, 1.07B

Baidu Gross Margin, Operating Margin, and Net Margin (Chart) Below is a chart of quarterly gross margin, operating margin, and net margin. Overall, these are incredible margins. Gross margin dipped in Q1 2011 to 72.51%, but has been above 70% for 4 consecutive quarters and has ranged from a low of 60.25% in Q1 2009 to a high of 74.57% in Q3 2010. Operating margin dipped below 50% to 49.04% in Q1 2011, after being above 50% for 3 consecutive quarters and has ranged from a low of 24.49% in Q1 2009 to a high of 52.37% in Q3 2010. Net margin dipped in Q1 2011 to 43.94%, but has been above 40% for 4 consecutive quarters and has ranged from a low of 22.34% in Q1 2009 to a high of 47.35% in Q4 2010. The chart covers from December 2008 through the latest quarter reported. Recent chart data is:

Quarter, Gross Margin, Operating Margin, Net Margin

Jun10: RMB 72.92%, 50.76%, 43.74%

Sep10: RMB 74.57%, 52.37%, 46.40%

Dec10: RMB 74.26%, 52.01%, 47.35%

Mar11: RMB 72.51%, 49.04%, 43.94%

Baidu Return on Assets (Chart) 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. The ROA is amazingly high and has been increasing for 5 consecutive quarters to the current Q1 2011 peak of 43.70%. The chart covers from December 2009 through the latest quarter reported. Recent chart data is:

Quarter, Return on Assets

Jun10: 36.51%

Sep10: 39.61%

Dec10: 43.19%

Mar11: 43.70%

Baidu Growth Rates (Chart) Below is a chart of the quarterly (QoQ, Q/Q, quarterly change) growth rates for revenues and earnings per share. Baidu has been high growth company and stock. Total revenues and earnings per share increased for 4 consecutive quarters, but dipped slightly in Q1 2011. The chart covers the from March 2009 through the latest quarter reported. Recent chart data is;

Jun10: +47.95%, +74.15%

Sep10: +17.84%, +24.98%

Dec10: +8.65%, +10.84%

Mar11: -0.60%, -7.80%

Traffic Acquisition Costs (Chart) 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. Q1 2011 TAC of 8.15% is flat QoQ compared to Q4 2010 of 8.14%. The chart covers from December 2009 through the latest quarter reported. Recent chart data is:

Quarter, TAC as a % of Total Revenues

Jun10: 9.69%

Sep10: 8.94%

Dec10: 8.14%

Mar11: 8.15%

Baidu Announces First Quarter 2011 Financial Results

BEIJING - April 27, 2011 - Baidu, Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the first quarter ended March 31, 2011 (1).

First Quarter 2011 Highlights

* Total revenues in the first quarter of 2011 were RMB2.436 billion ($372.0 million), an 88.3% increase from the corresponding period in 2010.

* Operating profit in the first quarter of 2011 was RMB1.195 billion ($182.4 million), a 125.1% increase from the corresponding period in 2010.

* Net income in the first quarter of 2011 was RMB1.071 billion ($163.5 million), a 122.8% increase from the corresponding period in 2010. Diluted earnings per ADS (2) for the first quarter of 2011 were RMB3.06($0.47); diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the first quarter of 2011 were RMB3.15($0.48).

(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 RMB6.5483 to US$1.00, the effective noon buying rate as of March 31, 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.

"Monetization improvements combined with continuing solid traffic growth drove another great quarter for Baidu," said Robin Li, chairman and chief executive officer of Baidu. "We remain focused on enhancing our Phoenix Nest platform to improve return on investments for our existing customers and enhancing awareness of the benefits of search engine marketing among the tens of millions of SMEs and large companies in China who are not yet using our Phoenix Nest platform."

Mr. Li continued, "User experience is central to our success, and users are responding positively to our efforts to integrate many different forms of data and applications into search. We are particularly excited about the growth of our open application platform, which now generates millions of clicks per day. Groundbreaking initiatives like this help us attract and retain users and demonstrate the progress of Box Computing, our vision for the future in which users will access the Internet through a simple command box powered by sophisticated backend programming."

Jennifer Li, Baidu's chief financial officer, commented, "Our top and bottom line results grew strongly in the first quarter despite usual seasonal weakness. We will continue to support the long-term growth of the Company by focusing significant investment on R&D, marketing, network infrastructure and strategic investments over the coming quarters."

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.

More Charts and Analysis!