Home News Baidu Announces First Quarter 2020 Results

Baidu Announces First Quarter 2020 Results

BEIJING, Baidu, Inc. a leading search engine, knowledge and information centered Internet platform and AI company, today announced its unaudited financial results for the first quarter ended March 31, 2020.

“Despite shelter-in-place in the first quarter, Baidu’s total revenues declined just 7% year-over-year, resulting from our diversified revenue streams, including marketing services for wide-ranging industries, new AI businesses and iQIYI. With the pandemic coming under control in China, offline activities are rebounding and Baidu stands to benefit from a restart of the Chinese economy.” said Robin Li, Co-founder and CEO of Baidu. “In March, a month after the peak of COVID-19 new cases, Baidu’s traffic remained robust with Baidu App DAUs reaching 222 million, up 28% year over year, in-app search queries up 45% and feed time spent up 51%. Our strategy to strengthen Baidu’s mobile ecosystem and promote in-app search has resulted in users increasingly come to Baidu for critical and reliable information.”

“Given COVID-19 headwinds, Baidu focused on quality revenue growth and continued to be disciplined with spending ROI, to maximize long-term shareholder value. In the first quarter, despite Baidu Core revenue declining 13% year over year to US$2.2 billion, Baidu Core adjusted EBITDA increased 38% to reach US$0.7 billion, and adjusted EBITDA margin reached 30%, increasing 11 points from last year,” said Herman Yu, CFO of Baidu. “Baidu Core’s operating efficiency can be attributed to the strengthening of Baidu mobile ecosystem, enabling in-app search to grow faster and be more profitable than browser search, and growing new AI businesses with smaller losses.”

First Quarter 2020 Financial Highlights

Baidu, Inc.
(In millions except per ADS,Q1Q4Q1
unaudited)201920192020YOYQOQ
RMBRMBRMBUS$
Total revenues24,12328,88422,5453,184(7%)(22%)
Operating income (loss)(936)4,655(437)(62)(53%)
Operating income (non-GAAP) [2]4016,7531,437203258%(79%)
Net income (loss) to Baidu(327)6,345416(99%)
Net income to Baidu (non-GAAP) [2]9679,1933,082435219%(66%)
Diluted earnings (loss) per ADS(0.98)18.250.020.00(100%)
Diluted earnings per ADS (non-GAAP) [2]2.7726.548.841.25219%(67%)
Adjusted EBITDA [2]1,7708,1752,85240361%(65%)
Adjusted EBITDA margin 7%28%13%13%
Baidu Core 
(In millions, unaudited)Q1Q4Q1
201920192020YOYQOQ
RMBRMBRMBUS$
Total revenues 17,45021,71115,2682,156(13%)(30%)
Operating income1,0916,8701,84826169%(73%)
Operating income (non-GAAP) [2]2,1108,4923,34847359%(61%)
Net income to Baidu Core7037,4331,698240142%(77%)
Net income to Baidu Core (non-GAAP) [2]1,8249,9504,519638148%(55%)
Adjusted EBITDA[2]3,3729,7884,64165638%(53%)
Adjusted EBITDA margin 19%45%30%30%

Other Highlights

Corporate

  • Baidu retooled its AI capabilities to help users, municipalities and health organizations better cope with the COVID-19 pandemic, as part of Baidu’s corporate social responsibility:
    – Baidu provided tens of millions of free online doctor consultations on its healthcare platform and made available its online healthcare services, such as pneumonia screening, to third-party medical apps, to free up hospitals for critical emergencies.
    – Baidu donated nearly 20,000 Xiaodu Smart Displays to frontline doctors and their families, allowing them to use contact-less, voice-enabled Internet and conveniently video conference home to stay in touch with their loved ones, while minimizing virus infection. DuerOS also partnered with online education organizations to enable home teaching for kids, while schools were closed down.
    – More than 100 Apollo-powered autonomous vehicles have been deployed across 17 cities in China, including Wuhan, Beijing, Shanghai, Shenzhen and Xiamen, to provide medication, face mask and food deliveries, as well as unmanned fever screening and sterilization services.
    – Baidu AI call center solution was retooled to allow over 20 local governments and health commissions to call people and survey their health conditions and travel information. Baidu’s smart call center handled over 3 million calls in the first two months, which is equivalent to the workload of approximately 1,000 full-time employees over a month’s period. Baidu’s smart call center was also used to update the new hours of operation for businesses on Baidu Maps, as restaurants, shops and supermarkets re-opened for business.
    – Baidu open-sourced LinearFold, its RNA analysis algorithm, to researchers worldwide for research on COVID-19. LinearFold can accelerate the prediction time of a virus’s RNA secondary structure, potentially from 55 minutes to 27 seconds, affording researchers an opportunity to better understand the pandemic and develop effective vaccines.
  • Baidu released its Annual ESG Report in May 2020, which details Baidu’s ESG policies and sustainability initiatives (see the report at http://csr.baidu.com/download.html).
  • Baidu completed a bond offering of US$1.0 billion in April 2020, consisting of US$600 million of 3.075% notes due 2025 and US$400 million of 3.425% notes due 2030, the proceeds from which are expected to be used to repay maturing bonds and for general corporate use.
  • Baidu returned $185 million to shareholders in the first quarter of 2020, under the 2019 Share Repurchase Program, bringing the cumulative repurchase total to approximately US$1.4 billion under the 2018 and 2019 Repurchase Programs.
  • Baidu’s board of directors recently approved a 2020 Share Repurchase Program effective until July 1, 2021, under which the Company may repurchase up to US$1 billion of its shares.� 

Mobile Ecosystem

  • Baidu App daily active users (“DAUs”) reached 222 million, up 28% year over year, in March 2020.
  • Baijiahao (“BJH”) publisher accounts reached 3.0 million, up 44% year over year, in March 2020. More original content creators are joining Baidu, due to the large user scale of the Baidu platform, including Baidu App, Haokan, Quanmin and Baidu Wiki.
  • App developers are migrating to Baidu Smart Mini Program (“SMP”), which allows users to access information and services within Baidu App and from its network, without having to download the individual apps. Baidu SMP monthly active users (“MAUs”) on Baidu App reached 354 million, up 96% year over year, in March 2020.

DuerOS

  • In March 2020, DuerOS monthly voice queries on Xiaodu devices reached 3.3 billion, up almost 5 fold from last year, and DuerOS total monthly voice queries reached 6.5 billion, up almost 3 fold from last year.
  • DuerOS skills store now offers over 3,800 skills in wide ranging genres, including education, video, online game and live streaming. DuerOS developer community has grown to over 40,000 members in March 2020.
  • DuerOS released Xiaodu Air, a 5.5-inch smart display, and Xiaodu Smart Speaker Kids Edition, which come equipped with advanced voice features, including allowing parents to personalize story telling with their own voices by recording 20 sentences and enabling parents to exit children mode through their voice prints.
  • IDC reported Xiaodu Smart Display ranked #1 in global smart display shipments for 2019, which has also been reported by Strategy Analytics and Canalys.

Cloud, AI Services & AI Platform� 

  • Baidu signed a strategic agreement with a major public utilities company to provide AI enterprise solutions to improve customer service and office productivity. The public utilities company leveraged Baidu’s newly launched AI PaaS (Platform-as-a-Service) to enable its customers to purchase electricity through facial recognition at its customer service centers, which significantly shortened queue time. Baidu AI PaaS was also used to help the customer’s employees more efficiently draft daily and weekly management reports, by recommending report highlights derived from relevant internal documents, using Baidu’s leading AI-powered recommendation engine.
  • Daily voice queries of Baidu IME (mobile keyboard) reached over 1 billion, increasing 185% year over year, in March 2020.

Apollo

  • Apollo continues to win smart transportation projects from municipalities, including Hefei (Anhui Province), Yangquan (Shanxi Province) and Chongqing, with state-of-the-art infrastructure solutions for smart transportation.
  • Navigant Research, a well-known research firm, names Apollo as one of the four global tier-one leaders in autonomous driving, recognizing Baidu as the only top-tier autonomous driving company from China.
  • Apollo received top ranking in the 2019 Beijing Autonomous Vehicles Road Test Report published by the Beijing Municipal Commission.

iQIYI

  • iQIYI subscribers reached 118.9 million, up 23% year over year, in March 2020. iQIYI’s large subscriber base further strengthens iQIYI’s foundation to produce entertainment-oriented blockbuster originals.

First Quarter 2020 Results

Total revenues reached RMB 22.5 billion ($3.18 billion), decreasing 7% year over year. Online marketing revenues were RMB 14.2 billion ($2.01 billion), decreasing 19% year over year. Other revenues were RMB 8.3 billion ($1.17 billion), increasing 28% year over year, driven mainly by the strong growth in iQIYI membership, cloud service and smart devices.� 

Revenue from Baidu Core reached RMB 15.3 billion ($2.16 billion), decreasing 13% year over year. Revenue from iQIYI reached RMB 7.6 billion ($1.08 billion), up 9% year over year. iQIYI membership revenue grew 35% year over year, offset by online advertising revenue declining 27% year over year.

Cost of revenues was RMB 14.7 billion ($2.07 billion), decreasing 1% year over year, primarily due to a decrease in traffic acquisition costs, offset by increase in content costs and impairment of intangible assets. The decrease in traffic acquisition costs reflected decreasing union revenues, as the Company focused on growing in-app search.

Selling, general and administrative expenses were RMB 3.9 billion ($544 million), decreasing 36% 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 4.4 billion ($628 million), increasing 7% year over year, primarily due to an increase in personnel related expenses.

Operating loss was RMB 437 million ($62 million) and operating margin was -2%. Baidu Core operating income was RMB 1.8 billion ($261 million) and Baidu Core operating margin was 12%.

Non-GAAP operating income was RMB 1.4 billion ($203 million) and non-GAAP operating margin was 6%. Non-GAAP Baidu Core operating income was RMB 3.3 billion ($473 million) and non-GAAP Baidu Core operating margin was 22%.� 

Total other loss was RMB 1.0 billion ($146 million), compared to total other income of RMB 900 million for Q1 2019. Total other loss in Q1 2020 was mainly due to impairment losses of RMB 1.6 billion ($232 million) on long-term investments.

Income tax expense was RMB 198 million ($28 million), compared to RMB 294 million in Q1 2019.

Net income attributable to Baidu was RMB 41 million ($6 million), and diluted earnings per ADS was RMB 0.02 ($0.00). Net income attributable to Baidu Core was RMB 1.7 billion ($240 million). Non-GAAP net income attributable to Baidu was RMB 3.1 billion ($435 million), and non-GAAP net margin was 14%. Non-GAAP diluted earnings per ADS amounted to RMB 9 ($1.25). Non-GAAP net income attributable to Baidu Core was RMB 4.5 billion ($638 million), and non-GAAP net margin for Baidu Core was 30%.

Adjusted EBITDA was RMB 2.9 billion ($403 million) and adjusted EBITDA margin was 13%. Adjusted EBITDA for Baidu Core was RMB 4.6 billion ($656 million) and adjusted EBITDA margin for Baidu Core was 30%.� 

As of March 31, 2020, cash, cash equivalents, restricted cash and short-term investments were RMB 146.7 billion ($20.72 billion), and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB 136.7 billion ($19.31 billion). Free cash flow was RMB 1.7 billion ($233 million). Free cash flow excluding iQIYI was RMB 2.3 billion ($327 million). For more information on the adoption of ASU 2019-02 beginning January 1, 2020, in accordance with the new accounting standard, please see explanation under “Non-GAAP Financial Measures.”

Financial Guidance

For the second quarter of 2020, Baidu expects revenues to be between RMB 25.0 billion ($3.5 billion) and RMB 27.3 billion ($3.9 billion), representing a growth rate of -5% to 4% year over year, which assumes that Baidu Core revenue will grow between -8% to 2% year over year. The COVID-19 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 9:15 PM on May 18, 2020, U.S. Eastern Time (9:15 AM on May 19, 2020, Beijing/Hong Kong Time).

Please register in advance of the conference call using the link provided below. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID by email.

For pre-registration, please click http://apac.directeventreg.com/registration/event/7490173. It will automatically direct you to the registration page of “Baidu Q1 2020 Earnings Conference Call”, where you may fill in your details for RSVP. If it requires you to enter a participant conference ID, please enter “7490173”.

In the 10 minutes prior to the call start time, you may use the conference access information (including dial-in number(s), Direct Event passcode and unique registrant ID) provided in the confirmation email that you have received following your pre-registration.

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