BIDU Delivers Record Revenues, Up 15% After Hours

Baidu reported total revenues of RMB1.294 billion ($189.6 million) for the first quarter of 2010, representing a 59.6% increase from the corresponding period in 2009.

Online marketing revenues for the first quarter of 2010 were RMB1.293 billion ($189.5 million), representing a 59.6% increase from the corresponding period in 2009. Baidu had around 221,000 active online marketing customers in the first quarter of 2010, representing a 19.5% increase from the corresponding period in 2009 and a 0.9% decrease from the previous quarter. Revenue per online marketing customer for the first quarter was approximately RMB5,900($864), a 34.1% increase from the corresponding period in 2009 and a 3.5% increase from the previous quarter.

Traffic acquisition costs (TAC) as a component of cost of revenues were RMB171.3 million ($25.1 million), representing 13.2% of total revenues, as compared to 15.3% in the corresponding period in 2009 and 16.0% in the fourth quarter of 2009. The decrease in TAC as a percentage of total revenues reflects initiatives to drive quality improvements on Baidu Union traffic.

Bandwidth costs as a component of cost of revenues were RMB58.0 million ($8.5 million), representing 4.5% of total revenues, compared to 6.0% in the corresponding period in 2009. Depreciation costs as a component of cost of revenues were RMB65.9 million ($9.7 million), representing 5.1% of total revenues, compared to 7.4% in the corresponding period in 2009. The decreases in bandwidth and depreciation costs as percentages of total revenues reflect efficiency improvements as well as increased scalability of investment in capital expenditure.

Selling, general and administrative expenses were RMB214.6 million ($31.4 million), representing an increase of 5.0% from the corresponding period in 2009, primarily due to increased sales headcount. The increase was partly offset by lower marketing expenses.

Research and development expenses were RMB122.1 million ($17.9 million), representing a 42.6% increase from the corresponding period in 2009, primarily due to increased R&D personnel expenses.

Share-based compensation expenses, which were allocated to related operating costs and expense line items, decreased in aggregate by 16.7% to RMB19.5 million ($2.9 million) in the first quarter of 2010 from RMB23.5 million in the corresponding period in 2009.

Operating profit was RMB530.8 million ($77.8 million), representing a 167.4% increase from the corresponding period in 2009. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB550.3 million ($80.6 million), a 147.9% increase from the corresponding period in 2009.

Income tax expense was RMB70.7 million ($10.4 million), compared to an income tax expense of RMB26.9 million for the corresponding period in 2009. The effective tax rate for the first quarter of 2010 was 12.8% as compared to 12.9% for the corresponding period in 2009.

Net income was RMB480.5 million ($70.4 million), representing a 165.3% increase from the corresponding period in 2009. Basic and diluted EPS for the first quarter of 2010 amounted to RMB13.82($2.02) and RMB13.77($2.02), respectively.

Net income excluding share-based compensation expenses (non-GAAP) was RMB500.1 million ($73.3 million), a 144.4% increase from the corresponding period in 2009. Basic and diluted EPS excluding share based compensation expenses (non-GAAP) for the first quarter of 2010 amounted to RMB14.38($2.11) and RMB14.33($2.10), respectively.

As of March 31, 2010, the Company had cash, cash equivalents and short-term investments of RMB4.909 billion ($719.2 million). Net operating cash inflow and capital expenditures for the first quarter of 2010 were RMB426.2 million ($62.4 million) and RMB105.3 million ($15.4 million), respectively.

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 RMB641.2 million ($93.9 million) for the first quarter of 2010, representing a 116.1% increase from the corresponding period in 2009.

Outlook for Second Quarter 2010

Baidu currently expects to generate total revenues in an amount ranging from RMB 1.830 billion($268.1 million) to RMB 1.870 billion ($274.0 million) for the second quarter of 2010, representing a 67% to 70% year-over-year increase. This forecast reflects Baidu’s current and preliminary view, which is subject to change.

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