Baidu Announces Fourth Quarter and Fiscal Year 2019 Results

BEIJING,Feb. 28,2020 -- Baidu,Inc. (NASDAQ: BIDU) ("Baidu" or the "Company"),a leading search engine,knowledge and information centered Internet platform and AI company,today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31,2019[1].

"We finished 2019 making tremendous progress in strengthening Baidu's mobile ecosystem. Through the building blocks of BJH publisher accounts,Smart Mini Program and Managed Page,Baidu App provides users single log-on,native-app-like experience to a wide range of information and services dispersed across isolated mobile apps and HTML5 websites. Baidu App's spanning mobile ecosystem has resulted in more users logging in,DAUs growing robustly to 195 million in December,up 21% year over year,and in-app search queries increasing almost 30% year over year," said Robin Li,Chairman and CEO of Baidu. "Baidu new AI businesses have also made great strides in 2019,as we built leadership in smart devices,smart transportation and enterprise cloud solutions with Baidu's leading AI technologies."

"Baidu delivered solid fourth quarter results with increasing year-over-year revenue growth rate,allowing 2019 revenue to reach RMB 107 billion,or US$15.4 billion," said Herman Yu,CFO of Baidu. "Baidu's quarterly operating margin has also been improving,through the strengthening of Baidu's mobile ecosystem and our focus on resource investment returns. Our leaner financial model and strong balance sheet put us in a good position to weather the slowing macro,while continuing to invest heavily in technology and new businesses,to optimize future growth."

Fourth Quarter 2019 Financial Highlights

Baidu,Inc.

For the three-month ended

(In millions except for per ADS information,

unaudited)

December 31,

2018

September 30,

2019

December 31,

2019

YOY

QOQ

December 31,

2019

RMB

RMB

RMB

US$

Total revenues

27,195

28,080

28,884

6%

3%

4,149

Operating income

1,112

2,355

4,655

319%

98%

669

Operating margin

4%

8%

16%

Non-GAAP operating income

2,747

3,691

6,753

146%

83%

970

Non-GAAP operating margin

10%

13%

23%

Net income (loss) attributable to Baidu

2,081

(6,373)

6,345

205%

-

911

Net margin

8%

(23%)

22%

Non-GAAP net income attributable to Baidu

4,703

4,387

9,193

95%

110%

1,320

Non-GAAP net margin

17%

16%

32%

Diluted earnings (loss) per ADS

5.93

(18.37)

18.25

208%

-

2.62

Non-GAAP diluted earnings per ADS

13.42

12.61

26.54

98%

110%

3.81

Baidu Core

For the three-month ended

(In millions except for per ADS information,

December 31,

September 30,

December 31,

unaudited)

2018

2019

2019

YOY

QOQ

2019

RMB

RMB

RMB

US$

Total revenues

20,520

21,010

21,711

6%

3%

3,119

Operating income

4,433

5,191

6,870

55%

32%

987

Operating margin

22%

25%

32%

Non-GAAP operating income

5,788

6,224

8,492

47%

36%

1,220

Non-GAAP operating margin

28%

30%

39%

Net income (loss) attributable to Baidu Core

4,050

(4,287)

7,433

84%

-

1,068

Net margin

20%

(20%)

34%

Non-GAAP net income attributable to Baidu Core

6,513

6,310

9,950

53%

58%

1,429

Non-GAAP net margin

32%

30%

46%

Fiscal Year 2019 Financial Highlights

Baidu,Inc.

For the twelve-month ended

(In millions except for per ADS information,

unaudited)

2018

2019

YOY

YOY[2]

2019

RMB

RMB

US$

Total revenues

102,277

107,413

5%

8%

15,429

Operating income

15,530

6,307

(59%)

906

Operating margin

15%

6%

Non-GAAP operating income

20,425

12,800

(37%)

1,839

Non-GAAP operating margin

20%

12%

Net income attributable to Baidu

27,573

2,057

(93%)

296

Net margin

27%

2%

Non-GAAP net income attributable to Baidu

23,976

18,182

(24%)

2,612

Non-GAAP net margin

23%

17%

Diluted earnings per ADS

78.03

5.60

(93%)

0.80

Non-GAAP diluted earnings per ADS

68.17

52.04

(24%)

7.48

Baidu Core

For the twelve-month ended

(In millions except for per ADS information,

unaudited)

2018

2019

YOY

YOY[2]

2019

RMB

RMB

US$

Total revenues

78,271

79,711

2%

6%

11,450

Operating income

23,808

15,261

(36%)

2,192

Operating margin

30%

19%

Non-GAAP operating income

28,020

20,311

(28%)

2,917

Non-GAAP operating margin

36%

25%

Net income attributable to Baidu Core

33,605

7,580

(77%)

1,089

Net margin

43%

10%

Non-GAAP net income attributable to Baidu Core

29,059

22,824

(21%)

3,278

Non-GAAP net margin

37%

29%

Other Highlights

Corporate

Baidu employees have devoted significant efforts to help contain the novel coronavirus outbreak and fulfill the Company's corporate social responsibility,including the following:

- On Baidu App,the Company launched a free medical consultation platform,to provide online access to doctors,answer pneumonia-related questions and save hospital resources. Baidu also partnered with medical experts to provide authoritative information on the novel coronavirus and leveraged its large platform reach to make available timely,reliable information to the public.

- Baidu Maps is providing timely information,including the location of traffic control areas,designated hospitals and infected cases,to help users cope with the coronavirus outbreak. By leveraging big data,Baidu Maps helps track population migration and predict the spread of the epidemic in China.

- Baidu leveraged its facial recognition and other AI technologies to develop and deploy many fever-screening systems to railway stations,hospitals and municipal government buildings in China. Baidu's fever-screening system can remotely measure the temperature of up to 200 people per minute,detect body temperatures of people wearing face masks and hats,and identify those not wearing masks or wearing them improperly. Baidu's AI model has also been open sourced,to further help reduce the spread of the coronavirus.

- Baidu has pledged RMB 300 million to these efforts,provide awareness education and improve public health in China.

The Company reported its ESG progress for 2019,noting: 1) Baidu AI has helped reunite over 10,000 missing persons with their families; and 2) Baidu data centers reduced carbon emissions by over 180,000 tons in 2019,with the average power usage effectiveness (PUE) of its data centers reaching 1.14,far exceeding the global industry average of 1.67 according to Uptime Institute,a globally recognized data center advisory organization.

Baidu returned $149 million to its shareholders in the fourth quarter of 2019,under the 2019 Share Repurchase Program.

Mobile Ecosystem

Baidu App's average daily active users ("DAUs") reached 195 million,in December 2019.

Baidu App's large user scale and unique search-plus-feed distribution channels are attracting more original content creators,with BJH publisher accounts for Baidu feed,reaching 2.6 million,up 38% year over year,in December 2019.

Baidu has partnered with major TV and provincial satellite stations,to provide TV streaming and VOD in Baidu App and short video apps. Through Baidu's mobile building blocks,TV stations can leverage Baidu's powerful content distribution channels to extend their reach and allow online users to engage with the TV shows.

Merchants with HTML5 websites across many industries are switching to Baidu Managed Page,as the landing page for their search result. Revenue from Baidu Managed Page reached almost a quarter of Baidu Core's online marketing services revenue in the fourth quarter of 2019.

Merchants with app development capabilities are adopting Baidu Smart Mini Program,whose monthly active users ("MAUs") reached 316 million,up 114% year over year,in December 2019.

All six major express delivery companies in China have adopted Baidu Smart Mini Program,which provides native-app-like experience to logged-in users,such as allowing them to check the shipping status of their e-commerce orders and request for an express delivery simply by searching "express delivery" in Baidu App.

Baidu Smart Mini Program is also extending its reach to government services. For example,employees in China can check the information of their housing fund,similar to social security in the U.S.,by simply scanning their face with Baidu App,as a logged-in user.

DuerOS

Monthly voice queries on DuerOS,a leading voice assistant for the Chinese language,surpassed 5.0 billion,up over 3 fold year over year,in December 2019. Monthly voice queries from Xiaodu first-party devices were 2.3 billion,up over 7 fold year over year.

DuerOS skills store now offers over 3,600 skills in wide ranging genres,including online education,gaming and live streaming. DuerOS developer community has expanded to over 38,000 members.

Xiaodu smart speakers ranked #1 in smart speaker shipments in China and Xiaodu Smart Display ranked #1 in smart display shipments globally for full year 2019,according to well-recognized market analytics firms Strategy Analytics and Canalys.

Baidu released Xiaodu Smart Display X8 in December 2019,with enhanced capabilities powered by Baidu AI,allowing users to wake the device up with eye gestures,pause streaming content with hand gestures and receive report on moving objects in the house when the owner leaves home.

Cloud,AI Services & AI Platform

Baidu partnered with Shanghai Pudong Development Bank,to launch a blockchain alliance with major Chinese commercial banks for inter-bank information verification built on Baidu's Blockchain as a Service (BaaS) platform.

In November 2019,Baidu released its end-to-end far-field Automatic Speech Recognition (ASR) solutions,based on in-house designed Baidu HonghuAI chip. Baidu Brain's leading speech recognition capabilities are used across Baidu products,including Xiaodu smart speakers,DuerOS in-vehicle infotainment,Baidu Maps and Baidu call-center enterprise solutions. Developers have tapped Baidu Brain's speech recognition engine on Baidu open AI platform more than 10 billion times.

Baidu is applying Baidu Kunlun,its high-performance AI chip,optimizing visual,speech,natural language processing and other AI capabilities,to power the Company's cloud servers.

In December 2019,Baidu's pre-training framework for language understanding,ERNIE (Enhanced Representation through kNowledge IntEgration),became the first to score above 90 on the General Language Understanding Evaluation benchmark,or GLUE,which is widely considered as the benchmark for testing AI language understanding and otherwise dominated by U.S. technology firms and universities. ERNIE powers Baidu search and Xiaodu smart devices,to provide the best user experience.

Baidu Maps has been selected by Tesla China to provide map cloud services,such as real-time traffic condition reporting,base map display and point-of-interest search. Baidu Maps is a leading location based service platform,supporting 1.8 million developers and tracking 2 billion daily kilometers.

Apollo

Baidu partnered with Cangzhou,Hebei province,to develop smart transportation using Baidu's V2X solutions to improve traffic condition and safety. The adoption of Baidu's V2X solutions has led to a second Apollo robotaxi pilot program,launched in November 2019,with an initial fleet of 30 vehicles.

Baidu also partnered with Yinchuan,Ningxia province,to provide the provincial capital with Baidu's V2X solutions to support autonomous trucking.

At the Apollo Partner Conference in December 2019,Apollo v5.5 was released to support urban road point-to-point autonomous driving,as well as open-platform development for V2X and IoV solutions. Apollo has garnered 177 leading OEMs,suppliers and other partners,and over 36,000 developers worldwide.

Apollo fleet has reached 3 million test kilometers on the road in December 2019,spanning across 23 cities,including Beijing,Wuhan,Cangzhou and Changchun. The municipality of Beijing granted Baidu its first batch of 40 manned autonomous driving licenses in December 2019.

iQIYI

iQIYI subscribers reached 106.9 million in December 2019,adding 19.5 million subscribers year over year. iQIYI's large subscriber base further strengthens iQIYI's foundation to produce entertainment-oriented blockbuster originals.

Fourth Quarter 2019 Results

Total revenues reached RMB 28.9 billion ($4.15 billion),up 6% year over year and 3% quarter over quarter. Online marketing revenues were RMB 20.8 billion ($2.98 billion),decreasing 2% year over year and increasing 2% quarter over quarter. Other revenues were RMB 8.1 billion ($1.17 billion),increasing 35% year over year,driven mainly by the strong growth in cloud services,smart devices and iQIYI membership.

Revenue from Baidu Core reached RMB 21.7 billion ($3.12 billion),increasing 6% year over year and 3% quarter over quarter. Revenue from iQIYI reached RMB 7.5 billion ($1.08 billion),up 7% year over year. iQIYI membership revenue grew 21% year over year,offset by online advertising revenue declining 15% year over year.

Cost of revenues,were RMB 15.5 billion ($2.23 billion),decreasing 1% year over year,primarily due to a decrease in content costs and traffic acquisition costs,offset by increases in hardware and cloud cost of goods sold,impairment and amortization of intangible assets and depreciation expenses.

Selling,general and administrative expenses were RMB 4.0 billion ($568 million),decreasing 33% 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 4.8 billion ($683 million),increasing 5% year over year,primarily due to an increase in personnel related expenses.

Operating income was RMB 4.7 billion ($669 million) and operating margin was 16%. Baidu Core operating income was RMB 6.9 billion ($987 million),and Baidu Core operating margin was 32%.

Non-GAAP operating income was RMB 6.8 billion ($970 million),and non-GAAP operating margin was 23%. Non-GAAP Baidu Core operating income was RMB 8.5 billion ($1.22 billion),and non-GAAP Baidu Core operating margin was 39%.

Total other income was RMB 699 million ($101 million),compared to total other loss of RMB 60 million for Q4 2018.

Income tax expense was RMB 304 million ($44 million),compared to RMB 484 million in Q4 2018.

Net income attributable to Baidu was RMB 6.3 billion ($ 911 million),and diluted earnings per ADS was RMB 18 ($2.62). Net income attributable to Baidu Core was RMB 7.4 billion ($1.07 billion). Non-GAAP net income attributable to Baidu was RMB 9.2 billion ($1.32 billion),and non-GAAP net margin was 32%. Non-GAAP diluted earnings per ADS amounted to RMB 27 ($3.81). Non-GAAP net income attributable to Baidu Core was RMB 10.0 billion ($1.43 billion),and non-GAAP net margin for Baidu Core was 46%.

Adjusted EBITDA was RMB 8.2 billion ($1.17 billion) and adjusted EBITDA margin was 28%. Adjusted EBITDA to Baidu Core was RMB 9.8 billion ($1.41 billion) and adjusted EBITDA margin for Baidu Core was 45%.

As of December 31,2019,cash,cash equivalents,restricted cash and short-term investments were RMB 147.4 billion ($21.17 billion),and cash,restricted cash and short-term investments excluding iQIYI were RMB 135.9 billion ($19.52 billion). Free cash flow was RMB 10.1 billion ($1.46 billion). Free cash flow excluding iQIYI was RMB 8.0 billion ($1.15 billion).

Fiscal Year 2019 Results

Total revenues reached RMB 107.4 billion ($15.43 billion),or 8% year over year,excluding the impact of announced divestures2. Online marketing revenues were RMB 78.1 billion ($11.22 billion),decreasing 5 % year over year. Other revenues were RMB 29.3 billion ($4.21 billion),increasing 44% year over year,driven mainly by the strong growth in iQIYI membership,cloud services and smart devices.

Revenue from Baidu Core reached RMB 79.7 billion ($11.45 billion),increasing 2% year over year,or increasing 6% year over year,excluding the impact of announced divestures2. Revenue from iQIYI reached RMB 29.0 billion ($4.17 billion),up 16% year over year. iQIYI membership revenue grew 36% year over year,offset by online advertising revenue declining 11% year over year.

Cost of revenues were RMB 62.9 billion ($9.03 billion),increasing 21% year over year,primarily due to increases in hardware and cloud cost of goods sold,content costs,depreciation expense,traffic acquisition costs and bandwidth costs.

Selling,general and administrative expenses were RMB 19.9 billion ($2.86 billion),increasing 4% year over year.

Research and development expenses were RMB 18.3 billion ($2.64 billion),increasing 16% year over year,primarily due to an increase in personnel related expenses.

Operating income was RMB 6.3 billion ($906 million) and operating margin was 6%. Baidu Core operating income was RMB 15.3 billion ($2.19 billion),and Baidu Core operating margin was 19%.

Non-GAAP operating income was RMB 12.8 billion ($1.84 billion),and non-GAAP operating margin was 12%. Non-GAAP Baidu Core operating income was RMB 20.3 billion ($2.92 billion),and non-GAAP Baidu Core operating margin was 25%.

Total other loss was RMB 6.6 billion ($955 million),mainly due to loss on equity investment arising from other-than-temporary decline,compared to total other income of RMB 11.8 billion for 2018,which was mainly due to disposal gains from Du Xiaoman and Global DU businesses. In Q4 2015,following a transaction where the Company exchanged shares of its majority-owned subsidiary Qunar for a minority stake in Trip.com,the Company deconsolidated Qunar,recorded its investment in Trip.com at the closing-date market value and recognized a non-cash accounting gain of RMB 24.4 billion. Since then,the market value of Trip.com shares has declined,and the continued low market price in 2019 resulted in the Company recognizing a non-cash impairment loss of RMB 8.9 billion in Q3 2019. In October 2019,the Company sold down its holding in Trip.com,reducing its interest from 19% to 12% of Trip.com's outstanding shares.

Income tax expense was RMB 1.9 billion ($279 million),compared to RMB 4.7 billion in 2018. The decrease in income tax expense was mainly due to lower taxable income from Baidu Core.

Net income attributable to Baidu was RMB 2.1 billion ($296 million),and diluted earnings per ADS was RMB 6 ($0.80). Net income attributable to Baidu Core was RMB 7.6 billion ($1.09 billion). Non-GAAP net income attributable to Baidu was RMB 18.2 billion ($2.61 billion),and non-GAAP net margin was 17%. Non-GAAP diluted earnings per ADS amounted to RMB 52 ($7.48). Non-GAAP net income attributable to Baidu Core was RMB 22.8 billion ($3.28 billion),and non-GAAP net margin for Baidu Core was 29%.

Adjusted EBITDA was RMB 18.4 billion ($2.65 billion) and adjusted EBITDA margin was 17%. Adjusted EBITDA to Baidu Core was RMB 25.5 billion ($3.66 billion) and adjusted EBITDA margin for Baidu Core was 32%.

Free cash flow was RMB 22.0 billion ($3.17 billion). Free cash flow excluding iQIYI was RMB 18.9 billion ($2.71 billion).

Financial Guidance

For the first quarter of 2020,Baidu expects revenues to be between RMB 21.0 billion ($3.0 billion) and RMB 22.9 billion ($3.3 billion),representing a decline of 5% to 13% year over year,which assumes that Baidu Core revenue will decline between 10% and 18% year over year. The Coronavirus 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 8:15 PM on February 27,2020,U.S. Eastern Time (9:15 AM on February 28,Beijing/Hong Kong Time). Dial-in details for the earnings conference call are as follows:

International:

+65 67135090

China

4006208038

US:

+1 8456750437

UK:

+44 2036214779

Hong Kong:

+852 30186771

Passcode for all regions:

1571908

A replay of the conference call may be accessed by phone at the following number until March 6,2020:

International:

+61 2 8199 0299

Passcode:

1571908

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

About Baidu

Baidu,Inc. is a leading search engine,knowledge and information centered Internet platform and AI company. The Company's mission is to make a complicated world simpler through technology. Baidu's ADSs trade on the NASDAQ Global Select Market under the symbol "BIDU". Currently,ten ADSs represent one Class A ordinary share.

Contacts

Investors Relations,Baidu,Inc.

Tel: +86-10-5992-8888

Email: ir@baidu.com

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," "confident" and similar statements. Among other things,the outlook for the first quarter of 2020,quotations from management in this announcement,as well as Baidu's and other parties' 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,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 but not limited to 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: Baidu's growth strategies; its future business development,including development of new products and services; its ability to attract and retain users and customers; competition in the Chinese Internet search and newsfeed market; competition for online marketing customers; changes in the Company's revenues and certain cost or expense items as a percentage of its revenues; the outcome of ongoing,or any future,litigation or arbitration,including those relating to intellectual property rights; the expected growth of the Chinese-language Internet search and newsfeed market and the number of Internet and broadband users in China; Chinese governmental policies relating to the Internet and Internet search providers,and general economic conditions in China and elsewhere. Further information regarding these and other risks is included in the Company's annual report on Form 20-F and other documents 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. All information provided in this press release and in the attachments is as of the date of the press release,and Baidu undertakes no duty to update such information,except as required under applicable law.

Non-GAAP Financial Measures

To supplement Baidu's consolidated financial results presented in accordance with GAAP,Baidu uses the following non-GAAP financial measures: non-GAAP operating income (loss),non-GAAP operating margin,non-GAAP net income (loss) attributable to Baidu,non-GAAP net margin,non-GAAP diluted earnings per ADS,adjusted EBITDA,adjusted EBITDA margin and free cash flow. 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.

Baidu believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding certain items that may not be indicative of its recurring core business operating results,such as operating performance excluding not only non-cash charges,but also other items that are infrequent or unusual in nature. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Baidu's historical performance and liquidity. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using these non-GAAP financial measures is that these non-GAAP measures exclude certain items that have been and will continue to be for the foreseeable future a significant component in the Company's results of operations. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently,limiting their usefulness as comparative measures to the Company's data.

Non-GAAP operating income represents operating income excluding share-based compensation expenses and amortization of intangible assets resulting from business combinations.

Non-GAAP net income attributable to Baidu represents net income attributable to Baidu excluding share-based compensation expenses,amortization and impairment of intangible assets resulting from business combinations,disposal gain or loss,impairment of long-term investments,fair value change of long-term investments,adjusted for related income tax effects. Baidu's share of equity method investments for these non-GAAP reconciling items,amortization of intangible assets not on the investees' books,accretion of their redeemable non-controlling interests,and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per shares,adjusted for related income tax effects,are also excluded.

Non-GAAP diluted earnings per ADS represents diluted earnings per ADS calculated by dividing non-GAAP net income attributable to Baidu,which is adjusted for accretion for the redeemable non-controlling interests,by the weighted average number of ordinary shares expressed in ADS. Adjusted EBITDA represents operating income excluding depreciation,amortization of intangible assets resulting from business combinations,and share-based compensation expenses. Free cash flow represents net cash provided by operating activities less capital expenditures.

For more information on non-GAAP financial measures,please see the tables captioned "Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures."

[1]

Unless otherwise noted,all translations from RMB to U.S. dollars are made at a rate of RMB 6.9618 to US$1.00,the exchange rate in effect as of December 31,2019 as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Translations are provided solely for the convenience of the reader.

[2]

Excluding revenue from divested businesses,which was approximately RMB3.1 billion for the twelve-months ended December 31,2018.

Baidu,Inc.

Condensed Consolidated Balance Sheets

(In millions except for share information,unaudited)

December 31,

2018

2019

2019

RMB

RMB

USD

ASSETS

Current assets:

Cash and cash equivalents

27,638

33,443

4,804

Restricted cash

2,189

996

143

Short-term investments

111,626

112,924

16,221

Accounts receivable,net

6,015

7,416

1,065

Amounts due from related parties

785

1,594

229

Other assets,current

6,841

9,189

1,320

Total current assets

155,094

165,562

23,782

Non-current assets:

Fixed assets,net

17,903

18,311

2,630

Intangible assets,net

9,181

7,887

1,133

Goodwill

18,536

18,250

2,621

Long-term investments,net

80,454

69,410

9,970

Amounts due from related parties

4,297

3,564

512

Deferred tax assets,net

2,324

2,193

315

Operating lease right-of-use assets

-

7,332

1,053

Other assets,non-current

9,777

8,807

1,264

Total non-current assets

142,472

135,754

19,498

Total assets

297,566

301,316

43,280

LIABILITIES AND EQUITY

Current liabilities:

Short-term loans

3,046

2,618

376

Accounts payable and accrued liabilities

35,381

32,701

4,698

Customer deposits and deferred revenue

9,221

11,062

1,589

Deferred income

523

529

76

Long-term loans,current portion

84

737

106

Notes payable,current portion

6,871

5,219

750

Amounts due to related parties

1,727

2,231

320

Operating lease liabilities

-

2,283

328

Total current liabilities

56,853

57,380

8,243

Non-current liabilities:

Deferred income

54

17

2

Deferred revenue

1,309

1,009

145

Amounts due to related parties

4,360

3,846

552

Long-term loans

7,456

7,804

1,121

Notes payable

42,735

38,090

5,471

Convertible senior notes

4,712

12,297

1,766

Deferred tax liabilities

4,099

3,273

470

Operating lease liabilities

-

4,486

644

Other non-current liabilities

236

299

44

Total non-current liabilities

64,961

71,121

10,215

Total liabilities

121,814

128,501

18,458

Redeemable noncontrolling interests

716

1,109

159

Equity

Class A Ordinary Shares,par value US$0.00005 per share,825,000,000 shares authorized,and 27,733,692 shares and 27,381,621 shares issued and outstanding as at December 31,2018 and December 31,2019

-

-

-

Class B Ordinary Shares,35,400,and 7,201,254 shares and 7,254 shares issued and outstanding as at December 31,2019

-

-

-

Additional paid-in capital

33,441

38,714

5,561

Retained earnings

129,246

126,268

18,137

Accumulated other comprehensive income

210

(1,383)

(199)

Total Baidu shareholders' equity

162,897

163,599

23,499

Noncontrolling interests

12,139

8,107

1,164

Total equity

175,036

171,706

24,663

Total liabilities,redeemable noncontrolling interests,and equity

297,280

Baidu,Inc.

Condensed Consolidated Statements of Income (Loss)

(In millions except for share,per share (or ADS) information,unaudited)

Three Months Ended

Twelve Months Ended

December 31,

2018

2019

2019

2019

2018

2019

2019

RMB

RMB

RMB

USD

RMB

RMB

USD

Revenues:

Online marketing services

21,197

20,434

20,765

2,983

81,912

78,093

11,217

Others

5,998

7,646

8,119

1,166

20,365

29,320

4,212

Total revenues

27,195

28,080

28,884

4,149

102,277

107,413

15,429

·

·

Operating costs and expenses:

Cost of revenues(1)

15,611

16,378

15,517

2,229

51,744

62,850

9,028

Selling,general and administrative(1)

5,943

4,657

3,956

568

19,231

19,910

2,860

Research and development(1)

4,529

4,690

4,756

683

15,772

18,346

2,635

Total operating costs and expenses

26,083

25,725

24,229

3,480

86,747

101,106

14,523

Operating income

1,112

2,355

4,655

669

15,530

6,307

906

Other income (loss):

Interest income

1,490

1,687

2,096

301

4,451

6,060

870

Interest expense

(574)

(788)

(674)

(97)

(1,883)

(2,960)

(425)

Foreign exchange income (loss),net

(50)

29

35

5

(122)

(33)

(5)

Loss from equity method investment

(390)

(729)

(94)

(14)

(79)

(1,254)

(180)

Other income (loss),net

(536)

(9,683)

(664)

(94)

9,428

(8,460)

(1,215)

Total other income (loss),net

(60)

(9,484)

699

101

11,795

(6,647)

(955)

Income (loss) before income taxes

1,052

(7,129)

5,354

770

27,325

(340)

(49)

Income tax expense

484

934

304

44

4,743

1,948

279

Net income (loss)

568

(8,063)

5,050

726

22,582

(2,288)

(328)

Less: net income (loss) attributable to noncontrolling interests

(1,513)

(1,690)

(1,295)

(185)

(4,991)

(4,345)

(624)

Net income (loss) attributable to Baidu

2,081

(6,373)

6,345

911

27,573

2,057

296

Earnings (loss) per ADS (1 Class A ordinary share equals 10 ADSs):

-Basic

5.96

(18.37)

18.28

2.63

78.64

5.68

0.82

-Diluted

5.93

(18.37)

18.25

2.62

78.03

5.60

0.80

Earnings (loss) per share for Class A and Class B ordinary shares:

-Basic

59.55

(183.74)

182.82

26.26

786.36

56.84

8.16

-Diluted

59.32

(183.74)

182.53

26.22

780.27

55.96

8.04

Weighted average number of Class A and Class B ordinary shares outstanding:

Basic

34,909,960

34,793,154

34,586,035

34,898,589

34,834,497

34,497

Diluted

35,044,338

34,613,834

34,834

35,171,043

34,884,854

34,854

(1) Includes share-based compensation expenses as follows:

Cost of revenues

71

70

92

13

224

327

47

Selling,general and administrative

587

336

413

60

1,725

1,768

254

Research and development

884

810

1,073

154

2,727

3,531

507

Total share-based compensation expenses

1,542

1,216

1,578

227

4,676

5,626

808

(2) All translations from RMB to U.S. dollars are made at a rate of RMB 6.9618 to US$1.00,2019 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System.

Baidu,Inc.

Selected Information

(In millions except for per ADS information,unaudited)

Three months ended

December 31,2018 (RMB)

Three months ended

September 30,2019 (RMB)

Three months ended

December 31,2019 (USD)

Baidu Core

iQIYI

Elim & adj(2)

Baidu,Inc.

Baidu Core

iQIYI

Elim & adj(2)

Baidu,Inc.

Total revenues

20,520

7,028

(353)

27,195

21,010

7,397

(327)

28,080

21,711

7,497

(324)

28,884

3,119

1,077

(47)

4,149

YOY

6%

7%

6%

QOQ

3%

1%

3%

Operating costs and expenses:

Cost of revenues (1)

7,374

8,523

(286)

15,611

8,502

8,176

(300)

16,378

8,215

7,914

(612)

15,517

1,180

1,137

(88)

2,229

Selling,general and administrative (1)

4,790

1,222

(69)

5,943

3,320

1,350

(13)

4,657

2,575

1,400

(19)

3,956

370

201

(3)

568

Research and development (1)

3,923

608

(2)

4,529

3,997

703

(10)

4,051

711

(6)

4,756

582

102

(1)

683

Total operating costs and expenses

16,087

10,353

(357)

26,083

15,819

10,229

(323)

25,725

14,841

10,025

(637)

24,229

2,132

1,440

(92)

3,480

YOY

(8%)

(3%)

(7%)

Cost of revenues

11%

(7%)

(1%)

Selling,general and administrative

(46%)

15%

(33%)

Research and development

3%

17%

5%

Operating income (loss)

4,433

(3,325)

4

1,112

5,191

(2,832)

(4)

2,355

6,870

(2,528)

313

4,655

987

(363)

45

669

YOY

55%

(24%)

319%

QOQ

32%

(11%)

98%

Operating margin

22%

(47%)

4%

25%

(38%)

8%

32%

(34%)

16%

Add: total other income (loss),net

(30)

(35)

5

(60)

(8,657)

(827)

(9,484)

624

75

-

699

90

11

-

101

Less: income tax expense

405

79

-

484

918

16

934

281

23

-

304

41

3

-

44

Less: net income (loss) attributable to NCI

(52)

38

(1,499)

(3)

(1,513)

(97)

13

(1,606)

(3)

(1,690)

(220)

18

(1,093)

(3)

(1,295)

(32)

3

(156)

(3)

(185)

Net income(loss) attributable to Baidu

4,050

(3,477)

1,508

2,081

(4,287)

(3,688)

1,602

(6,373)

7,433

(2,494)

1,406

6,345

1,068

(358)

201

911

YOY

84%

(28%)

205%

QOQ

-

(32%)

-

Net margin

20%

(49%)

8%

(20%)

(50%)

(23%)

34%

(33%)

22%

Other Key Metrics：

Non-GAAP operating income (loss)

5,788

(3,045)

2,747

6,224

(2,529)

3,691

8,492

(2,052)

6,753

1,220

(295)

970

YOY

47%

(33%)

146%

QOQ

36%

(19%)

83%

Non-GAAP operating margin

28%

(43%)

10%

30%

(34%)

13%

39%

(27%)

23%

Non-GAAP net income (loss) attributable to Baidu

6,513

(3,196)

4,703

6,310

(3,394)

4,387

9,950

(1,901)

9,193

1,429

(273)

1,320

YOY

53%

(41%)

95%

QOQ

58%

(44%)

110%

Non-GAAP net margin

32%

(45%)

17%

30%

(46%)

16%

46%

(25%)

32%

Adjusted EBITDA

6,952)

3,922

7,525

(2,405)

5,116

9,788

(1,926)

8,175

1,406

(277)

1,174

Adjusted EBITDA margin

33%

(42%)

14%

36%

(33%)

18%

45%

(26%)

28%

(1) Includes share-based compensation as follows:

Cost of revenues

43

28

71

25

45

70

43

49

92

6

7

13

Selling,general and administrative

435

152

587

207

129

336

220

193

413

32

28

60

Research and development

843

41

884

749

61

810

1,001

72

1,073

144

10

154

Total share-based compensation

1,321

221

1,542

981

235

1,264

314

1,578

182

45

227

(2) Relates to intersegment eliminations and adjustments

(3) Relates to the net loss attributable to iQIYI noncontrolling interests

Baidu,unaudited)

Twelve months ended

December 31,2018 (RMB)

Twelve months ended

December 31,2019 (RMB)

Twelve months ended

December 31,2019 (USD)

Baidu Core

iQIYI

Elim & adj(3)

Baidu,Inc.

Baidu Core

iQIYI

Elim & adj(3)

Baidu,Inc.

Total revenues

78,271

24,989

(983)

102,277

79,711

28,994

(1,292)

107,413

11,450

4,165

(186)

15,429

YOY

2%

16%

5%

YOY excluding revenue from divested businesses(1)

2%

5%

Operating costs and expenses:

Cost of revenues (2)

25,370

27,133

(759)

51,744

34,019

30,348

(1,517)

62,850

4,887

4,359

(218)

9,general and administrative (2)

15,310

4,168

(247)

19,231

14,733

5,237

(60)

19,116

753

(9)

2,860

Research and development (2)

13,783

1,994

(5)

15,772

15,698

2,667

(19)

18,255

383

(3)

2,635

Total operating costs and expenses

54,463

33,295

(1,011)

86,747

64,450

38,252

(1,596)

101,106

9,258

5,495

(230)

14,523

YOY

18%

15%

17%

Cost of revenues

34%

12%

21%

Selling,general and administrative

(4%)

26%

4%

Research and development

14%

34%

16%

Operating income (loss)

23,808

(8,306)

28

15,530

15,261

(9,258)

304

6,307

2,192

(1,330)

44

906

YOY

(36%)

11%

(59%)

Operating margin

30%

(33%)

15%

19%

(32%)

6%

Add: total other income (loss),net

13,169

(676)

(698)

11,795

(5,680)

(967)

-

(6,647)

(816)

(139)

-

(955)

Less: income tax expense

4,664

79

-

4,896

52

-

1,948

272

7

-

279

Less: net income (loss) attributable to NCI

(1,292)

49

(3,748)

(4)

(4,991)

105

46

(4,496)

(4)

(4,345)

15

7

(646)

(4)

(624)

Net income(loss) attributable to Baidu

33,605

(9,110)

3,078

27,573

7,580

(10,323)

4,800

2,057

1,089

(1,483)

690

296

YOY

(77%)

13%

(93%)

Net margin

43%

(36%)

27%

10%

(36%)

2%

Other Key Metrics：

Non-GAAP operating income (loss)

28,020

(7,623)

20,425

20,311

(7,815)

12,917

(1,122)

1,839

YOY

(28%)

3%

(37%)

Non-GAAP operating margin

36%

(31%)

20%

25%

(27%)

12%

Non-GAAP net income (loss) attributable to Baidu

29,059

(8,599)

23,976

22,824

(8,765)

18,182

3,278

(1,258)

2,612

YOY

(21%)

2%

(24%)

Non-GAAP net margin

37%

(34%)

23%

29%

(30%)

17%

Adjusted EBITDA

31,438

(7,311)

24,155

25,451

(7,339)

18,416

3,655

(1,054)

2,646

Adjusted EBITDA margin

40%

(29%)

24%

32%

(25%)

17%

(1) Excluding revenue from divested businesses,which was approximately RMB3.1 billion for the twelve months ended December 31,2018.

(2) Includes share-based compensation as follows:

Cost of revenues

141

83

224

156

171

327

22

25

47

Selling,general and administrative

1,356

369

1,092

676

1,768

157

97

254

Research and development

2,623

104

2,293

238

3,531

473

34

507

Total share-based compensation

4,120

556

4,676

4,541

1,085

5,626

652

156

808

(3) Relates to intersegment eliminations and adjustments

(4) Relates to the net loss attributable to iQIYI noncontrolling interests

Baidu,Inc.

Condensed Consolidated Statements of Cash Flows

(In millions,unaudited)

Three months ended

Three months ended

Three months ended

Three months ended

December 31,2018 (RMB)

September 30,2019 (RMB)

December 31,2019 (USD)

Baidu excl. iQIYI

iQIYI

Baidu,Inc.

Baidu excl. iQIYI

iQIYI

Baidu,Inc.

Net cash provided by operating activities

8,409

528

8,937

8,508

293

8,801

8,688

2,343

11,031

1,248

337

1,585

Net cash provided by (used in) investing activities

(5,146)

(6,412)

(11,558)

(11,960)

(922)

(12,882)

10,194

(2,089)

8,105

1,464

(300)

1,164

Net cash provided by (used in) financing activities

10,084

6,923

17,007

(1,903)

(160)

(2,063)

(1,181)

(259)

(1,440)

(170)

(37)

(207)

Effect of exchange rate changes on cash,cash equivalents and restricted cash

(239)

(110)

(349)

122

258

380

(254)

(178)

(432)

(36)

(26)

(62)

Net increase (decrease) in cash,cash equivalents and restricted cash

13,108

929

14,037

(5,233)

(531)

(5,764)

17,447

(183)

17,264

2,506

(26)

2,480

Cash,cash equivalents and restricted cash

At beginning of period

9,959

5,831

15,790

15,315

7,624

22,939

10,082

7,093

17,175

1,448

1,019

2,467

At end of period

23,067

6,760

29,827

10,175

27,529

6,910

34,439

3,954

993

4,947

Net cash provided operating activities

8,585

Less: Capital expenditures

(2,900)

(178)

(3,078)

(1,031)

(181)

(1,212)

(652)

(232)

(884)

(94)

(33)

(127)

Free cash flow

5,509

350

5,859

7,477

112

7,589

8,036

2,111

10,147

1,154

304

1,458

Twelve months ended

Twelve months ended

Twelve months ended

December 31,2018 (RMB)

December 31,Inc.

Net cash provided by operating activities

33,083

2,884

35,967

24,552

3,906

28,458

3,527

561

4,088

Net cash used in investing activities

(13,511)

(20,949)

(34,460)

(8,225)

(11,749)

(19,974)

(1,181)

(1,688)

(2,869)

Net cash provided by (used in) financing activities

(8,393)

23,475

15,082

(11,753)

7,880

(3,873)

(1,688)

1,132

(556)

Effect of exchange rate changes on cash,cash equivalents and restricted cash

1,285

617

1,902

(112)

113

1

(16)

16

-

Net increase in cash,cash equivalents and restricted cash

12,464

6,027

18,491

4,462

150

4,612

642

21

663

Cash,cash equivalents and restricted cash

At beginning of period

10,603

733

11,336

23,827

3,312

972

4,284

At end of period

23,827

27,947

Net cash provided operating activities

33,088

Less: Capital expenditures

(8,160)

(612)

(8,772)

(5,688)

(740)

(6,428)

(817)

(106)

(923)

Free cash flow

24,923

2,272

27,195

18,864

3,166

22,030

2,710

455

3,165

Note: Baidu excl. iQIYI represents Baidu,Inc. minus iQIYI's consolidated cash flows.

Baidu,Inc.

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

(In millions except for ADS and per ADS information,2019 (USD)

Baidu Core

iQIYI

Baidu,Inc.

Baidu Core

iQIYI

Baidu,Inc.

Operating income (loss)

4,325)

1,832)

2,528)

4,655

987

(363)

669

Add: Share-based compensation expenses

1,321

221

1,542

981

235

1,264

314

1,578

182

45

227

Add: Amortization and impairment of intangible assets(1)

34

59

93

52

68

120

358

162

520

51

23

74

Non-GAAP operating income (loss)

5,045)

2,529)

3,052)

6,220

(295)

970

Add: Depreciation of fixed assets

1,082

93

1,301

124

1,425

1,296

126

1,422

186

18

204

Adjusted EBITDA

6,952)

3,405)

5,926)

8,406

(277)

1,174

Net income (loss) attributable to Baidu

4,477)

2,688)

(6,494)

6,068

(358)

911

Add: Share-based compensation expenses

1,319

221

1,444

974

235

1,106

1,257

314

1,433

181

45

206

Add: Amortization and impairment of intangible assets(1)(4)

19

47

46

21

50

47

15

131

88

2

19

13

Add: Disposal gain(4)

282

-

282

-

-

-

445

-

445

64

-

64

Add: Impairment of long-term investments(4)

185

-

185

8,023

-

8,023

465

141

544

66

20

78

Add: Fair value change of long-term investments(4)

16

13

23

745

1

745

(60)

(1)

(61)

(9)

-

(9)

Add: Reconciling items on equity method investments(4)

642

-

642

834

8

839

395

8

399

57

1

57

Non-GAAP net income (loss) attributable to Baidu

6,196)

4,394)

4,901)

9,429

(273)

1,320

Diluted earnings (loss) per ADS

5.93

(18.37)

18.25

2.62

Add: Accretion of the redeemable noncontrolling interests

0.01

0.06

0.06

0.01

Add: Non-GAAP adjustments to earnings per ADS

7.48

30.92

8.23

1.18

Non-GAAP diluted earnings per ADS

13.42

12.61

26.54

3.81

(1) This represents amortization of intangible assets resulting from business combinations.

(2) This represents Baidu's share of equity method investments for other non-GAAP reconciling items,amortization of intangible assets not on the investee's books,accretion of their redeemable noncontrolling interests,adjusted for related income tax effects.

(3) Non-GAAP measures are adjusted retroactively to exclude: 1) amortization of intangible assets resulting from business combinations ; and 2) share-based compensation and amortization of intangible assets not on their books,resulting from equity method pick-up; and 3) fair value change of the investees' long-term investments,net of tax,as follows:

(4) Net of related tax impact

Non-GAAP operating income,previously reported

5,754

(3,104)

2,654

6,172

(2,597)

3,571

8,134

(2,214)

6,233

1,169

(318)

896

Add: Amortization and impairment of intangible assets(1)

34

59

93

52

68

120

358

162

520

51

23

74

Non-GAAP operating income,revised

5,788

(3,045)

2,747

6,224

(2,529)

3,691

8,492

(2,052)

6,753

1,220

(295)

970

Non-GAAP net income attributable to Baidu,previously reported

6,458

(3,243)

4,621

6,052

(3,452)

4,098

9,847

(2,040)

9,013

1,414

(293)

1,294

Add: Adjustments relating to equity-method investments,net of tax

36

-

36

237

8

242

88

8

92

13

1

13

Add: Amortization and impairment of intangible assets(1),net of tax

19

47

46

21

50

47

15

131

88

2

19

13

Non-GAAP net income attributable to Baidu,revised

6,513

(3,196)

4,703

6,310

(3,394)

4,950

(1,901)

9,193

1,429

(273)

1,320

Adjusted EBITDA,887

(2,877)

3,970

7,542

(2,345)

5,153

9,803

(1,549)

8,208

1,408

(223)

1,179

Less: Adjustments to amortization/impairment of intangible assets

(17)

(75)

(48)

(17)

(60)

(37)

(15)

(377)

(33)

(2)

(54)

(5)

Adjusted EBITDA,870

(2,952)

3,922

7,525

(2,405)

5,116

9,788

(1,926)

8,406

(277)

1,174

Baidu,unaudited)

Twelve months ended

Twelve months ended

Twelve months ended

December 31,Inc.

Operating income (loss)

23,306)

15,258)

6,330)

906

Add: Share-based compensation expenses

4,120

556

4,085

5,626

652

156

808

Add: Amortization and impairment of intangible assets(1)

92

127

219

509

358

867

73

52

125

Non-GAAP operating income (loss)

28,623)

20,815)

12,122)

1,839

Add: Depreciation of fixed assets

3,418

312

3,730

5,140

476

5,616

738

68

807

Adjusted EBITDA

31,311)

24,339)

18,054)

2,646

Net income (loss) attributable to Baidu

33,110)

27,323)

2,483)

296

Add: Share-based compensation expenses

4,118

556

4,454

4,515

1,126

649

156

736

Add: Amortization and impairment of intangible assets(1)(4)

59

104

123

71

282

226

10

41

32

Add: Disposal gain(4)

(6,388)

-

(5,684)

233

1

234

33

-

34

Add: Impairment of long-term investments(4)

566

-

566

8,929

164

9,031

1,283

24

1,298

Add: Fair value change of long-term investments(4)

(4,124)

(149)

(4,279)

(658)

(1)

(660)

(95)

-

(95)

Add: Reconciling items on equity method investments(4)

1,223

-

1,223

2,154

27

2,168

309

4

311

Non-GAAP net income (loss) attributable to Baidu

29,599)

23,765)

18,258)

2,612

Diluted earnings per ADS

78.03

5.60

0.80

Add: Accretion of the redeemable noncontrolling interests

0.37

0.22

0.03

Add: Non-GAAP adjustments to earnings per ADS

(10.23)

46.22

6.65

Non-GAAP diluted earnings per ADS

68.17

52.04

7.48

(1) This represents amortization of intangible assets resulting from business combinations.

(2) This represents Baidu's share of equity method investments for other non-GAAP reconciling items,previously reported

27,928

(7,750)

20,206

19,802

(8,173)

11,933

2,844

(1,174)

1,714

Add: Amortization and impairment of intangible assets(1)

92

127

219

509

358

867

73

52

125

Non-GAAP operating income,revised

28,020

(7,623)

20,425

20,311

(7,815)

12,800

2,917

(1,122)

1,839

Non-GAAP net income attributable to Baidu,previously reported

28,471

(8,703)

23,324

21,841

(9,074)

17,030

3,137

(1,303)

2,446

Add: Adjustments relating to equity-method investments,net of tax

529

-

529

912

27

926

131

4

134

Add: Amortization and impairment of intangible assets(1),net of tax

59

104

123

71

282

226

10

41

32

Non-GAAP net income attributable to Baidu,revised

29,059

(8,599)

23,976

22,824

(8,765)

18,182

3,278

(1,258)

2,612

Adjusted EBITDA,previously reported

31,503

(7,091)

24,315

25,512

(6,768)

18,569

3,664

(972)

2,668

Less: Adjustments to amortization/impairment of intangible assets

(65)

(220)

(160)

(61)

(571)

(153)

(9)

(82)

(22)

Adjusted EBITDA,revised

31,438

(7,311)

24,155

25,451

(7,339)

18,416

3,655

(1,054)

2,646

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