Stock Update (NASDAQ:BIDU): Baidu Inc (ADR) Announces 2Q:15 Results


Baidu Inc (ADR) (NASDAQ:BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the second quarter ended June 30, 2015.

“With Baidu’s cornerstone search business delivering solid growth and enjoying ample runway ahead, and with powerful mobile gateways to leverage, we are ideally positioned to capture the O2O e-commerce opportunity and build the ‘Next Baidu’,” said Robin Li, chairman and CEO of Baidu. “As we continue to connect people with services and enable closed loop transactions, we are creating a transactional business model as Baidu grows and evolves in the age of mobile.”

“We delivered solid financial results in the second quarter of 2015, with our core search business exhibiting strong growth and attractive profitability,” said Jennifer Li, CFO of Baidu. “With the solid base of our core search business, coupled with upward momentum of our O2O e-commerce initiatives, we continue to invest decisively in the ‘Next Baidu’. We are delighted by the progress we have achieved and are confident that these investments will generate long term shareholder value. Going forward, we will report the financial impact of the new initiatives, namely O2O & Other[2] and iQiyi.”

Second Quarter 2015 Operational Highlights

  • Mobile search monthly active users (MAUs) were 629 million for the month of June 2015, an increase of 24% year-over-year
  • Mobile maps MAUs were 304 million for the month of June 2015, an increase of 48% year-over-year
  • Gross merchandise value[3] (GMV) for O2O services totaled RMB40.5 billion ($6.5 billion) for the second quarter of 2015, an increase of 109% year-over-year

Second Quarter 2015 Financial Highlights

  • Total revenues in the second quarter of 2015 were RMB16.575 billion ($2.673 billion), a 38.3% increase from the corresponding period in 2014. Mobile revenue represented 50% of total revenues for the second quarter of 2015, flat from the first quarter of 2015.
  • Operating profit in the second quarter of 2015 was RMB3.470 billion ($559.6 million), a 2.5% decrease from the corresponding period in 2014. O2O & Other reduced operating margins by 25.3 percentage points and iQiyi reduced operating margins by 5.1 percentage points.
  • Net income attributable to Baidu in the second quarter of 2015 was RMB3.662 billion ($590.6 million), a 3.3% increase from the corresponding period in 2014. Diluted earnings attributable to Baiduper ADS for the second quarter of 2015 were RMB10.19 ($1.64); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2015 were RMB11.19 ($1.81).

Second Quarter 2015 Results

Baidu reported total revenues of RMB16.575 billion ($2.673 billion) for the second quarter of 2015, representing a 38.3% increase from the corresponding period in 2014.

Online marketing revenues for the second quarter of 2015 were RMB16.227 billion ($2.617 billion), representing a 37.1% increase from the corresponding period in 2014. Baidu had about 590,000 activeonline marketing customers[4] in the second quarter of 2015, representing a 20.9% increase from the corresponding period in 2014 and a 12.6% increase from the first quarter of 2015. Revenue per online marketing customer for the second quarter was approximately RMB27,400 ($4,419), a 13.2% increase from the corresponding period in 2014 and a 15.1% increase compared to the first quarter of 2015.

Traffic acquisition cost as a component of cost of revenues was RMB2.112 billion ($340.6 million), representing 12.7% of total revenues, flat from the corresponding period in 2014 and compared to 13.5% in the first quarter of 2015.

Bandwidth costs as a component of cost of revenues were RMB896.2 million ($144.5 million), representing 5.4% of total revenues, compared to 5.8% in the corresponding period in 2014. Depreciation costs as a component of cost of revenues were RMB616.1 million ($99.4 million), representing 3.7% of total revenues, compared to 3.9% in the corresponding period in 2014.

Content costs as a component of cost of revenues were RMB840.2 million ($135.5 million), representing 5.1% of total revenues, compared to 3.0% in the corresponding period in 2014 and 4.8% in the previous quarter. The year-over-year increase was mainly due to iQiyi’s increased content costs.

Selling, general and administrative expenses were RMB3.890 billion ($627.4 million), representing an increase of 81.0% from the corresponding period in 2014, primarily due to an increase in promotional spending for O2O.

Research and development expenses were RMB2.713 billion ($437.5 million), a 56.2% increase from the corresponding period in 2014. The increase was primarily due to an increase in the number of research and development personnel.

Share-based compensation expenses, which were allocated to related operating costs and expense line items, were RMB354.7 million ($57.2 million) in the second quarter of 2015, compared to RMB220.6 million in the corresponding period in 2014 and RMB291.1 million in the first quarter of 2015. The increase from the corresponding period was a result of increased share grants to employees.

Operating profit was RMB3.470 billion ($559.6 million), representing a 2.5% decrease from the corresponding period in 2014. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB3.824 billion ($616.8 million), a 1.2% increase from the corresponding period in 2014.

Income tax expense was RMB763.0 million ($123.1 million), compared to an income tax expense of RMB605.6 million in the corresponding period in 2014. The effective tax rate for the second quarter of 2015 was 19.0% compared to 15.4% for the corresponding period in 2014 and 20.7% in the first quarter of 2015.

Net income attributable to Baidu was RMB3.662 billion ($590.6 million), representing a 3.3% increase from the corresponding period in 2014. Basic and diluted earnings per ADS for the second quarter of 2015 amounted to RMB10.22 ($1.65) and RMB10.19 ($1.64), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB4.017 billion ($647.9 million), a 6.6% increase from the corresponding period in 2014. Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2015 amounted to RMB11.23 ($1.81) and RMB11.19 ($1.81), respectively.

As of June 30, 2015, the Company had cash, cash equivalents and short-term investments of RMB74.959 billion ($12.090 billion). Net operating cash inflow for the second quarter of 2015 was RMB5.727 billion ($923.8 million). Capital expenditures for the second quarter of 2015 were RMB923.1 million ($148.9 million).

Adjusted EBITDA (non-GAAP), defined in this announcement as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, wasRMB4.707 billion ($759.1 million) for the second quarter of 2015, representing a 4.7% increase from the corresponding period in 2014.

Outlook for Third Quarter 2015

Baidu currently expects to generate total revenues in an amount ranging from RMB18.170 billion ($2.931 billion) to RMB18.580 billion ($2.997 billion) for the third quarter of 2015, representing a 34.4% to 37.4% year-over-year increase. This forecast reflects Baidu’s current and preliminary view, which is subject to change.¬†(Original Source)

Following earnings, shares of Baidu are trading down 10.97% to $183.62 in after-hours trading. BIDU has a 1-year high of $251.99 and a 1-year low of $178.81. The stock’s 50-day moving average is $200.66 and its 200-day moving average is $207.24.

On the ratings front, Baidu¬†has been the subject of a number of recent research reports. In a report issued on July 22, Summit Research analyst Henry Guo maintained a Buy rating on BIDU, with a price target of $256, which implies an upside of 29.5% from current levels. Separately, on July 15, Merrill Lynch’s Eddie Leung maintained a Buy rating on the stock and has a price target of $225.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Henry Guo and Eddie Leung have a total average return of 4.0% and 32.1% respectively. Guo has a success rate of 42.9% and is ranked #1637 out of 3712 analysts, while Leung has a success rate of 63.6% and is ranked #321.

Overall, 4 research analysts have assigned a Hold rating and 7 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $239.29 which is 21.0% above where the stock opened today.

Baidu Inc is a Chinese language Internet search provider. The Company offers a Chinese-language search platform on its website Baidu.com.