Baidu Beat Market Expectations, Generated 9.52 Bn Revenue in Q4 2013

Baidu financial report of Q4 in 2013 showed that the revenue hit 9.52 billion Yuan (USD 1.57 billion), with 50.3% YoY growth. Net profit belonging to Baidu was 2.78 billion Yuan (USD 460 million), falling slightly by 0.4% yearly. Moreover, mobile accounted for over 20% of revenue in Q4.

Baidu’s achievement in Q4 beat former expectations, leading to 8% rise of stock price. Baidu’s former expectation of Q4 revenue was between 9.22 billion to 9.48 billion Yuan (USD 1.5 to 1.55 billion).

The revenue from internet marketing was 9.46 billion Yuan (USD 1.56 billion), up 50.5% compared with 2012. Baidu provided service to over 450,000 customers, 2.8% lower than previous quarter, but 11.1% higher than that of 2012; APRU increased 34.8% to 20,900 Yuan (USD 3,453) in Q4 2013.

“In 2013, Baidu made great progress in mobile business, and established position in mobile market by actively investing in the fields of searching, mobile distribution and LBS. Our customers acknowledged the value of search marketing. As the report showed, mobile revenue accounted for over 20% of all. ” said Robin Li, chairman and CEO of Baidu.

And Baidu’s CFO, Jennifer Li said, “Looking ahead, in this critical period of transformation, we will keep expanding Baidu’s strategic planning in platforms. We will also increase investment in R&D, sales, marketing and infrastructure.”

Cost and expenses of Baidu was 6.78 billion Yuan (USD 1.11 billion) in Q4 2013, 22% higher than Q3 and 95% higher than Q4 2012, including:

• TAC (traffic acquisition cost): 1.18 billion Yuan (USD 194.3 million), represented 12.3% of revenue; the proportion was 9.6% last year and 11.7% last quarter.
• Bandwidth cost: 563.7 million Yuan (USD 93.1 million),  represented 5.9% of revenue; the proportion was 5.3% a year earlier.
• Depreciation cost: 410.2 million Yuan (USD 67.8 million), represented 4.3% of revenue; the proportion was 4.9% a year earlier.
• Content costs: 361.7 million Yuan (USD 59.7 million), represented 3.8% of revenue, compared to 1.9% in Q4 2012 and 2.5% in previous quarter.
• SG&A expenses: 1.86 billion Yuan (USD 307.77 million), was 135.1% higher than the same period of last year, and 34.6% higher than Q3. The increase primarily was due to the increase of promotion spending on mobile product.
• R&D expenses: 1.26 billion Yuan (USD 208.8 million), increased 80.1% more than a year ago and 15.9% more than last quarter. The main reason of increasing was the growing number of R&D employees.
• Share-based compensation expenses: 177.4 million Yuan (USD 29.3 million), compared with 66.6 million Yuan (USD 10.87 million) last year and 134.1 million Yuan (USD 21.88 million) last quarter.

Baidu’s operating profit fell slightly by 3.8% to 2.74 billion Yuan (USD 452.6 million), compared to Q4 2012. The operating profit excluding share-based compensastion (not follow GAAP) was 2.92 billion Yuan(USD 481.9 million), increasing 0.1% from the same period last year. Operating margin was 29%, decreasing 16 percentage points from Q4 2012.

Income tax of Baidu was 338.8 million Yuan (USD 560 million), 0.4% lower than last year. The effective tax rate for Q4 2013 was 11.2% in comparison with 16.2% for Q4 2012.

Net profit reached 2.78 billion Yuan (USD 459.9 million), representing a 0.4% YoY decrease. Basic and diluted earnings per share was 7.92 Yuan (USD 1.31) and 7.90 Yuan (USD 1.30) respectively.

Up to December 31, 2013, cash, cash equivalent and short-term investment of Baidu summed up to 38.43 billion Yuan (USD 6.348 billion).

Net operation cash flow and expenditure was 4.11 billion Yuan (USD 678.5 million) and 961 million Yuan (USD 158.7 million) respectively.

According to Baidu’s estimate, total revenue in Q1 2014 would be between 9.24 billion Yuan(USD 1.526 billion) to 9.52 billion Yuan (USD 1.573 billion), with a 54.8% to 59.5% YoY increase.